Approximately Tk3.03 lakh crore will be spent on subsidies and incentives, interest payments on loans, and salaries and allowances for government employees in the next fiscal year, which accounts for around 41.69% of the upcoming national budget, said officials of the Ministry of Finance.
Finance Minister Abul Hasan Mahmud Ali will present a budget worth around Tk8 lakh crore for the fiscal year 2024-2025 in the National Parliament on Thursday (6 June).
This is the first budget of the current government and also the first budget by Abul Hasan Mahmud Ali as the 26th finance minister of the country.
Finance Division officials said Tk1.21 lakh crore has been proposed to be allocated for subsidy and incentives, Tk1.28 lakh crore for interest payments and a total of Tk3.32 lakh crore for wages, salaries and allowances for government employees in the upcoming fiscal year.
The budget for the current fiscal year has an allocation of Tk2.86 lakh crore for these sectors and the amount was reduced to Tk2.81 lakh crore in the revised budget.
The allocation for these sectors in the next fiscal will be increased by Tk46,574 crore or 16.31% compared to the original budget of the current fiscal year; and an 18.27% increase or about Tk51,296 crore compared with the revised budget.
As a percentage, the allocation for these sectors is being increased from 37.48% of the budget to 39%.
Officials said the upcoming budget would be less than 5% bigger than the current one following drastic contractionary measures even though the ministry would each year’s budget by around 14-17% in recent times.
Government will keep control of the spending due to various crises including inflation, failure to generate enough revenue and conditions of the International Monetary Fund (IMF) to limit the budget deficit.
Economists and experts said that allocation to sectors such as logistics, infrastructure, social protection, education and health is required to increase to revive the economy from crisis.
Confidence of entrepreneurs can be rebuilt through funding for investment and ensuring a steady supply of power and energy, they added.
They said increasing the allocation for interest, salaries and incentives by reducing the expenditure in the development sector may hamper economic growth and adversely affect the macroeconomic environment.
Big jump in subsidies
Around Tk1.21 lakh crore will be allocated for subsidies and incentives in the next financial year, which is 2.15% of GDP and over 14% of the proposed budget.
In the current financial year, Tk1.11 lakh crore has been allocated to this sector, but it has been reduced to Tk98,000 crore as part of compliance with various conditions of IMF including an increase in gas and electricity prices, and adjustment in fuel prices.
The subsidies are to increase by Tk9913 crore in the next fiscal as compared to the original budget of the current fiscal and it is to be increased by Tk22,585 crore or 23% as compared to the revised budget.
Despite the government increasing the tariff, the subsidy for electricity is to be allotted Tk40,000 crore with a rise of Tk5,000 crore from the current fiscal.
Subsidy in the agriculture sector will remain unchanged at Tk25,122 crore in the next financial year, said officials of the finance division.
However, the allocation for food subsidy may increase marginally from TTk6766 crore in the current fiscal to Tk7,360 crore in the next fiscal.
The Trading Corporation of Bangladesh (TCB) will get an allocation of Tk14,000 crore to continue the supply of food at subsidised prices.
Another Tk12,000 crores will be kept as grants for various private-level organisations including hospitals, charities, research institutes and NGOs.
Interest payment costs to rise by 36%
Of the Tk1.14 lakh crore allocated to pay interests, Tk93,000 crore will be for local debts while the payment for interest on foreign loans to be Tk20,500 crore.
A sum of Tk94,376 crore has been allotted in the current fiscal to pay interest but the amount was set to Tk1.05 lakh crore due to a rise in the rate of interest in home and abroad and devaluation of the Taka.
Accordingly, the interest payment will be increased by 20.26% in the next budget compared to the current one.
The review showed that the interest on domestic debt will be increased by 13.41% in the next fiscal year from the allocated Tk82,000 crore in the current budget.
On the other hand, the interest costs for foreign loans will increase by around 65.64% compared to the current allocation of Tk12,376 crore.
