The national budget for the upcoming financial year 2024-2025 will be announced tomorrow amid decade-high inflation and growing pressure to repay foreign loans.
Finance minister Abul Hasaan Mahmood Ali, who will place his first budget, is also facing daunting challenges to meet growing expenditures on subsidies and for administration with an overall outlay of Tk 7,97,000 crore, amid slow revenue growth over the years.
The creation of employment through higher private investment as well as foreign direct investment is no less challenging for the 82-year-old diplomat turned finance minister with the ongoing shortage of dollars and the trend of local currency depreciation.聽
Besides tackling inflation by enhancing market monitoring and expanding the social safety net programme, steps should be taken to curb hundi as well as capital flights, said former Bangladesh Bank governor Salehuddin Ahmed.
The overall 12-month average inflation has been recorded at 9.73 per cent between June 2023 and May 2024, after it hit a decade-high of 9.02 per cent in FY23, compounding the miseries of the majority population.
The former BB governor said scopes for improving the country鈥檚 financial account were dim without curbing hundi as well as capital flight.
The country鈥檚 financial account deficit, which mainly reflects the bad economic situation, surged to $9,258 million in July-March of FY24 from $2,928 million in the same period of FY23, putting the local currency at risk of further depreciation.
The local currency depreciation by around 36 per cent in the past 23 months as a consequence of the financial account deficit has already created extra pressure on foreign loan repayment.
The Economic Relations Division has calculated that the foreign loan repayment will grow 53 per cent to around Tk 57,800 crore in FY25 against Tk 37,775 crore in the outgoing FY24.
Policy Research Institute executive director Ahsan H Mansur expected that the finance minister would give a clear idea of how the repayment of foreign debt would be made against the growing interest payments for big spending projects like the Roopour Nuclear Power Plant, Metro Rail, and Padma Rail Link Projects.聽
Suggestions have already been made for debt restructuring, he said.
Economists expected that the exercise of value for money in the new budget by cutting unnecessary expenditures as well as development projects and stopping revenue leakages would be imperative for the proper implementation of the new fiscal measures.
Of the fiscal measures, the finance ministry has committed to keeping the budget deficit within 4.6 per cent of the gross domestic product in FY25, or Tk 2,57,000 crore, under the ongoing $4.7 billion loan programme taken from the International Monetary Fund to assist with the balance of payments.聽
The IMF has already disbursed $1.1 billion and hinted at the disbursement of $1.15 billion in the current month, with the Bangladesh Bank struggling to keep its forex reserves, hovering just over $18 billion from $48 billion in August 20921, in the safe zone.
Former World Bank Dhaka office chief economist Zahid Hussain said that the budget deficit of 4.6 per cent had been aimed at cutting the growing dependency on borrowing.
The government has aimed at generating an extra 0.5 per cent revenue in the upcoming FY25, or an overall Tk 4,80,000 crore, under the IMF loan programme.
Zahid said it would give the government access to funds for spending more on the education and health sectors ahead of the country鈥檚 graduation from the least developed countries.
Economists said that steps for the necessary supply of energy and power to the agriculture and manufacturing sectors without price hikes were crucial for the country鈥檚 overall growth in FY 25.
They said that the government could easily decrease the pressure on power subsidies by stopping the payment of capacity charges to unnecessary rental power plants.
It has been reported that the finance division calculated a power subsidy of Tk 35,000 crore in FY25 against the backdrop of overcapacity in the power sector by more than 50 per cent.
Salehuddin observed that export growth in the outgoing FY24 was not encouraging.聽
Income from exports contributed over 80 per cent of the country鈥檚 inflow of foreign currencies and grew 3.93 per cent to $47.47 billion in July鈥揂pril of FY24 from $45.67 billion during the same period of FY23.
