Finance minister AHM Mustafa Kamal on Thursday set an ambitious target of 8.2 per cent GDP growth for the next fiscal with a comprehensive plan that includes four main strategies although he himself admitted that all calculations about the global economy have been turned upside down under the impact of the COVID-19 global pandemic.
"The Asian Development Bank made a forecast of 7.8 per cent growth this year based on our performance in the first eight months. But unfortunately, all calculations about the global economy have been turned upside down under the impact of the COVID-19 global pandemic," he said while placing his Tk 568,000 crore , which is 17.9 per cent of the GDP, budget proposal in parliament.
The finance minister in his 130-page budget speech with the slogan 'Economic Transition and Pathway to Progress' said that since the beginning of the COVID-19 pandemic, the government has taken various steps to combat its fallout.
"We have taken a comprehensive plan to overcome the possible negative impacts of pandemic on our economy and people. Under this plan, we have taken measures that were necessary in the immediate term and we are implementing some in the medium term. We have also taken up a range of initiatives that will be implemented in longer-term to achieve full economic recovery," he said.
Firstly, about the main four strategies, he said the government will discourage luxury expenditures and prioritize government spending that creates job. Due to sound macro-fiscal operation by the government during the last ten years, the Debt-to-GDP ratio is still as low as 34 per cent. This provides the country a cushion against any negative macroeconomic implication while we are increasing public spending to overcome the crisis.
Secondly, he said, we are creating loan facilities through commercial banks at subsidized interest rates for the affected industries and businesses so that they can revive their economic activities and maintain competitiveness at home and abroad.
"Our third strategy is to expand the coverage of the government's social safety net programs to protect the extremely poor and low paid workers of the informal sector from the sudden loss of their source of earning due to pandemic."
Finally, he mentioned that the government will increase the money supply to the economy while making a delicate balance between increased money supply and possible inflationary pressure.
Mustafa Kamal hoped that he will be able to maintain a 5.4 per cent inflation in the next fiscal year.
He said that total allocation for operating and other expenditures is estimated at Tk. 3,62,855 crore, while the allocation for the annual development program (ADP) is Tk. 2,05,145 crore, where the overall budget deficit will be Tk.190,000 crore, which is 6 percent of GDP while it was 5 percent in the outgoing fiscal.
"Out of the total deficit, Tk. 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk. 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources," he narrated.
The allocation proposed for the social infrastructure sector in the next budget is Tk. 1,55,536 crore, which is 27.38 per cent of total allocation, in which allocation for human resource sector (education, health and other related sectors) will be Tk. 1,40,222 crore.
The allocation proposed for the physical infrastructure sector will be Tk. 1,67,011 crore or 29.40 per cent, in which Tk. 69,553 crore will go to overall agricultural and rural development, Tk. 61,435 crore to overall communications, and Tk. 26,758 crore to power and energy.
A total Tk. 1,40,265 crore has been proposed for general services, which is 24.69 per cent of the total allocation. Tk. 36,610 crore is proposed for public-private partnerships (PPP), financial assistance to different industries, subsidies and equity investments in nationalized corporations, banks, and financial institutions, which is 6.45 per cent of the total allocation.
A total of Tk. 63,801 crore for interest payment, which is 11.23 per cent of total allocation. Tk. 4,777 crore for net lending and other expenses, which is 0.84 per cent of the total allocation.