Interest payment likely to go up 17% next fiscal year

The government’s interest payment on borrowings is estimated to be Tk 80,275 crore in the next fiscal 2022-23, an increase of 17 percent from Tk 68,586 crore allocated for the current fiscal year, according to a finance ministry document.

Yet, the next year’s allocation would be 1.8 percent of gross domestic product (GDP), down from 2 percent earmarked for the current fiscal year, shows the document.

Of the upcoming budget’s interest payment allocation, around 90 percent would be spent on paying the interest on domestic debt and the rest 10 percent for foreign debt. Most of the domestic debt comes from the national savings certificates.

Finance Minister AHM Mustafa Kamal is expected to announce the national budget for FY23 worth Tk 6,77,864 crore in the Jatiya Sangsad on June 9. As per estimates, the interest payment amount would be 11.84 percent of the total budget expenditure for the next fiscal year.

The budgetary allocation for the interest payment has been increasing every year as as the government spend Tk 14,709 crore for the purpose in FY11. The steep rise in the interest payment has been attributed by Finance Division officials to higher borrowing from both local and foreign sources to meet the budget deficit.

The requirement of funding development projects, many of which are overvalued, leads the government to take more loans against the backdrop of lower than expected revenue income, said an expert.

Other officials, however, say the interest payment outlay increased in line with other allotments.

Former finance adviser to caretaker government Dr AB Mirza Azizul Islam told the Business Insider Bangladesh that the government’s growing dependence on debt to meet the budget deficit is going to increase loans. It should be utilised in right kind of projects, he added.

He expressed disappointment that many projects are undertaken without proper feasibility studies and these projects would hardly contribute to the economy.

Centre for Policy Dialogue has recommended that the government should improve the capacity and efficiency of public expenditure to reduce huge interest payment outlay in the budget.