Next budget size to be Tk 6,77,874cr; Govt advised on macroeconomic pressures from Russia-Ukraine war – The Daily Star

The Finance Division has recommended that the government avoid hard-term loans and discourage import of luxury goods to cope with macroeconomic pressures arising from the Russia-Ukraine war.
It has also suggested gradual and slight increase in the prices of power, energy and fertiliser to keep the government subsidies at a reasonable level.
The recommendations came at a meeting of the Fiscal Coordination Council, presided over by Finance Minister AHM Mustafa Kamal, as part of preparations for the budget for fiscal 2022-23. The meeting also evaluated the current economic situation and outlined the next course of action.
The Division proposed that the size of the next budget would be Tk 6,77,874 crore or 15.4 percent of the GDP. It would be 12 percent bigger than the current budget of Tk 6,03,681 crore, which is 17.5 percent of the GDP.
The revenue collection target would be Tk 4,33,000 crore, of which Tk 3,70,000 crore would be collected by the NBR, said sources.
State Minister for Planning Shamsul Alam said import of luxury and unnecessary items should be discouraged to reduce pressure on foreign exchange reserves.
He said agricultural subsidies would continue but subsidies may be slashed for several other sectors.
The Russia-Ukraine war is putting pressure on the global economy and also that of Bangladesh. And if the war rages on, the government will have to take some measures, he said.
Outlining the budget for fiscal 2022-23, the Finance Division proposed keeping the subsidy allocation below 1 percent of the GDP. It also suggested gradual adjustment of subsidies for oil, energy, gas and fertiliser.
If price is not adjusted, around Tk 18,000 crore will be required for power, Tk 15,000 crore for fertiliser and Tk 12,300 crore for import of LNG in the next fiscal year.
In the current fiscal year, subsidies for power stand at Tk 9,000 crore, for import of LNG Tk 6,000 crore and for fertiliser Tk 9,500 crore.
The prices of these items have gone up due to the Covid pandemic and the Russia-Ukraine war. Additional Tk 50,000 crore has been set aside for these sectors.
The Division also suggested avoiding hard-term loans given that those are unlikely to help alleviate poverty and facilitate growth. It said an increase in government loans would pose risk to budget management.
Proposals were also made for increasing the Letter of Credit (LC) margin up to 100 percent to discourage people from importing luxury and unnecessary products.
Sources said the budget deficit rose more than 5 percent of the GDP in the last two years due to the Covid pandemic. In the current fiscal year, it is estimated to be over 6 percent of the GDP.
The Division advised bringing down the budget deficit below 5 percent of the GDP in the next two years.
In the first eight months of the current fiscal year, the current account deficit reached $12.83 billion which was a surplus of $825 million during the same period in the last fiscal year. This was because the country’s import rose to $58.77 billion during the eight months in FY22 from $40 billion during the same period in FY21.
The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
The Division recommended adjusting the exchange rate of the dollar against taka gradually to encourage export and remittance, said sources.
Shamsul Alam said, “Our inflation has increased recently… Domestic production has gone up but not up to the expected level. Restrictions on luxury and unnecessary products are necessary to keep the foreign currency reserves at a satisfactory level.
“No restrictions will be imposed on import of essential items and productive sectors.”
He further said subsidies on agriculture will continue and it will not be curtailed.
“During the Covid pandemic, the agriculture sector has given us relief… We will give more subsidies on agriculture.”
Shamsul said the government will give subsidy on energy. “But it may be reduced if it goes beyond the tolerable level.”
The Division also proposed gradual withdrawal of extra loan facilities offered during the pandemic.
It observed that the financial health of commercial banks is weakening due to the rise in non-performing loans, which have pushed up the costs of LC.
It also suggested taking initiatives so that mega projects could be completed in due time.
At yesterday’s meeting, the outlines of the next budget were presented and directives were given to the ministries concerned to do their part in its preparation.
According to the outline, the size of the annual development programme will be Tk 2,46,207 crore, and that of the revenue budget Tk 4,31,657 crore.
Of the revenue expenditure, Tk 76,412 crore will be allocated for salary and allowances, and Tk 80,275 crore for paying interest on government debts.
দুই বছর আগে স্ত্রীকে না জানিয়ে সপ্তাহে ১ হাজার টাকা সুদে ৫ হাজার টাকা ঋণ নিয়েছিলেন স্বামী। কিন্তু সময়মতো ঋণ পরিশোধ না করায় চক্রবৃদ্ধি সুদে টাকার পরিমাণ কয়েকগুণ বেড়ে গেলে স্বামী পালিয়ে যান। ঋণ…


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