Next budget will be contractionary lowering GDP growth to 6.9%: official document

The government is preparing the next annual budget as contractionary aiming to reduce the inflation rate and restore financial stability, according to an official document.

The size of the budget is likely to be Tk8.05 lakh crore, and the expenditure growth is being fixed at 8%, cutting down from 10 to 12% of previous years.

At the same time, the GDP (gross domestic product) growth target is also being lowered to 6.9% (7.5% in the current budget). The government concentrates on giving more attention to controlling inflation rather than achieving growth.

The policymakers are considering increasing the inflation target to 7.5% from 6.0% in the existing budget of FY2023-24, the document stated.

Also, due to the existing political and economic situation, the budget for the current fiscal year (2023-24) will not be fully implementable. As a result, the government decided to cut at least Tk52,000 crore.

Amid the economic crisis and austerity programme, the finance division is moving away from giving an expansionary budget for the next fiscal year 2024-25.

"The new budget will be quite contractionary as the revenue collection is less, import and export situation is not good. This situation may continue next year as well. This decision has been taken after analysing the overall situation," an additional secretary of the finance division who is involved in preparing the budget told  UNB on Thursday.

He said that the size of the next budget- total expenditure Tk8.05 lakh crore, income Tk5.55 lakh crore, and deficit Tk2.50 lakh crore.

In this case, the size is increasing by Tk43,000 crore compared to the budget of the current fiscal 2023-24. The revenue target will increase by Tk51,100 crore.

Usually, the size of a new budget increases by 10 to 12% compared to the current year's budget, said a finance division official. But this time it will increase by less than 8%. This is being done as the size of the budget must match revenue collection.

Revenue collection is low, imports and exports are decreasing. Considering these issues, it is not possible to give a big budget, like previous years, said the official who wished anonymity.

Dr AB Mirza Azizul Islam, former bureaucrat and adviser of a caretaker government, told UNB that the decision not to give an expansionary budget is correct in the prevailing situation.

Currently, there is uncertainty in every supply, and investment is not expanding as desired. In this situation achieving over 7% GDP growth is challenging, he said.

"Inflation is now 10% which shows no signs of abating, so downing GDP growth is justified," Mirza Azizul said.

Dr Ahsan H. Mansur, executive director of Policy Research Institute (PRI) said in this regard that the decision against expanding the budget is in line with the time's requirement.

There is no benefit in increasing the size of the budget if the revenue cannot be increased, he said.

"There are dollar and revenue challenges. The size of the budget should be fixed keeping that in mind. As a result, a low growth budget will be correct," he said.