B Mirror Desk : The banking sector in Bangladesh is currently experiencing a liquidity crisis, which has made it challenging for banks to extend credit. As a result, the government is under significant pressure to address the budget deficit for the fiscal year 2024-25. In response, the government has opted to rely more on foreign debt and has lowered the target for domestic bank credit. This decision was made during a meeting of the Economic Coordination Council.
Adjustment of bank credit targets: In the revised budget for the current fiscal year, the bank credit target has been decreased by Tk 38,500 crore, from an initial target of Tk 1,37,500 crore to a new target of Tk 99,000 crore.
Increase in foreign credit targets: Conversely, the target for foreign credit has been raised from Tk 95,000 crore to Tk 1,09,000 crore.
Economic growth and inflation: The target for economic growth has been revised downward from 6.75% to 5%. Additionally, the inflation target has been increased from 6.5% to 8%, although experts believe achieving this may be challenging, given that inflation is already nearing 8%.
Revenue collection challenges: The revenue collection target in the budget has also been lowered. The government’s collections from VAT, customs duties, and income tax have significantly decreased compared to the previous two fiscal years, further complicating efforts to address the budget deficit.
Revised budget overview: The overall budget has been reduced by Tk 53,000 crore, resulting in a new budget size of Tk 7,44,000 crore.
Causes of the economic crisis: The government’s financial difficulties stem from stagnation in revenue collection, challenges in trade and industry, slowdowns at ports, and delays in development activities. Political changes and economic hurdles have contributed to various issues in executing the budget.
The government is taking various steps to address this crisis, such as increasing foreign borrowing and reducing bank lending targets. However, more effective measures are needed to achieve economic stability in the long term.
