Wednesday, 25 May, 2022
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Formulation of next budget challenging for govt

Formulation of next budget challenging for govt

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The next fiscal’s budget is going to be challenging for the government as it has to blend the demands of the upcoming polls with the economic issues stemming from the corona crisis as well as the Ukraine war.

The finance minister will be in a safe zone in terms of facing corona challenges with the pandemic entering the third year and economic activities returning to normalcy.

But he has to face the daunting task of managing subsidies on fertiliser, gas and electricity because primary energy, agro-inputs and food prices skyrocketed in the global market amid the Ukraine war.

In the last three budgets, the government faced no pressure from national polls. But this time, the finance minister has to meet the people's representatives’ demands for region-based development work with the ensuing 12th parliamentary polls in the 2022-23 fiscal’s budget. 

So, it is predictable that the government won’t take any steps which will cause public suffering.

Political analysts and economists think that the new budget will be basically focused on national polls.

Even though the corona situation is now under control, the situation is not fully risk-free at the moment. So the pressure of increased expenditure on corona recovery will be still on.

Revamping the shattered economy by enhancing revenue collection to create more jobs is going to be a major challenge for the finance minister.

Finance Minister AHM Mustafa Kamal may place the country’s 51st budget at the national parliament on June 02.

The finance ministry officials hinted that the new budget could be expansionary for spending more on corona recovery and managing other pressures at this moment. The present trend of comparatively higher budget deficit may continue in the FY23 budget as well.

The size of the next budget may be around Tk 6.75 or Tk 6.78 trillion where the ADP size could be of Tk 2.5 trillion or more. The budget deficit may still remain above 6 percent although it was within 5 percent before the covid crisis, they hinted.

In the current 2021-22 fiscal year, the original budget size was Tk 6.03 trillion, which has been slashed to Tk 5.9 trillion. Similarly, the ADP size has been trimmed to Tk 2.07 trillion by curtailing Tk 99.07 billion from Tk 2.25 trillion original ADP.

The fertilizer subsidy is going to be a major challenge for the budget. In the current fiscal year, Tk 95 billion was allocated as fertilizer subsidy but it is likely to finally cross Tk 280 billion at the end of this fiscal.

Fertilizer subsidy was Tk 77 billion in the last fiscal year and Tk 71.80 billion in the previous fiscal year.

Given the current global fertilizer price trend, the government might have to provide three times more subsidies on fertilizer, according to agriculture ministry officials.

The total amount of subsidies in the original budget of the current fiscal year was Tk 490 billion. But finance ministry officials hinted that it could be Tk 700 to Tk 800 billion in the next budget.

As the corona pandemic has not yet gone, the government is mulling setting aside block allocation for purchasing vaccines. This fiscal year, Tk 140 billion was set aside for this purpose.

National Board of Revenue (NBR) might be tasked with collecting Tk 3.7 trillion revenues next year. The target was Tk 3.3 trillion in FY22.

“The revenue target has been kept unchanged in the revised budget as well as the collection was good this year,” a finance ministry official said seeking not to be named.

The total size of the budget deficit may be nearly Tk 2.40 trillion which is over Tk 2.14 trillion this year.

The GDP growth target is being set higher at 7.5 percent which was 7.2 percent in the current fiscal year, while the inflation target is being set at 5.5 percent which is 5.3 percent in FY22, official sources said.