The New Nation - Internet Edition

Staff Reporter

The government borrowing from the banking system would rise to some extent than was estimated to finance the widening budget deficit in the current fiscal year.

"The extent of enhanced borrowing is not yet finalised," Finance Adviser Dr Mirza Azizul Islam yesterday told reporters emerging from a high-powered meeting at the Planning Ministry.

The budget for fiscal 2007-08 estimated bank borrowing to the tune of Tk 7,253 crore, but the government already borrowed Tk 7,950 crore as of February 19, according to Bangladesh Bank figures.

"Overall domestic borrowing will not increase too much as sale of national savings certificates has declined," said the Adviser, who chaired the meeting of the Coordination Council on Fiscal, Monetary and Exchange Rate Policies.

The budget for 2007-08 estimated total domestic borrowing of Tk 19,276 crore, including the bank borrowing, and foreign borrowing Tk 6,305 crore to finance an estimated deficit of 4.2 per cent of GDP.

Dr Aziz said the meeting discussed issues of budget deficit, revenue collection and revised size of Annual Development Programme (ADP) to prepare the next budget for the next fiscal year (2008-09).

Bangladesh Bank Governor Dr Salehuddin Ahmed, Finance Secretary Dr Mohammed Tareq, ERD Secretary Aminul Islam Bhuiyan, Planning

Secretary Zafar Ahmed Chowdhury and NBR Chairman Mohammed Abdul Mazid were present at the meeting.

Replying to a question, the Finance Adviser said the borrowing from the banking system is unlikely to affect inflation too much as the money market has surplus liquidity.

He told another questioner that foreign assistance has increased simultaneously with revenue collection to help finance the deficit against a planned ADP cut to a range between Tk 22,500 crore and Tk 23,000 crore from original allocation of Tk 26,500 crore.

"Even the bank borrowing will increase to some extent to finance the deficit," he said.

The revenue collection, he added, would increase by 24-25 per cent at the end of the current fiscal year from Tk 37,479 crore in the previous fiscal.

Meanwhile, the revenue collection has increased by 25 per cent to Tk 23,483 crore during the first half of the current fiscal year from 18,845 crore in the same period last fiscal.

"Improved collection system has helped increase the revenue," the Adviser said.