Abstract
Budget deficit is one of the most significant macroeconomic issues which have been debated both in the academic and political arena since 1970s. This study aims to explore the current position of government budget deficit, its trends, and sources of budget deficit financing in Bangladesh covering the periods of 1980 to 2018. Secondary data has been used which is collected from Bangladesh Economic Review and World Bank. Data has been analyzed through descriptive methods. The Government financing budget deficit from two sources like domestic and foreign sources. The study finds that Government finances most of its budget deficit from the domestic sources than foreign sources especially from non-banks sources due to the increase in the net sale of national savings certificates while borrowing from bank sources is on the decline. Along with the effective measures of generating more internal resources, the government should also focus on other areas to reduce the budget deficit. The government should be taken proper steps to make progressively investable resources and generate a fund for financing the non-development spending for reducing the reliance on debt that can guarantee more distribution on the development sector.
Highlights
Budget deficit is one of the most important macroeconomic issues that have been debated since 1970s in both academic and political arenas
Deficit financing is met by borrowing from other sectors of the economy or international financial market, government borrowing from domestic sources, and, it can be done by issuing government securities (Lwanga & Mawejje, 2014)
The main aim of this study is to examine the sources of budget deficit financing in the Bangladesh economy for the period between 1980-2018
Summary
Budget deficit is one of the most important macroeconomic issues that have been debated since 1970s in both academic and political arenas. Developed countries do not automatically suffer from the negative impact of budget deficits on macroeconomic balances as opposed to developing countries due to a relatively healthy foreign trade balance, reasonably large foreign exchange reserves, strong capital stocks, and low inflation levels (Samirkas, 2014). Bangladesh has experienced continuous budget deficits and rising debt levels accompanied by a fall in revenue sources. The financing of budget deficit requires more borrowing and external credits, because the collection of revenue is slower as opposed to total expenditure. The foremost being when the actual revenues collected fall short of the projected amount. This may be attributed to low economic performance affecting the power of the government to gather enough. The other causes may be due to the alters in weather outlook that suppresses the productivity of an economy, the uncertainty that dampens the travel industry, outer elements like the worldwide emergency that reduces the private and public speculations, catastrophic events like dry spells, floods, and tropical storms that demolish resources and hamper economic functions
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