Staff Reporter :
A crisis management national budget is unveiled for the fiscal year 2024–25 as the country is passing through macro-economic instability, including an ever-depleting forex reserve, increasing interest payments, low export earnings, scant inbound remittances, a sick financial sector, inflation, low investment, etc.
Yet, in a turn reminiscent of bygone patterns, the Finance Minister, Abul Hassan Mahmood Ali, has unfurled a budget grander in scale than its predecessors, perpetuating a trend that experts have deemed mishmash within the fiscal fabric.
The finance minister placed the Tk 7,97,000 crore national budget for the upcoming fiscal year in the parliament on Thursday, but it was met with a chorus of critique, branded as a “mishmash” by those versed in the nuances of economic policy.
“The budget has set mountainous targets, but it fails to show the way those could be achieved. There is no such specific direction on how the revenue could be generated up to Tk 5,41,000 crore,” Dr. Ahsan H. Mansur, Executive Director of the Policy Research Institute (PRI), told The New Nation.
In a bid to navigate economic challenges, the government has unveiled the Fiscal Year 2025 budget, revealing a modest increase of 4.6 percent compared to its predecessor. This growth rate starkly contrasts with the double-digit spikes witnessed in the past five years, signalling a more conservative fiscal approach.
The current fiscal year’s budget boasted a significant 12.35 percent expansion over the previous year, highlighting the shift in strategy amidst economic uncertainties.
Despite this cautious stance, the government has set an ambitious economic growth target of over 7 percent for the current fiscal year, while projecting a slightly lower target of 6.75 percent for FY25.
Addressing the pressing issue of inflation, which has averaged over 9 percent in recent years due to ineffective measures by both the central bank and the government, the finance minister emphasised a multi-faceted approach.
“To control inflation, austerity measures will be maintained on a limited scale,” he stated, “while expanding safety net programmes to shield low-income individuals from the burden of high inflation.”
Notably, the budget aims to contain the deficit to 4.6 percent of GDP, a level not seen in a decade, with an estimated deficit of Tk 2,56,000 crore. Revenue income for the upcoming year is projected at Tk 5,41,000 crore, constituting 9.7 percent of the GDP. Of this, Tk 4,80,000 crore is slated to be collected through the National Board of Revenue, with an additional Tk 61,000 crore from other sources.
In a move prioritising social welfare, a significant allocation of Tk 2,06,569 crore has been proposed for social infrastructure in the budget, comprising 25.92 percent of the total allocation.
For physical infrastructu
re, an allocation of Tk 2,16,111 crore has been proposed, which constitutes 27.12 percent of the total allocation. For the common service sector, an allocation of Tk 1,68,701 crore has been proposed, which comprises 21.17 percent of the total allocation.
A total of Tk 1,13,500 crore has been allocated for realising the expenditure on interest payments, which constitutes 14.24 percent of the total allocation.
Regarding the budget deficit and financing, the finance minister said, “Our prudent and pragmatic macroeconomic policy has kept our debt management relatively risk-free, as mentioned in the reports of the International Monetary Fund.”
“Despite the increase in expenditure for loan and interest payments due to the depreciation of foreign currency over the past two years, our deficit and borrowing will remain sustainable in our overall budget,” he added.
In the proposed budget, the estimated deficit will stand at Tk 2,56,000 crore, which is 4.6 percent of GDP. The minister proposed Tk 1,60,900 crore from domestic sources and Tk 95,100 crore from foreign sources for financing the deficit.
He also proposed an allocation of Tk 38,819 crore for primary and mass education for the upcoming FY, which was Tk 34,722 crore in the current FY, and Tk 44,108 crore to the secondary and higher education sector, which was Tk 42,839 crore in the current FY.
He also proposed an allocation of Tk 11,783 crore for FY ’25 for the Technical and Madrasa Education Division, which was Tk 10,602 crore in the current fiscal year.
In FY ’25, an allocation of Tk 41,407 crore has been proposed to maintain the progress of health services, health education, and family welfare, which was Tk 38,051 crore in the current FY.
Alongside the agriculture sector, he proposed an allocation of Tk 38,259 crore for the fisheries and livestock sectors to ensure food security for the coming FY. In FY’24, the allocation for this sector was Tk 35,880 crore.
Besides, an allocation of Tk 46,552 crore has been proposed for the local government and rural development sector, which was Tk 48,137 crore in the current FY.
Considering the importance of the power and energy sectors, an allocation of Tk 30,317 crore has been proposed for the next FY, compared to Tk 34,819 crore in FY’24.
Considering the importance of the country’s trade, commerce, and supply systems, the finance minister proposes an allocation of Tk 80,498 crore for the development of the communication infrastructure sector for the next FY, compared to Tk. 85,191 crore in the current FY.
On the other hand, an allocation of Tk 1,36,026 crore has been allocated for the next FY for the social safety net programme, which was Tk 1,26,272 crore in the current FY.
About the instability in the country’s macro-economy, Mahmud Ali said, “Considering the current global political landscape and the state of the domestic macro-economy, time-befitting reforms in the fiscal sector will be undertaken.”
“These include digital transformation, expansion of the tax net, collection of non-tax revenue, and enhancement of administrative capacity to ensure adequate resource mobilization. While maintaining the budget deficit at a manageable level, reliance on external sources for deficit financing will be reduced,” he added.
He further said, “Bangladesh is facing pressure from two sides simultaneously. It is observed that the capital outflows in the external sector are showing a bullish trend as opposed to the reduced inflow of capital.”
“This opposite trend increases the deficit in financial accounts on the one hand and creates the burden of repayment of foreign loans on the other,” he added.
“The ‘Crawling Peg’ system has been introduced as a primary measure to make the exchange rate market-based. As a result, exports will be encouraged, and remittances through the official channel will increase as well.
Though the financial account is facing a deficit, it is expected that it will reduce in the medium run and the foreign exchange reserve will continue to grow. The exchange rate of taka will gain again once the reserve is stabilised,” he said.