Next budget size likely Tk 7.5t
With sights set on the upcoming general election, the government may target a larger annual budget for the next fiscal year as a coordination council on fiscal and monetary matters, and currency exchange sits Tuesday. Officials said the meeting might set a preliminary size of the budget for fiscal year 2023-24 at around Tk 7.5 trillion, up from Tk 6.78-trillion outlay of the present budget. Also, the committee, headed by Finance Minister AHM Mustafa Kamal is likely to set gross domestic product (GDP) growth target at 7.0 per cent, little lower than the current fiscal year’s target. Sources say the government wants to keep the rate of inflation around 7.5 per cent in the next fiscal year as people involved with budget preparation think that the ongoing war between Russia and Ukraine will end shortly. Consumer prices will come down gradually in the international and domestic markets when the war ends, thus the rate of inflation will also go down, they hope, in reflection of government’s view about a gradual reflation in the economy. Since July this year, the rate of inflation remained very high, between 7.48 per cent and 9.52 per cent, pushing the fixed-income group of people to the streets to buy essential commodities sold at subsidised rates. A senior finance ministry official says, “The next budget is government’s election-year budget, so various issues will be taken into consideration in its preparation level.” Budget officials will put forward a number of facts and figures for consideration before the committee, which mainly be chosen by the finance minister, he adds.
BB relaxes loan repayment policy again
The Bangladesh Bank yesterday relaxed its already flexible loan repayment policy, saying the real income of borrowers has fallen due to the severe impacts of the prolonged Russia-Ukraine war. Now, borrowers will be allowed to avoid being classified as a defaulter if they clear 50 per cent of their instalments payable in the final quarter of 2022 instead of 75 per cent previously, according to a notice of the central bank. Insiders expressed their worries that the relaxed policy would deepen the liquidity stress in the banking sector as lenders will not get back the expected amount of funds from borrowers. Banks in Bangladesh are already struggling to mobilise deposits owing to the negative returns on savings for the higher inflation and erosion of confidence among savers after loan-related scams recently left them upset. The relaxed policy will be applicable for borrowers who took term loans, whose repayment tenure is more than one year, said the notice. The central bank says the cost of industrial production has surged in recent times due to the war since the conflict has driven up the commodity prices in the global market.
Banks’ lending to industries slows
The growth in advances in the form of term loans for industries have slowed down as businesses took a slow approach amidst the ongoing economic uncertainty while banks became conservative owing to a reduction in excess liquidity. As of September of this year, banks’ advances to industries in the form of term loans stood at Tk 261,654 crore, which was 8 per cent higher year-on-year. Yet, this was the lowest growth in the last five years, according to Quarterly Scheduled Banks Statistics released by Bangladesh Bank last week. The amount of term loan for industries, however, declined 0.37 per cent in the July-September period from Tk 262,618 crore at the end of April-June quarter this year.