The interim government has made progress in mobilising more external loans from multilateral lenders but that will not reduce pressure on fiscal management due to lower than the expected domestic revenue generation, said economists.
Finance Division officials have calculated that around $2.5 billion loan as budget support is expected to be released in the next month by the International Monetary Fund, World Bank and Asian Development Bank.
The budget support will power the on-going government efforts in tackling the dollar shortage.
But the increased flow of external loans will not reduce pressure on fiscal management as the domestic revenue generation still remains 1 per cent negative in the first four months of the current financial year of 2024鈥�25 marked by the regime change on August 5 amid a student-led mass uprising.
In a bid to get $500 million as budget support from the World Bank, the interim government, which has succeeded the Awami League regime, is likely to announce the separation of the policy department of the National Board of Revenue from its executive department soon.
The separation has been a long pending issue between the Washington-based lender and the government since 2003.
The separation of the policy department of the NBR from its executive department was even approved in 2008 by the then caretaker government.
But the implementation of the decision had remained pending, said revenue board chairman Abdur Rahman Khan.
Former World Bank Dhaka office chief economist Zahid Hossain observes though that the separation would not guarantee higher revenue generation immediately.
Emphasising a meaningful separation he observes that engagement of skilled policymakers is imperative for fruitful outcomes in implementation of policy and checking corruption.
Bangladesh is losing $355 million in tax annually because of corporate tax abuse and offshore tax abuse, according to a report titled 鈥楽tate of tax justice 2024鈥� released by the Tax Justice Network in the current month.
The amount is 21.4 per cent of the country鈥檚 total health expenditure, states聽 the report of the United Kingdom-based global network.
With an overall revenue generation target of Tk 4,80,000 crore for FY24鈥�25, and against the target for the first four months, the revenue board has managed to collect around Tk 1,01,281 crore, facing a shortfall of Tk 30,831 crore.
Economists said that the government鈥檚 reliance on borrowing from the banking sector would increase against the backdrop of lower than the expected revenue, and the situation might even lead it to mobilise more loans from the multilateral lenders.
Fiscal management would remain a big challenge for the interim government due to the sloppy condition of the economy, said Research and Policy Integration for Development chairman Mohammad Abdur Razzaque.
Blaming the previous regime鈥檚 reckless decision and management for the overall messy condition, he said that it was imperative for the government to reduce its expenditure.
The projected loan from the banking sector in FY24鈥�25 budget is Tk 1,37,500 crore, while Tk 90,700 crore has been projected to get from the foreign sources to meet the budget deficit of 4.6 per cent.
Finance Division officials said that the interim government had successfully negotiated in increasing the World Bank鈥檚 budget support to $500 million from initially projected $250 million.
The manila-based ADB is going to release $600 million in the next month from initially agreed $300 million, they said.
The officials said that the IMF had given positive signals to the extra loan sought by the interim government in addition to the availability of the half-yearly tranche under the ongoing $4.7 billion loan programme since 2023.
The immediate past political government took the loan to tackle the severe shortage of dollars.
An IMF mission will arrive in the capital next week to negotiate over the extra loans and review the current loan programme.
Finance secretary Khairuzzman Mozumder said that they were expecting to receive $1 billion loan as extra support from the IMF.
The forex reserve hovering around $18.5 billion (as per Sixth Edition of the IMF鈥檚 Balance of Payments and International Investment Position Manual standards) in November will improve with the release of the budget support from the multilateral lenders, said finance division officials.
