Contractionary budget in making amid financial constraints

Finance officials are stitching up a contractionary budget for the next fiscal year, officials said, giving top priority to taming inflation and employment generation.

As the government walks tightropes to make ends meet amid both internal and global economic adversities, the size of the new budget may see an around 5.0-percent rise over the current outlay, to less than Tk 8.0 trillion.

The draft budget is set to be placed before the committee for coordination on fiscal, monetary, and currency exchange today (Thursday).

Finance Minister Abul Hassan Mahmood Ali will preside over the meeting to be held virtually, the officials said.

Growth target is getting a bit trimmed obviously as giving people some respite from inflation-fuelled high prices takes precedence. Officials concerned said the gross domestic product (GDP) growth for the 2024-25 fiscal year may be set at 6.5 per cent in Thursday's meeting.

And the government may target the near-double-digit rate of inflation to shoot down to 6.25 per cent, they presume.

"Inflation control will be our prime agenda in the next fiscal year," says a senior finance division official involved with budget perpetration.

The new budget will be contractionary in nature in view of the overall global economic scenario and revenue-collection prospects, adds, specifying some major constraints.

He mentions that revenue mobilisation, especially import-duty collection, has been facing tremendous challenges as government seriously contained import amid forex-reserves crunch.

"Thus a large budget would not be feasible this year," the finance official concludes in reference to the suggestions made by country's top economists recently.

Dr Ahsan H Mansur, executive director, the Policy Research Institute (PRI) of Bangladesh, told the FE recently that the National Board of Revenue might not be able to meet the revised revenue-collection target in the current fiscal year, forecasting a substantial budget shortfall.

The ground situation being so, the government recently revised down revenue mobilisation for the current fiscal year to Tk 4.1 trillion from the original target of Tk 4.30 trillion. Mr Mansur estimates that the tax officials may end up managing some Tk 3.90 trillion by the year-end.

The finance official said the volume of overall subsidy will lessen in the next fiscal year as automatic adjustment system of fuel-oil price has been introduced.

However, food and agri subsidy may increase in the next fiscal year, as the government continues distribution of essential commodities at subsidised rates among the needy people.

The allocation for export-sector incentives will be lowered in next fiscal year since the government has already cut incentives for a number of export-oriented sectors keeping in mind the consequences of Bangladesh's graduation from the world's least-developed-country club.

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