budget deficit
Govt aims to collect 11.2% of GDP in taxes by FY 2025-26
The government aims to collect total revenue amounting to 11.2 percent of GDP by the end of the 2025-26 fiscal, according to the Medium Term Macroeconomic Policy Statement (2023-24 to 2025-26) of the Finance Division under the Finance Ministry.
It said that Bangladesh has consistently maintained an expansionary fiscal stance keeping a moderate budget deficit—usually around 5 percent of GDP—to foster economic growth, reduce poverty, and improve social outcomes.
However, the tax-GDP ratio in Bangladesh is significantly lower than its peers and hence, the government has taken several initiatives to improve revenue collection.
Yet, it said, the fast pace of GDP growth has made it challenging to increase the ratio.
No tax fair, NBR will organise tax support service to smooth returns submission
The measures that have been undertaken are expected to gradually improve revenue collection by increasing both the tax volume and the number of taxpayers.
The Statement said that the foremost objectives of the public expenditure policy are to stimulate private investment through building infrastructures and improving the business climate, creating employment opportunities, supporting low-income population through social safety net programs, and reducing poverty through ensuring efficient redistribution of wealth and thus ensuring inclusive development.
With the advent of the Covid-19 outbreak, the government started to focus on saving lives while keeping the living standards from falling.
To do this, it mentioned, the Government emphasised on retaining jobs, providing income support, keeping supply chains active, reviving the rural economy, and ensuring food supply.
Public pension is considered tax-free, notification soon: Finance Ministry
For this, the government increased spending and implemented comprehensive recovery programs consisting of twenty-eight stimulus packages.
The stimulus efforts worked well and as a result the economy returned to a high growth trajectory fast while other countries continued to struggle.
However, the Russia-Ukraine war has again posed considerable risks and to mitigate the risks the Government has been pursuing a policy to rationalise public expenditure to stimulate economic growth by inducing domestic productivity growth.
While managing the economy to maximise welfare and development, the government is expected to maintain a budget deficit of around 5 percent of GDP over the medium term.
Historically, the size of public expenditure has been low relative to GDP in Bangladesh because of various limitations in the process of revenue collection and budget implementation.
Land Development Tax Bill 2023 passed in JS
To improve the situation, the government has undertaken certain strategies to increase public expenditure.
The target of increasing public expenditure has been set to around 16.2 percent of GDP in FY 2025-26.
Moreover, the government is pursuing the Public Financial Management (PFM) reforms process to achieve this target.
To improve overall public service delivery, financial control of budget allocations, real-time monitoring of budget execution, and integration of recurrent and capital spending, implementation of the PFM Action Plan (2018-23) is ongoing, and revised PFM Reform Action Plan (2024-2028) has recently been formulated.
Under the PFM reforms, pension automation and E-challan automation systems have been introduced with the help of iBAS++ software.
This system continues to play a significant role in simplifying the budget management process. At the same time, all beneficiary programs are being brought under the Government to Person (G2P) payment system with the help of the iBAS++ software, which brings greater transparency in government expenditure management.
In addition, all government allocations from government institutions as well as all semi-government, autonomous, and state-owned enterprises, are being brought under the Treasury Single Account (TSA) through the iBAS++ system in the medium term.
How to Deactivate TIN in Bangladesh: A Comprehensive Guide
1 year ago
Govt aims to bring budget deficit back within 5% by FY25
The government of Bangladesh is projecting to rein in the budget deficit back within 5 percent of GDP by 2024-25 fiscal from the current 5.5 percent.
The budget deficit for 2023-24 fiscal has been projected at 5.1 percent, according to an official budget document.
The revised deficit in fiscal 2021-22 was 5.1 percent. The deficit for 2020-21 fiscal was 3.7 percent.
The current deficit remains higher than the norm prior to the outbreak of the Covid-19 pandemic: the deficit averaged 3.5% of GDP in FY15-FY19.
Read more: ADB provides assurances of $2 billion in budget support
According to the document, the size of the country’s GDP for the running 2022-23 fiscal is Tk44,49,959 crore.
It will be Tk 49,91,337 crore for the next 2023-24 fiscal while Tk 56,06,269 crore for 2024-25 fiscal.
The document said that to mitigate the budget deficit the government will bank on the internal resources.
In the running 2022-23 fiscal 3.3 percent of the GDP will come from the internal resources and 2.4 percent of the GDP will come from the banking sector.
Read more: Budget’s highest priority is to tame inflation: PM
The external financing will contribute some 2.2 percent of the GDP in the running fiscal, as per the document.
For the 2023-24 fiscal 2.9 percent of the GDP will come from the internal resources and 2.3 percent of the GDP will be from the banking sector.
The external financing will contribute some 2.2 percent of the GDP in the current fiscal.
For 2024-25 fiscal 2.8 percent of the GDP will come from the internal resources and 2.3 percent of the GDP will come from the banking sector.
Read more: Food production, price control should get prioritised in budget: Dr. Debapriya
The external financing will contribute some 2.3 percent of the GDP in the running fiscal, as per the document, which says the economic activities of the country suffered a serious setback from March 2020 due to the spread of Coronavirus.
While the economy was turning around the time of the Russia-Ukraine war, the sanctions and counter-sanctions caused another blow to the recovery as the world economy stared at another recession.
The document mentioned that a potentially huge global supply-side shock may reduce growth and push up inflation, affecting the post-COVID-19 recovery.
Russia’s invasion of Ukraine and the economic sanctions on Russia that followed put global energy supplies at risk.
Read More: Govt struggles to lift tax-GDP ratio to double digits
It mentioned that Russia supplies around 10 percent of the world’s energy, including 17 percent of its natural gas and 12 percent of its oil.
The jump in oil and gas prices will add to industry costs and reduce consumers’ real income.
Record inflation is currently evident in a number of countries, including Bangladesh.
Twelve-month average inflation in the country was 5.6 percent for FY21. Considering the inflation scenario of trade partners, inflation projection for FY22 is as high as 5.8 percent and 5.6 percent for FY23.
Read More:IMF suggests updating GDP report every 3 months
On the other hand, the point-to-point inflation rate in Bangladesh is moving higher to 6.29 percent on March 22 which was 5.56 percent in the previous year.
1 year ago
Govt aims to reduce budget deficit to 5.7% in upcoming financial year, says official document
The government has projected to reduce the budget deficit to 5.7 per cent of the GDP in the next FY2022-23 from existing 6.2 per cent, according to an official document.
The budget deficit for the FY2023-24 has been projected at 5.5 per cent.
In the FY2020-21 budget the deficit was revised at 6.1 per cent from original projection of 6 per cent. The deficit for the FY2019-20 was 5.3 per cent.
The official document says government has been seeking additional funds from the multilateral/ bilateral development partners to implement its declared fiscal stimulus package of TK1.28 trillion - 4.2 per cent of the Nominal GDP in FY21) since the pandemic hit the economy in March 2020.
Read:Budget deficit: Savings certificates, non-bank sources to be tapped for one-third of domestic financing
The government's financing requirement has been projected at Tk. 2.1 trillion (6.2 per cent of GDP) in FY2021-22.
Government's request for budgetary / BOP support has received favourable response from the major development partners, including the World Bank, the Asian Development Bank, Asian Infrastructure Investment Bank (AlB), Japan International Cooperation Agency (JICA) and EDCF (of Korea), says the document.
It says that government has already received US$ 1.7 billion in FY2019-20 and is expected to receive US$ 6.2 billion in total by FY2022-23 out of which US$ 1.5 billion would be used for vaccination programme and the rest would be used for budget/BOP support.
With this external support, the government will avoid crowding out the domestic economy as the government's domestic financing requirement will reduce by 8.5 per cent of GDP in running FY2021-22 from the previous fiscal year.
For the FY2022-23 some Tk 990 billion will come from external sources as loan, Tk 40 billion as grants while Tk 105.50 billion will be used for amortisation.
Among the domestic sources, the banking sector would provide the major share as the government has been phasing out its dependence on expensive nonbank borrowing gradually.
As per the official document, in FY2022-23, Tk 1020.10 billion will come from banking sector, Tk 330 billion will be from non-banking sector, Tk 280 billion from National Savings Certificate while Tk 50 billion from other sources.
For FY2023-24 some Tk 1010 billion will come from external sources as loan, Tk 42 billion as grants while Tk 152.5 billion will be used for amortisation.
In FY2022-23 an amount of Tk 1210.30 billion will come from banking sector, Tk 310 billion will be from non-banking sector, Tk 260 billion from National Savings Certificate while Tk 50 billion from other sources.
The document reads that the government projects to reduce its financing requirement with narrowing of the fiscal deficit in the medium term as the economy is expected to recover from the COVID-19 fallout with the implementation of mass vaccination programme and the fiscal stimulus package.
Medium term financing projection shows that government financing requirement would gradually come down to 5.5 per cent of GDP in FY2023-24 from the peak of 6.2 per cent of GDP in the running FY2021-22.
Read: Govt staring at ‘burgeoning budget deficit’ in aftermath of pandemic
Domestic financing that remains the major source of government finance in the medium term is projected to come down to 3.5 per cent of GDP (bank and non-bank ratio 3.9) while external financing to 2.1 per cent of GDP by FY2023-24.
In the absence of a vibrant domestic bond market, the government projects to keep the share of expensive nonbank borrowing (e.g. NSCs) low while the share of bank financing to rise, the document adds.
2 years ago
Budget deficit: Savings certificates, non-bank sources to be tapped for one-third of domestic financing
A substantial portion of the proposed 6.2 percent of GDP budget deficit in the next fiscal will be met from the local sources, where a total of Tk 37,001crore will be taken out from the savings certificates and other non-bank sources.
Finance Minister AHM Mustafa Kamal placed this outline while unveiling the national budget in parliament on Thursday giving a total estimated expenditure of Tk. 6,03,681 crore, which is 17.5 percent of GDP.
Read: Govt aims to rein in budget deficit back within 5% from next fiscal
He said the overall budget deficit for FY2021-2022 will be Tk 2,14,681 crore, which is 6.2 percent of GDP, up slightly from the last budget's 6.1 percent.
“Out of the total deficit, Tk. 1,01,228crore will be financed from external sources, while Tk 1,13,453 crore from domestic sources of which Tk. 76,452 crore , or two-thirds will come from the banking system, and the remaining third, Tk 37,001crore, from savings certificates and other non-bank sources.
He mentioned that the government has set the target for total revenue income in the fiscal year 2021-2022 at Tk 3,89,000 crore, which is 11.3 percent of GDP.
Read: Overall budget deficit Tk. 190,000 crore in 2020-21
“Out of this, Tk 3,30,000crore will be collected through the NBR sources while revenue from non-NBR sources has been estimated at Tk 16,000 crore and the non-tax revenue is estimated to be Tk 43,000 crore”.
3 years ago
Govt aims to rein in budget deficit back within 5% from next fiscal
The government has set itself a target to rein in the budget deficit within 5% of GDP once again from the 2021-22 fiscal, relying on a vibrant economic performance resulting from its injection of various stimulus packages for various sectors to overcome the adverse impacts of the COVID-19 pandemic.
3 years ago
COVID-19: Budget speech to detail plan to save economy
The Tk 556,978 crore budget for 2020-21 fiscal containing the outline of salvaging the economy from the grasp of COVID-19 will be placed on Thursday next.
4 years ago