The Finance Division will have to put aside a substantial amount of fund to make the interest payment for loans taken from domestic and external sources over the past one and a half decades.
About Tk 1.22 lakh crore is going to be allocated for interest payment in the budget for the financial year 2025-26, which will account for at least 15.44 per cent of the overall budget outlay -- likely to be Tk 7.9 lakh crore -- up from 14 per cent in the previous budget.聽
Finance adviser Salehuddin Ahmed is scheduled to announce the new budget tomorrow, the first under the interim government that assumed office on August 8 following the ouster of the Awami League government amid a popular uprising.
According to economists, the payment of interest would continue to have pressure on the budget management.
Blaming the previous political regime鈥檚 borrowing spree from both external and domestic sources, they said that interest payment had already shrunk the fiscal space amid a poor revenue generation.
During its 15 years of non-stop rule, the AL regime borrowed heavily from local and foreign sources while the overall government debt stood around Tk 18.36 lakh crore at the end of June 2024, compared with Tk 2.77 lakh crore when it formed government in 2009.
Of the total debt of some Tk 18.36 lakh crore in June 2024, Tk 10.35 lakh crore accounted for the domestic debt and Tk 8.01 lakh crore for the external debt.
Loans were mostly taken for implementing infrastructure projects, such as bridges, roads, electricity plants, highways, expressways, and urban transportation schemes.
But many of the projects have proved to be politically motivated.
Some of those projects have already turned out to be burden for the nation, said聽 former World Bank Dhaka office chief economist Zahid Hussain -- especially the underground tunnel below the river Karnaphuli, the Dasherkandi Sewage Treatment Plant, and the Payra Sea Port.
The projected allocation for interest payment will exceed 21 per cent of the non-development budget -- likely to be Tk 5.6 lakh crore.
The interim government has already approved the annual development programme at Tk 2.3 lakh crore.
The overall revenue collection target is likely to be set at 5.61 lakh crore, leaving the interim government to manage a relatively small budget deficit of some 3.8 per cent.
M Masrur Reaz, chair of the Policy Exchange Bangladesh, said that the Finance Division needed to be cautious as the bank borrowing target may discourage the private sector.
Businesses are already facing an investment inertia, he said.
Economists said that extra efforts were imperative to improve the implementation the ADP.
According to finance ministry officials, the gross domestic product size for FY26 is likely to be projected at Tk 62.44 lakh crore, up from Tk 55.52 lakh crore for the outgoing FY25, as calculated by the Bangladesh Bureau of Statistics.
