The Govt of Bangladesh has unveiled its budget for the fiscal year 2022-23, where inflation control and currency stability appear as the core concern while accelerating economic growth remains the key objective with a 7.5% GDP growth target.

Total expenditure in the proposed budget is estimated at BDT 6.8 Tn which would be a 14.2% growth over the last year’s revised budget. The total allocation for pay & allowances, interest and subsidies is close to 76% of the revenue which is likely to be revised upwards given the global headwinds. This incremental allocation for higher subsidy spending may leave reduced fiscal space for targeted public investment.

On the revenue front, direct tax and VAT which accounts for 58% of total revenue collection have been targeted to contribute 67% of the incremental revenue collection compared to last year’s revised budget.

The budget deficit is expected to increase by 20% where 44% of the deficit will be financed through the Banking system. A 39% increase in bank borrowings may result in a liquidity challenge pushing up interest rates further. Moreover, expected depreciation in the currency arena may make foreign borrowing costlier, encouraging the government to continue to rely on domestic borrowing sources.