Overall deficit is set to widen nearly 15 per cent in the Tk 4.0-trillion budget announced for next fiscal year (FY) 2017-18, compared to the current level.
As stated by the finance minister in his budget speech Thursday in parliament, the bigger outlay of the budget is necessitated for footing the bill for higher spending on both development and revenue heads.
The budget deficit is estimated to be Tk 1.123 trillion for the upcoming FY18 against Tk 978.53 billion of the original budget estimations for the outgoing FY17.
Later in the passing fiscal, the government revised its budget deficit to be Tk 986.74 billion from Tk 978.53 billion.
However, the proposed budget deficit in percentage of GDP (gross domestic product) remains unchanged within a 5.0 per cent bracket.
The government eyes Tk 519.24 billion from overseas sources and the rest Tk 603.52 billion will be borrowed from domestic sources to meet the overall budget deficit for the next fiscal, according to the budget documents for the FY 2017-18.
Under proposed arrangements, borrowing from overseas sources will jump by more than 50 per cent or Tk 156.31 billion in the upcoming FY.
The government plans to borrow Tk 464.20 billion from overseas sources and receive Tk 55.04 billion as foreign grants, the documents say about deficit financing.
The foreign borrowing was projected at Tk 307.89 billion for the FY 17. But it was revised at Tk 240.77 billion. Such borrowing was Tk 128.66 billion in the FY 16.
Of the total domestic debts, Tk 282.03 billion is to come from the banking system and Tk 301.50 billion from the sales of savings certificates. The reaming Tk 19.99 billion has been proposed to be mobilised from other non-banking sources.
Under the proposed bank borrowing, the government will borrow Tk 208.87 billion by issuing long-term bonds while the remaining Tk 73.16 billion through treasury bills (T-bills).
The government has already slashed its bank-borrowing target to Tk 239.03 billion for the FY 17 from the original target at Tk 389.38 billion, the budget documents showed.
Currently, three T-bills are transacted on auction to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years respectively are traded on the money market.
On the other hand, the government had increased borrowing target from the sales of savings instruments at Tk 450 billion from the original target at Tk 196.10 billion for the FY 17.
"In the case of domestic sources, receipt from non-bank sources such as sale of savings certificates may increase substantially," Finance Minister AMA Muhith explained in his budget speech.
As a result, bank borrowings would slightly decline. As of April, savings certificates worth Tk 420.98 billion were sold against the target of Tk 196.10 billion for the FY 17, according to the minister.
Talking to the FE, a senior official familiar with the government debt management said government's net borrowing from the banking system is still in a negative position.
"Such negative trend may continue by the end of this fiscal although government's bank borrowing will rise substantially in the month of June," the official explained.
Meanwhile, allocation for implementation of the Annual Development Programme (ADP) is set at Tk 1.590 trillion for the FY 18, up from Tk 1.170 trillion of the original budget estimation for the FY 17.
However, the government is set to pay Tk 2.29 trillion to meet revenue expenditure for the FY18 against Tk 2.078 trillion of the original budget estimation for this fiscal. But it was revised at Tk 1.960 trillion for the FY17.
The government had expended Tk 1.571 trillion for the same purposes in the FY16, the budget documents showed.
Under the proposed revenue expenditures, the government will have to spend Tk 197 billion for interest payments on national savings certificates against Tk 167.36 billion of the original budget estimation.
Later on, such interest-payment expenditure was revised at Tk 155.99 billion for the FY17. It was Tk 119.59 billion in the FY16.
© 2017 - All Rights with The Financial Express