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Bank & Finance - 3 weeks ago

Tk 1.14 tr to be spent on interest payments

Farhad Chowdhury: Every fiscal year, the government has to borrow from various sources to meet the budget deficit. As a result, interest expenditure on the government has doubled in the last five years. In the financial year 2019-2020, Tk 57,663 crore had to be spent on interest payments. In the next financial year, the proposed allocation for this sector is Tk 1 lakh 14 thousand crores (Tk 1.14 trillion). This information is known from sources in the Finance Department of the Ministry of Finance.
In the budget of the current financial year, there is an allocation of Tk 94,376 crores in the interest expenditure sector. But in the revised budget it has been increased to Tk 1 lakh 5 thousand 300 crore.
In this regard, the finance department said, another challenge in the government’s financial system is the high interest rate in both the domestic and international markets, which is increasing the borrowing cost of the government. This situation will be more challenging in the medium term due to the increasing demand for infrastructure, social protection systems and other development targets of the government.
According to the projection of the finance department, in the financial year 2025-2026, Tk 1 lakh 38 thousand 30 crore will be spent only in the interest sector.
As the reason for the increase in interest expenses, the finance department said, the amount of rigid and semi-flexible loans in financing from foreign sources is gradually increasing. As a result, the interest rate of this sector is also increasing. In addition, devaluation and rise in global interest rates will increase the underlying interest rate of foreign sources from 1 percent in FY2020-2021 to 2 percent in FY2025-2026.
In this regard, an official of the finance department said that the domestic interest expenditure has increased a lot due to government securities. Interest expense on government bill bonds is hovering between 11 percent and 12 percent. Which was 6-7 percent eight months ago. As a result, the government’s interest expense has increased a lot.
Meanwhile, it is seen from the budget document that the interest expenditure in the budget is increasing every year. For example, in the fiscal year 2021-2022, the interest expenditure was Tk 77,779 crores. In the financial year 2022-2023, it increased to Tk 80,375 crores. Later it was revised and taken to Tk 90,013 crores.
In the revised budget for the fiscal year 2020-2021, the expenditure on interest sector is Tk 63,823 crores. In the original budget which was Tk 63,801 crores. Out of this, domestic interest expenditure is Tk 58,500 crore and foreign interest expenditure is Tk 5,323 crore.
In the financial year 2019-2020, the interest sector spent Tk 57,664 crores. Out of this, interest expenditure on domestic sector was Tk 52,796 crores and interest expenditure on foreign loans was Tk 4,868 crores.
In the financial year 2018-2019, interest expenditure in the domestic sector was Tk 45,278 crore and foreign interest expenditure was Tk 3,467 crore. In the financial year 2017-2018, the domestic interest expenditure was Tk 38,160 crore and the foreign debt interest expenditure was Tk 3,605 crore.
In the financial year 2016-2017, this expenditure was Tk 38,240 crores and Tk 1,711 crores respectively. In 2015-2016 financial year Tk 30,044 crore and Tk 625 crore and in 2014-2015 financial year domestic interest expenditure was Tk 29,436 crore and foreign debt interest expenditure was Tk 1,537 crore.
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