Budget deficit falls 72% in first 5 months of FY21

Bangladesh’s budget deficit dropped 71.53 percent in the first five months of the current fiscal year compared to the same period a year ago, thanks to low implementation rate of development projects caused by Covid-19.

From July through November in FY2020-21, the government spent Tk106,593 crore and earned Tk96,371 crore, showing a deficit of Tk10,222 crore. The deficit was Tk35,900 crore in the same period of the previous fiscal year.

The government has been forced to suspend development projects due to a 66-day countrywide lockdown and revenue shortfall, resulting in a sharp drop in the budget deficit, said an official involved in the budget implementation process.

However, the International Monetary Fund (IMF) projected the fiscal deficit to increase to 7.9 percent of the country's GDP in fiscal 2019-20 and 10 percent in fiscal 2020-21 due to the pandemic-related expenditure.

“The five months of budgetary data offers no real economic scenario of Bangladesh,” said AB Mirza Azizul Islam, former adviser to the caretaker government.

“There is nothing to worry about the big budget deficit as per the IMF’s projection. Now, the only objective of the government is to save lives from the pandemic,” he said.

Budget deficit has been set at 5.8 percent of GDP for the upcoming fiscal year in a virtual meeting of the budget management panel presided over by Finance minister AHM Mustafa Kamal on Thursday.

The overall budget deficit will be Tk207,565 crore in fiscal year 2021-22, up from Tk189,221 crore in the revised fiscal 2020-21 budget, according to official documents.

In the current fiscal year, the outlay of foreign loan and assistance has been estimated at Tk84,565 crore and loan from local resources Tk123,000 crore. The government needs to borrow Tk93,000 crore from the banking system to offset the deficit.

In the last five months, the government borrowed Tk5,878 crore and paid Tk3,206 crore. According to the Implementation, Monitoring and Evaluation Division, the implementation rate of the Tk2.14 trillion ADP was only 18 percent in the first five months of FY21 — the lowest in the last 10 years.