The overall deficit in the next fiscal year's budget will cross Tk 30,000 crore mainly due to expenditures in subsidies, safety net programmes and wage increases of government employees, says the draft estimate of the FY08-09 bud-

get

The draft also shows that revenue income in the next budget will increase about 21 percent compared to the revenue target of current fiscal year, but at the same time, the expenditure will rise by 25 percent on the whole.

To meet the deficit, the government plans to borrow Tk 14,000

crore from the banks.

As a result, the estimated borrowing in the next fiscal year may rise by 83 percent compared to the total borrowing in FY07-08, which was targeted atTk7,253 crore.

The Finance Division is now busy putting finishing touches to the budget to be placed on June 9. “We are bringing some minor changes in budgetary allocations as new demands are coming from different ministries every day," said a senior finance ministry official, involved in the budget preparation

He said that the total size of tire budget would depend largely on price adjustment of petroleum products. "We have estimated the

budget size calculating 25-30 percent price increase of petroleum products in the next fiscal year," the official added.

According to the draft, expenditure in the next budget will be Tk 99,970 crore whereas it was Tk 79,614 crore in the current fiscal year.

The next budget would spend around 15 percent of its total expenditure in subsidies, Finance Adviser Mirza Azizul Islam told the reporters at the Zia International Airport yesterday on his return from the annual conference of Islamic Development Bank (IDB) in Jeddah.

Despite price adjustment of petroleum products, the government needs to provide more than Tk6,000 crore for fuels and overTk 3,000 crore for fertiliser in subsidies.

Another Tk 3,000 crore will be spent as subsidies in food and electricity and incentives on exports, the draft budget of FY08-09 shows.

In addition, the government is going to introduce four new social safety-net programmes of Tk 3,000 crore to alleviate the sufferings of the people bearing the brunt of high food prices.

The government is also considering 10 percent increase in the amount for the existing social ^safety-net programmes in the next “budget

The amount for targeted social empowerment, social safety net. poverty reduction and employment generation programmes in the current fiscal year is more than Tk 3,893 crore.

The expenditure against the wages of government employees in FY07-08 is about Tk 13.507 crore, which will be more than Tk 19,000 crore in the next fiscal year as the government will provide dearness allowances of around 20 percent to its employees.

If the government plans to provide the dearness allowances with retrospective effect then the expenditure in the current fiscal year will be increased, sources said.

On revenue income, the draft budget shows that targeted revenue income in FY08-09 is Tk 69,401 crore, which wasTk 57,301 crore in the current budget.

Of the FY08 09 targeted revenue, NBR related taxes are Tk

54,500 crore, which is 24 percent higher than the original NBR related tax collection target of the current fiscal year.

The budget will put emphasis on VAT and income tax as main source of NBR related revenue income, sources said.

As the government is depending on bank borrowing to meet the budget deficit, the Centre for Policy Dialogue (CPD) warned that a sustained high deficit for a long period may cause a vicious circle of borrowing and higher revenue expenditure through debt servicing liabilities.