Dhaka, Bangladesh (BBN)– Bangladesh’s overall budget deficit is set to widen by nearly 15 per cent in the next fiscal year (FY) 2017-18 from this fiscal due to meet higher expenditures for both development and revenue of the government.
The budget deficit is estimated to BDT 1.123 trillion for the upcoming FY 18 from BDT 978.53 billion of the original budget estimations for the FY 17.
Later on, the government revised its budget deficit at BDT 986.74 billion from BDT 978.53 billion for the FY 17.
However, the proposed budget deficit in percentage of GDP (gross domestic product) remains unchanged at 5.0 per cent, according to the proposed budget documents for the FY 18.
The government is set to receive BDT 519.24 billion from the overseas sources and rest of BDT 603.52 billion will be borrowed from the domestic sources to meet the overall budget deficit for the next fiscal.
Borrowing from overseas sources will jump by more than 50 per cent or BDT 156.31 billion in the upcoming FY 18, according to the proposed budget.
The government is also set to borrow BDT 464.20 billion from overseas sources and rest of BDT 55.04 billion will be received as foreign grants, it added.
The foreign borrowing was projected at BDT 307.89 billion for this FY. But it was revised BDT 240.77 billion. Such borrowing was BDT 128.66 billion in the FY 16.
Of the total domestic debt, BDT 282.03 billion is to come from the banking system and BDT 301.50 billion from the seals of savings certificates and reaming BDT 19.99 billion has been proposed to mobilise other non-banking sources.
Under the proposed bank borrowing, the government will borrow BDT 208.87 billion issuing long-term bonds while the remaining BDT 73.16 billion through treasury bills (T-bills).
The government has already slashed its bank borrowing target to BDT 239.03 billion for the FY 17 from the original target at BDT 389.38 billion, the budget documents showed.
Currently, three T-bills are being transacted through auctions 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 seals of savings instruments at BDT 450 billion from the original target at BDT 196.10 billion for the FY 17.
“In the case of domestic sources, receipt from non-bank sources such as sale of savings certificate may increase substantially,” Finance Minister AMA Muhith has explained in his budget speech.
As a result, bank borrowing would slightly decline. As of April, savings certificates worth of BDT 420.98 billion were sold against the target of BDT 196.10 billion for the FY 17, according to the minister.
However, the government’s net borrowing from the banking system is still in negative position, a senior official familiar with the government debt management activities told BBN in Dhaka.
“Such negative trend may continue by the end of this fiscal although the government’s bank borrowing will rise substantially in the month of June,” the official explained.
The government is set to borrow BDT 160 billion from the banking system using its T-bills and bonds in June to meet budget deficit partly, the official explained.
Meanwhile, allocation for implementation of the Annual Development Programme (ADP) is set to BDT 1.590 trillion for the FY 18 up from BDT 1.170 trillion of the original budget estimation for the FY 17.
Later on, the government’s revised its ADP allocation at BDT 1.160 trillion from BDT 1.170 trillion.
However, the government is set to pay BDT 2.29 trillion to meet revenue expenditure for the FY 18 against BDT 2.078 trillion of the original budget estimation for this fiscal. But it was revised at BDT 1.960 trillion for the FY 17.
The government had expended BDT 1.571 trillion for the same purposes in the FY 16, the budget documents showed.
Under the proposed revenue expenditures, the government will have to pay BDT 197 billion for making payments interest on national savings certificates against BDT 167.36 billion of the original budget estimation.
Later on, such interest payment expenditure was revised at BDT 155.99 billion for the FY 17. It was BDT 119.59 billion in the FY 16.
However, the government is also set to spend BDT 229.40 billion as pensions and gratuities in the FY 18 against BDT 169.15 billion of the original budget projection for the FY 17. It was revised at BDT 126.67 billion for the outgoing fiscal year.