DHAKA (Reuters) - Bangladesh’s finance minister on Thursday announced the budget for the next fiscal year would increase by a quarter to more than 4 trillion taka ($50 billion) to help spur on economic growth.
The budget, for the year July 2017 to June 2018, is crucial for the government as it looks towards the next national election, due before the end of 2018.
“This is the last full budget of our current tenure as the general election is scheduled to be held next year,” Abul Mal Abdul Muhith told parliament as he announced the figure, a near 26 percent rise on current financial year.
He said the economy would grow at the rate of 7.4 percent in the coming fiscal year, the highest in the past four decades, compared with 7.11 percent during this fiscal year.
“We will be able to achieve the target by increasing domestic and external demands by creating more jobs and increasing investment,” he said.
“Domestic demand is the principal driving force of our GDP growth.”
He said the rate of inflation would come down to 5.5 percent from 6.10 percent in the past year.
The budget deficit in the next fiscal year will be 1,122.75 billion taka, which is 5 percent of GDP.
“The deficit will increase slightly compared with the previous year, due to increased allocations for development activities and the social security sector,” the minister said.
“It is unlikely to have any negative macroeconomic impact due to robust GDP growth.”
The deficit will be financed both from domestic and external sources, such as borrowing from the banking system and from selling savings certificates.
Giving a list of success during the outgoing fiscal year, Muhith said that, per provisional estimates from the Bangladesh Bureau of Statistics, by the end of current fiscal year, the country’s per capita income will grow to $1,602 a year. The same figure was $543 in the fiscal year 2005-06.
During the same period, poverty and extreme poverty has been reduced to 23.2 and 12.9 percent from 38.4 and 24.2 percent respectively, he said. Life expectancy had increased from 65.4 years in 2006 to almost 72 years now.
In order to increase agricultural production, in addition to the regular subsidies, Bangladesh is providing cash incentives for agricultural exports, and a 20 percent rebate is being provided on electricity consumed by irrigation pumps.
($1 = 80.7400 taka)
Reporting by Serajul Quadir; Editing by Alison Williams