Bangladesh’s budget deficit for the upcoming fiscal year could be in jeopardy if it fails to meet its ambitious growth target, warned Fitch Ratings.
In a recent report, the US-based credit rating agency highlighted the historical trend of significant disparities between Bangladesh’s fiscal outcomes and budget forecasts, mainly due to consistent underspending compared to set targets.
Fitch Ratings stated that the revised figures for the current fiscal year, FY23, indicate a budget deficit target of 5.1% of GDP, lower than the initial goal of 5.5% and Fitch’s previous projection of 5.7%.
The agency attributed this deviation to lower-than-anticipated spending on development projects while acknowledging the positive revenue collection performance.
The impact of increased subsidy spending, which reached 2.2% of GDP, further contributed to the deficit.
This exceeded the original budget target of 1.8%, primarily driven by elevated global fertilizers, fuel, and natural gas prices.
Fitch Ratings’ assessment raises concerns about Bangladesh’s fiscal stability and ability to manage the budget deficit effectively.
According to Fitch Ratings, the country’s GDP growth is predicted to rebound to 6.7% in the 2021-22 period.
However, if the growth falls short of the government’s optimistic target, the budget deficit projection for the following fiscal year could be at risk.
These findings underscore the importance of closely monitoring spending patterns and revenue generation to ensure the government’s fiscal objectives align with actual outcomes.
The disparities between budget forecasts and fiscal performance will be crucial for sustaining Bangladesh’s economic stability in the coming years.