Interest payment takes up 17.56pc more allocation
Debt servicing will take up 17.56 percent more allocation in the upcoming budget than it did in the current one as the government continues to rely excessively on high-cost domestic borrowing to finance deficits.
Some Tk 35,109 crore has been allocated for interest payment in fiscal 2015-16's budget against Tk 29,865 crore in the current year's one.
The difference between revenue and expenditure in the budget is met through a combination of foreign and internal borrowings.
The rate of interest on foreign borrowing is on average 2 to 3 percent but that on internal borrowing is more than 8 percent.
AB Mirza Azizul Islam, a former adviser of a caretaker government, said though the spending on interest payment has increased, debt service payment is still within the limit. “It should not raise any serious concerns.”
The citizens get a bounty as a result of the government's increased domestic borrowing as a big portion of it comes from savings instrument.
The country has about $19 billion of unused foreign aid in the pipeline and stress should be given on how to use more of that fund, he added.