Govt to earmark Tk 100b to pay interest subsidy

* Stimulus packages to enhance by two to three more years

* Subsidy burden will thus increase further

* Remittance subsidy will be increased to Tk 40b next year

To provide subsidy against interest of the 23 Covid-linked incentive packages, Bangladesh government will set aside some Tk 100 billion in the budget for next fiscal year (FY) 2021-22.

Officials said, such a huge allocation for one specific segment may shot up the total subsidy allocation in the upcoming budget.

Last year to help the pandemic-hit sectors as well as people to come out from the shock and make recovery, the government declared 23 incentive packages, involving Tk 1.24 trillion.

The tenure of disbursing loans from these stimulus packages will end on June 30, but still a significant portion of funds remains undistributed.

According to the Ministry of Finance officials, the government is planning to enhance the tenure of the stimulus packages by two to three more years.

A senior official said on Sunday that most of the stimulus packages would be implemented through the banks and financial institutions.

The government will provide half of the total interest of the stimulus loan packages to the implementing banks and financial institutions as subsidy, while the borrowers will pay the rest.

This subsidy will involve a large amount of money. So, the new budget will keep an allocation of Tk 100 billion in this regard, he added.

Another official said late disbursement of loans from the stimulus packages increased significantly.

“As the pandemic continues to disrupt the country's economic activities, there is no scope to keep the allocated fund of the packages undisbursed.”

He also said if the pandemic situation does not improve and its third wave hits Bangladesh, the government may need to announce some more stimulus packages to enhance the size of the existing packages to support various hard-hit sectors.

“The government’s subsidy burden will thus increase further in the upcoming FY.”

On the other hand, remittance inflow is increasing significantly this year. It has already gone up by 35 per cent, compared to the previous year. The government pays 2.0 per cent as incentives to remitters for encouraging them to send money through official channels.

The official noted that the government kept an allocation of Tk 30.06b in the outgoing FY to pay as remittance subsidy, which will be increased to Tk 40b next year.

The allocation for export subsidy, however, will be kept same at Tk 68.25b in the next FY.

The subsidy allocation for energy sector in FY 2021-22 will remain same at Tk 90 billion like the current year, he added.