Govt has no option but to print huge Taka to meet budget deficit

Staff Reporter :
The government may have to print huge amount of Taka to meet budget deficit in the coming fiscal year (2023-24) as the traditional sources are drying up, economists warned.
Following this, inflation will be increased as well as the local currency will be devalued further in days to come, they said while speaking at a webinar on “Budget 2023-24 and Economic Stability Assessment” organized by the Forum for Bangladesh Studies on Thursday.

In his key-note paper, Zia Hasan, the project researcher of the German Federal Ministry of Education and Research, said, “The government mainly relies on bank loan, foreign loan and saving certificates to meet the budget deficit. But these traditional sources are drying up.”

“As a result, the government may have to print Taka worth up to Tk 1 lakh crore in the coming fiscal year (2023-24),” he added.
He further said, “The recurrent expenditure of the government has increased by 26 per cent or Tk 86,000 crore in the current fiscal year. Of this, expenditure on staff and administrative sector has increased by Tk 60,000 crore or 37 per cent and on mega project by Tk 6,000 crore or 11 per cent.”

“It means, not the mega projects, but meeting the administrative expenses has now emerged as the biggest stress for the people of the country,” Zia added.

The additional expenditure of the government will exceed at least Tk 1 lakh crore in next fiscal year and there is no chance of financing in any other way except printing the Taka, he observed.
“Following this, inflation will be inevitable and the life of the common people will become unbearable. This will also lead to a decline in the value of Taka,” he added. On the other hand, letters of credit (LCs) cannot be opened for essential commodities for the common man for giving priority to government commodities due to dollar rationing, he said.

Dr Salehuddin Ahmed, former governor of Bangladesh Bank, said that if the government takes a huge loan from the banking sector and the central bank, investment in the private sector will not increase.
“It means the government itself is blocking the way of employment and it was not a right decision to reduce the dependence on savings certificates,” he said.
“The government must take measures to increase exports and expatriate income as well as transparency and accountability. Otherwise foreign loans will not come,” the economist opined. Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said, “Loan credit to private will decline, if the government takes loans from banking sector heavily. So, unnecessary or less important projects should be scrapped.”