A large annual budget and projected higher deficit for the 2008-09 (July-June) fiscal year has forced Bangladesh's interim government to raise borrowing through saving certificates by more than 120 percent in the first quarter of the year, a senior official said on Sunday.
In July-September, it borrowed nearly 7.6 billion taka ($111 million), compared to about 3.45 billion taka ($50 million) borrowed through the same instrument in the same period of the previous year, the official said. The government had to pay more than 17 percent higher interest due to the increased borrowing, compared with the same period of fiscal year to June 2008, he said.
Bankers and economists said the government was compelled to raise borrowings because of the large size of the national budget and fiscal deficit in the current year. On June 9, Mirza Azizul Islam, the government's finance and planning adviser (minister), announced a nearly 1 trillion taka ($14.6 billion) budget for the year to June 2009, with overall five percent fiscal deficit of gross domestic products (GDP).
The value of GDP in the fiscal year is $79 billion, officials said. "It will also push the inflation up as the money is being spent in non-productive sectors," said Khandaker Ibrahim Khaled, a former deputy governor of the central bank and also a noted economist.
Bangladesh's annual consumer price inflation rose to 10.19 percent in September, well above the government's target for average annual inflation of 9.0 percent for the year to June 2009.
Khaled told Reuters the government should revise the budget downward to make it realistic and focus more on raising resources from the domestic sources, principally from tax revenue. But the job is likely to fall upon the next government which is due to take over in January, following a parliamentary election set for December 18.
The election will cap nearly two years of rule under a state of emergency by the interim authority, headed by former central bank governor Fakhruddin Ahmed.
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