Next budget presumed bigger at Tk8.45t

A little bigger next budget than the current one is being envisaged by the interim government through taking into account prevailing internal and external factors that affect the country's economy, officials said.

The budget outlay for fiscal year 2025-26 can be around Tk 8.45 trillion, nearly 6.0-percent bigger than the current one worth Tk 7.97 trillion, they added.

In the run-up to drafting the new budget, government's coordination committee on fiscal, monetary, and currency exchange and resource management, headed by Finance Adviser Dr Saleh Uddin Ahmed, will sit next Monday for the stocktaking of overall economic situation and progress in the implementation of the current budget.

The meeting will also prepare an outline for the next fiscal budget, including the possible size of the outlay, the requirement of resource mobilisation, target for gross domestic product (GDP) growth, possible rate of inflation, and budget deficit.

Meanwhile, sources said, finance officials sat last week to prepare a draft budget outline for the next fiscal year which will be placed before the coordination council meeting Monday.

According to officials concerned, in the new budget the government may set a target of 6.0-percent growth in the gross domestic product, little down from the present fiscal's 6.75 per cent.

However, as the rate of inflation remains obdurately high through this fiscal year, the government is unlikely to change the target from current budget's 6.5 per cent for the new fiscal year.

The officials predict that by the end of this fiscal year, the point-to-point inflation might go down to around 8.0 per cent from the present double-digit rate.

A senior Finance Division official told the FE the next budget will be contractionary one in nature like the current one with the aim of containing inflationary pressure being borne by people.

"But, at the same time, we won't let economic growth and investment get affected due to excessive tightening," he said, as regards fiscal and economic balancing.

The official explains that the new budget will be slightly bigger because of government's plan to pay off all the power-sector-and fertiliser-import dues.

The International Monetary Fund (IMF) has been pressing for complete payout to clear the power-and fertliser-purchase-related dues by the next year.

According to another finance official, in the new fiscal the government will try to trim down public spending as part of its efforts to contain long-running high inflation.

He notes that the size of budget every year increases by 10 to 12 per cent but current budget increased less than 8.0 per cent while the next budget will rise by around 6.0 per cent in view of the global economic situation.

However, economists think that a 6.0-percent bigger budget with large deficit is not suitable in the current economic contexts when higher revenue mobilisation is not in sight.

"The large budgetary deficit will further fuel inflation," says Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office.

He observes that the budget is actually going to be expansionary. "A 6.0-percent growth in size between one budget and another is very high, because budget never gets implemented fully."

He thinks if a Tk 8.45-trillion budget is prepared and revenue-mobilisation target is set at Tk 5.0 trillion, attaining the target will be very tough.

"Then the budget deficit will reach Tk 3.4 trillion which is very high and will further fuel inflation," says Mr Hussain.

If so, he predicts, government bank borrowing will go up significantly and affect private-sector investment which will put negative impact on both investment and growth.

Mr Hussain thinks even if the inflation goes down to 8.0 per cent by the yearend, that is also a very high rate of inflation. "We need to bring inflation at less than 5.0 per cent. The high food inflation is hurting people. We need to take it back to negative territory."

He says, "Before fixing the size of budget we need to fix the size of deficit. The next budget deficit should be lower than the present one."

Mr Hussain suggests the government not prepare a budget bigger than Tk 6.5 trillion. "This is not a political government and no need to be popular by expanding budgetary spending."

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