Polls, MPO allowance hike, new Islamic Bank capital to cost Tk 270b

Current crunch time comes as a reminder to ministries and divisions concerned to make realistic fund demand from this year's revised budget to help the government avoid higher bank borrowings and interest payments.

The direction comes from finance division while holding consultation with the ministries and divisions separately for revising the budget for the fiscal year 2025-26-deficit one as usual--to make the two ends meet.

Officials say at the meetings some ministries and divisions are claiming that they will need entire operating budget allocated to them in the current fiscal year.

However, sources say, the finance officials asked them to strictly follow the austerity measures taking into consideration the trend in revenue collection.

A senior finance official told The Financial Express that every year nearly one-fifth of operating expenditure of the fiscal budget is being spent to pay interest on loans taken from domestic sources. And the debt-servicing obligation has been on the increase over the years.

He says for the current fiscal year, some Tk 1.0 trillion has been earmarked for interest payment against domestic loans.

"If the ministries make demand for funds that would not be needed actually, the finance division would have to borrow from banks and other sources for which interest has to be paid unnecessarily," he adds.

"We can avoid the unnecessary payment of interest if the estimation of spending can be more realistic," says the official, preferring not to be quoted by name.

Another finance division official says already this year government is under financial pressure due to spending around Tk 30 billion for holding national elections. Moreover, very recently the government was forced to enhance house-rent allowances for the MPO-listed teachers which may cost some Tk 40 billion additionally.

Also, the government has made commitment to provide some Tk 200 billion in the newly formed United Islamic Bank to give five Islamic banks a lifeline.

"These will create a significant pressure on government spending this year, significantly raising the borrowings from banks and treasury system, unless the revenue board enhances collection magically," he added.

However, another finance official says revenue collection is rising significantly, registering over 15-percent growth during July-October period, generating hope of lessening pressure from bank borrowing for deficit financing.

"If the trend in revenue collection continues, the dependence on bank borrowing of the government may decrease," the official predicts.

Finance Division officials says the interim government has, until now, decided to lessen this fiscal budget by around Tk 150 billion but would not finalise the amount and leave it for a final decision to the next political government taking office after next parliamentary election.

syful-islam@outlook.com