Interest payment burden is getting so heavy that the government has to earmark an amount for it that is more than double the allocation given for the health sector in the proposed budget.
For fiscal year 2020-21, Finance Minister AHM Mustafa Kamal has proposed Tk63,801 crore for interest payments, which is the third-highest allocation in the proposed budget. The amount is 11.23 percent of the total allocation and 10.64 percent higher than the outgoing year.
According to the budget proposal, the government's domestic debt interest payment target is Tk58,253 crore and foreign debt payment target is Tk5,548 crore for the upcoming fiscal year, which will start from July 1.
Ahsan H Mansur, executive director of the Policy Research Institute, told The Business Standard, "It is not a good sign. We are spending almost 30 percent of our revenue earnings to pay interest. That means, we are spending the loan to pay service costs."
"The government has to rethink the non-development expenditure with the loan," he added.
The new target is 10.64 percent higher than the revised debt payment target of the current fiscal year. For the current fiscal year, the revised debt payment target has been set at Tk57,664 crore. Of the amount, the internal debt payment target is Tk52,796 crore and foreign debt target is Tk4,868 crore.
The actual debt payment target of the current fiscal year was Tk57,119 crore, of which domestic debt payment target was Tk52,797 crore and foreign debt payment target was Tk4,273 crore.
Every year, the government is increasing budget expenditure though the revenue earnings target remains unfulfilled.
For the current fiscal year, the government set a revenue target of Tk325,000 crore. But in the first ten months from July to April, it can earn Tk165,000 crore from tax and other sources.
Former governor of the Bangladesh Bank Dr Salehuddin Ahmed said, "We are one of the highest interest payment countries compared to the revenue earnings. The government can utilise this huge spending to develop other sectors."
In the upcoming fiscal year, the government has allocated Tk568,000 crore, of which the highest allocation is for education and technology sectors, 15.09 percent or Tk85,780 crore. For transport and communication, the government allocated the second-highest amount, Tk64,587 crore, which is 11.37 percent of total projected expenditure.
At the end of April this year, the total outstanding bank loan stood at Tk167,069 crore and at the end of February, outstanding loan from national savings tools was Tk295,325 crore.