Amid challenges of dollar shortage, low revenue generation, absent remittance flows, exchange rate volatility and high inflation, the government may prepare a provision of Rs 7.5 lakh crore for the next national budget.

A virtual meeting of the National Coordination Committee on Budget Monitoring and Resources on Tuesday outlined the new budget with a proposed deficit of more than 5 percent of gross domestic product, officials who attended the meeting said.

They calculated that the proposed budget would be only 10 percent more than the current budget of Rs 6.7 lakh crore because of the shortage of resources at home and abroad.

The current budget is 12 percent higher than the previous fiscal year's expenditure.

MK Mujeri, former director general of Bangladesh Institute of Development Studies, said the budget size should be larger and it must ensure quality spending before the country graduates from least developed countries from 2026 onwards.

But lower revenue in recent years has forced the government to borrow to meet growing budget deficits, he said.

Mujeri advised the government to increase revenue and ensure quality expenditure.

In the meeting presided over by Finance Minister AHM Mustafa Kamal, it was decided to bring down the GDP estimate for the current financial year from 7.5 percent to below 7 percent.

Senior officials from Finance Department, Ministry of Planning, Economic Relations Department, National Board of Revenue, Bangladesh Bank and Ministry of Commerce attended the meeting to discuss the overall economic situation of the country.

They identified slowdown in remittance flows, exchange rate volatility, high subsidies and inflation as major challenges in the new financial year and pegged gross domestic product growth at 7.5 percent.

The government is already under pressure to make upward adjustments to gas and electricity prices to cut subsidies under an initial deal with the International Monetary Fund for a $4.5 billion loan over three years.

Remittance growth fell more than 2 percent to $8.6 billion in July-November of FY23, while the local currency has depreciated nearly 20 percent against the dollar in the past five months, pushing foreign exchange reserves below $35 billion this month. from $48 billion in August 2021.

High inflation that rose to 9.5 percent in August has put low- and fixed-income groups under pressure to maintain their daily consumption.

Officials said the Coordinating Council has decided to allocate more than a third of the proposed expenditure for the annual development program in the coming fiscal year which will also witness the next national elections.

They also calculated that the proposed new budget would be 14 percent higher than the proposed revised budget of Rs 6.5 lakh crore earmarked for the current fiscal year.

Overall revenue in the new financial year is pegged at Rs 4.8 lakh crore which will force the government to borrow around Rs 2.6 lakh crore, mainly from local sources, to meet the deficit.