Budget deficit financing: Govt to borrow more abroad, less at home

In the upcoming fiscal year, the government has set a target to utilise $13.27 billion, or Tk 1,62,000 crore, in foreign assistance through loans and grants -- an increase of 62 percent compared to the revised target for the current fiscal year.

According to the Ministry of Finance, $3.59 billion of this foreign assistance will be allocated as budget support, while the remaining amount will come in the form of project loans and grants.

The government is set to move away from its reliance on domestic borrowing to fund the budget deficit in the next fiscal year and opt for foreign borrowing in a bid to free up resources for the private sector and contain inflationary pressures, according to the finance ministry.

The overall deficit has been projected at Tk 2,43,000 crore, which is 3.6 percent of the GDP.

The outgoing fiscal year’s deficit target stands at Tk 2,00,000 crore. The government borrowed Tk 1,37,000 crore from domestic sources and Tk 58,000 crore from abroad, while about Tk 5,000 crore came in grants.

The budget plan for the next fiscal year says net domestic borrowing is expected to fall by 7.29 percent to Tk 1,27,000 crore, with bank borrowing cut by more than five percent to Tk 1,12,000 crore. Net foreign borrowing is projected to surge by over 89 percent to Tk 1,09,850 crore. The remaining Tk 6,150 crore will come from grants.