Bangladesh to Keep Spending Loose to Beat Pandemic Fallout

(Bloomberg) -- Bangladesh plans to keep its budget loose for a third straight year, as the government seeks to boost spending to spur economic activity and offset the pandemic’s fallout.

The government proposes a 6.04 trillion taka ($71 billion) national budget for the year starting July 1, Finance Minister A.H.M. Mustafa Kamal said in parliament Thursday. The spending, which needs to be approved by lawmakers, represents a 12% increase from the current year’s revised plan.

The increase will result in the fiscal deficit widening to 6.2% of gross domestic product, compared with a revised 6.1% gap seen in the current year. The nation had targeted to narrow the gap to 5% last fiscal year, but missed the goal as the pandemic set in. The shortfall next year will be 2.15 trillion taka, of which 1 trillion taka will be raised in the form of foreign aid and loans.

The spending is seen helping the South Asian economy expand 7.2% in the next fiscal year, according to the government. The growth in the current year is estimated at 6.1%. A faster pace of expansion will be key to creating enough jobs for the nation’s 67 million-strong labor force and checking inequalities fueled by the pandemic.

“Strong domestic demand will be the main source of our growth,” Kamal said. “Our focus will be on increasing consumption and investment to stimulate domestic demand and enhancing exports to augment external demand,” he said.

Rapid growth before the Covid-19 crisis helped put Bangladesh on track to gaining the ‘developing-nation’ status sometime later this decade. Even in the midst of the pandemic, the economy’s per capita income surpassed neighbor India’s, while its central bank helped Sri Lanka with funds to meet foreign currency spending.

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