Local borrowing expected to rise, foreign borrowing to fall

Borrowing from foreign sources is expected to decrease while it will increase significantly from local sources in the next national budget to fill the 5.5% of GDP shortfall in the new fiscal year.

According to finance division officials, net borrowing from foreign sources is expected to be projected at around Tk 93,000 crore in the FY23 national budget.

The amount is Tk 4,700 crore lower than the Tk 97,738 crore projected in the outgoing national budget.

Finance Minister AHM Mustafa Kamal will announce the budget for the new fiscal year in parliament on June 9.

Finance division officials said the flow of budget support from multilateral lending agencies such as the World Bank and Asian Development Bank is expected to be Tk 15,000 crore in the coming financial year, while that it was Tk 20,000 crore for the outgoing fiscal year.

The high inflow of budget support had been projected in the outgoing budget year in relation to lending by multilateral lenders to address the Covid situation.

To compensate for the lower inflow of loans from foreign sources and to fill the budget gap, the government is likely to increase borrowing from the banking sector, finance division officials said.

They added that the amount would be around Tk 1,01,818 crore, more than Tk 25,000 crore more than the projected net borrowing from the banking sector at Tk 76,452 crore.

They noted that borrowing from the banking sector was less costly than borrowing through national savings certificates under non-banking sources.

The finance minister is likely to project the budget deficit at 5.5 percent of GDP in the new fiscal year.

The budget deficit rose to 5.5% in FY20 from 4.8% in FY19, while the figure was 6% in FY21 and 6, 2% in the outgoing fiscal year.

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