Budget deficit financing: Country turns again to IMF after a decade

[Indos]

I don't know why you want to indulge in things you told understand. INDIA'S budget deficit is financed through rupee bonds and through banking, we don't take loans from external sources to cover budget deficit.

So it means you do take loan. And any way many countries have already had bond that in majority absorbed by local market and used local currency. For Indonesia case, it is already around 70-80 percent using local currency for state bond, so what happen in India bond issuance is not something that can be called as exceptional, as I only respond to your statement that India government doesnt borrow money in this fiscal year to finance India budget deficit.

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According to India's Quarterly External Debt Report for quarter ended December 2021, the country's external debt was placed at USD 614.9 billion, recording an increase of USD 11.5 billion over its level at the end of September 2021. "India's external debt continues to be sustainable and prudently managed," it said.Mar 31, 2022

 

[Protest_again]

So it means you do take loan. And any way many countries have already had bond that in majority absorbed by local market and used local currency. For Indonesia case, it is already around 70-80 percent using local currency for state bond, so what happen in India bond issuance is not something that can be called as exceptional, as I only respond to your statement that India government doesnt borrow money in this fiscal year to finance India budget deficit.

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According to India's Quarterly External Debt Report for quarter ended December 2021, the country's external debt was placed at USD 614.9 billion, recording an increase of USD 11.5 billion over its level at the end of September 2021. "India's external debt continues to be sustainable and prudently managed," it said.Mar 31, 2022

Read the thread title and talk on the context. All countries have external debt including Bangoland ($71 billion and growing). But we don't rely on external loans to drive our capital spending which has always been recipe for disaster as can be seen in case of Sri Lanka.

 

[Sliver]

India is also still borrowing from IMF right until this day ?

- India did not borrow from IMF in a long time

Revenues are very low. And for past 3-4 fiscals, BD has been putting up budgets of over $6 trillion, never to actually achieve the said goal, always falling short of BE of revenue. Even the next fiscal revenue estimates are unlikely to be achieved. All hype no substance.


Lol. INDIA doesn't borrow to finance budget deficits. Infact last fiscal India's revenue was 30% more than budget estimates. Unlike Bangladesh which for hype overestimate their budget, we keep our budgets realistic.

India does borrow but only from its own markets or from the RBI

now can we please get back to BD's IMF borrowing?

I am yet to see why BD is planning to borrow from IMF when it says its doing well economically - something isnt adding up. any BD folks here to help out? why cant BD fund the deficit internally? usually IMF funds are taken to fund external obligations (imports/paying loans) and not budget deficits.

 

[mmr]

Country turns again to IMF after a decade

After the lapse of a decade, Bangladesh is likely to borrow funds from the International Monetary Fund (IMF) to narrow its budget deficit, seen as a bit high in current context. Ministry of Finance (MoF) officials said Monday they had opened negotiations with the Washington-based lender on the p

thefinancialexpress.com.bd

Budget deficit financing​

Country turns again to IMF after a decade​

FHM HUMAYAN KABIR | Published: June 28, 2022 08:09:55 | Updated: June 28, 2022 18:26:49

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After the lapse of a decade, Bangladesh is likely to borrow funds from the International Monetary Fund (IMF) to narrow its budget deficit, seen as a bit high in current context.

Ministry of Finance (MoF) officials said Monday they had opened negotiations with the Washington-based lender on the potential budgetary support.

"We had a meeting with IMF Dhaka office on Monday. The IMF has offered us the budgetary credit support to help minimise the budget deficit," a senior MoF official said.

The IMF recently offered the policy-support credit meant for financing the deficit of the total Tk 6.78-trillion budget in the upcoming fiscal year (FY) 2022-23.

The multilateral funding agency had last confirmed $987 million worth of budget support, titled Extended Credit Facility (ECF), in April 2012 to help restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth.
Back then, Bangladesh was hit hard by a global financial meltdown that started in 2007.

A senior MoF official says since Bangladesh has also been affected by the Covid-19 pandemic and the recent global price push amid Russia-Ukraine war, "we are trying to explore the budget-support facility from the IMF".

"The amount of the loan has yet to be confirmed. But we are hopeful of getting more than $1.0 billion from the IMF," he told the FE.

"We started meeting with the Washington-based lender Monday. Some few other meetings will be held in the coming days before finalising the loan," says another MoF official.

The IMF Resident Representative in Bangladesh, Jayendu De, high officials from Finance Division, Economic Relations Division (ERD) and Financial Institutions Division were present at the talks.

The lender informed Bangladesh that the country could avail up to $6.8 billion worth of loans in next few years, if the need arises so, the official adds.

The government will analyse detailed offers of the IMF with the country's financial health, he further says. "We will also calculate the repayment cycles and its pressure on government's fiscal and monetary situation amid the internal and global situations," he adds.

Besides, the government will analyse IMF's proposed terms and conditions regarding different kinds of reforms tagged to the credit facility.

The IMF has introduced short-maturity loans under the nomenclatures of Resilience and Sustainability Facility (RSF), Extended Fund Facilities (EFF) and Extended Credit Facility (ECF).
The Fund has offered the RSF as it wants to help Bangladesh in the area of climate-change impact.

The RSF arrangements have a 20-year maturity and a 10.5-year grace period during which no principal is required to be repaid.
Borrower country will have to pay nearly 1.539 per cent of interest (SDRi+75 basis points) and a 0.25-percent service charge for receiving the IMF loan.

Meanwhile, the government is also searching for several other credit facilities from the World Bank, the Asian Development Bank and from some other lenders for minimising the budget deficit in the coming days.

kabirhumayan10@gmail.com

This is expected.

Bd fx reserves will continue go down as import bills go up. Export and remittance will go down further. Export going down because bd has only garments to Export which is non essential item during inflation. And remittance will go down thanks to hundi and bd central bank flip flop on fx rates. Ukraine war might last for years meaning high commodity..metal...oil...grain prices in coming years.

But hey dont worry...u have walton...already Exported 11 million dollars..maybe next year it will be 22 million lol..and ola! Probelm solved.

 

[Indos]

- India did not borrow from IMF in a long time

India does borrow but only from its own markets or from the RBI

now can we please get back to BD's IMF borrowing?

I am yet to see why BD is planning to borrow from IMF when it says its doing well economically - something isnt adding up. any BD folks here to help out? why cant BD fund the deficit internally? usually IMF funds are taken to fund external obligations (imports/paying loans) and not budget deficits.

This year BD trade deficit is extra ordinary, I believe it is the reason. Just look on their trade balance Jan-May 2022 and compare it with last year trade deficit in the same period.

This is due to higher energy prices, higher commodity prices, and also higher inflation in general as producers will pass high energy and commodity prices into their product price, not to think consequence in higher labor price as well around the world due to higher inflation rate across the world

 

[PadmaBridge]

This year BD trade deficit is extra ordinary, I believe it is the reason. Just look on their trade balance Jan-May 2022 and compare it with last year trade deficit in the same period.

This is due to higher energy prices, higher commodity prices, and also higher inflation in general as producers will pass high energy and commodity prices into their product price, not to think consequence in higher labor price as well around the world due to higher inflation rate across the world

Bangladesh, being a Muslim country, will not tolerate the level of inequality that is inherent in Hindu society.

BD government borrowed massively during covid to ensure only a few thousand people died.

Whilst the Indian government abandoned its poor. Many died of starvation on the way to their villages.

In a Muslim country you cannot hide the dead. In a Hindu society the government incinerated the poor akin to how they abort millions of baby girls each year.

I believe this is why the almighty Allah mandates a burial instead of burning to ashes.

Allah wants the rulers to see the consequences of their actions - nothing like graves to remind the rulers of their failure!

Modi literally incinerated his COVID failures!

 

[bluesky]

Revenues are very low. And for past 3-4 fiscals, BD has been putting up budgets of over $6 trillion, never to actually achieve the said goal, always falling short of BE of revenue. Even the next fiscal revenue estimates are unlikely to be achieved. All hype no substance.


Lol. INDIA doesn't borrow to finance budget deficits. Infact last fiscal India's revenue was 30% more than budget estimates. Unlike Bangladesh which for hype overestimate their budget, we keep our budgets realistic.

Any developing country has to borrow to meet the annual budget deficit. India certainly borrows much heavily from the IMF and others.

Please read @Indos post and trust the information instead of arguing on the false premise.

 

[PadmaBridge]

Any developing country has to borrow to meet the annual budget deficit. India certainly borrows much heavily from the IMF and others.

Please read @Indos post and trust the information instead of arguing on the false premise.

Virtually every country runs a budget deficit.

Whether a country goes bankrupt is dependent on their ability to pay for imports.

Due to a combination of high exports and high remittance - Bangladesh is managing to pay for its imports. And still maintain a healthy forex reserve.

Industrial base that is not dependent on oil and gas - of course helps!

 

[Protest_again]

Any developing country has to borrow to meet the annual budget deficit. India certainly borrows much heavily from the IMF and others.

Please read @Indos post and trust the information instead of arguing on the false premise.

Lol. INDIA doesn't borrow from external sources to finance its budget. INDIA takes it SDR rights and put it to good use. INDIA sovereign guaranteed debt (public debt) is only $100 billion.

Here is the Bangladesh case.


The ratio of Bangladesh’s external debt to gross domestic product (GDP) increased to 21.8 per cent in 2021, according to updated statistics released by the central bank. The ratio was 19.5 per cent in 2020. The external debt to gross national income (GNI) reached 24.10 per cent at the end of 2021, the statistics showed; it was 21.5 per cent in 2020.

The total outstanding stock of the external debt reached $90.79 billion at the end of 2021, recording 24.50 per cent growth over the same period of 2020.

Of the total external debt, long-term debt was 80.10 per cent, or $72.70 billion, while short-term debt was 19.90 per cent, or $18.09 billion.

The half-yearly report, titled ‘Foreign Direct Investment and External Debt: July-December 2021’, shows around 75 per cent of the total external debt is in the public sector, while the rest is in the private sector.

75% of $90 billion is $62.5 billion. That is for an economy 8 times lower. Hope you understand ratios.

 

[Sliver]

Any developing country has to borrow to meet the annual budget deficit. India certainly borrows much heavily from the IMF and others.

Please read @Indos post and trust the information instead of arguing on the false premise.

here is the imf page on India
Financial Position in the Fund for India as of May 31, 2022

IV. Outstanding Purchases and Loans: None


Repayment of all the loans taken from International Monetary Fund has been completed on May 31, 2000. India is now a contributor to the IMF.

Please read @Indos post and trust the information instead of arguing on the false premise.

i hope the above information from imf's site clears the air.

 

[bluesky]

Lol. INDIA doesn't borrow from external sources to finance its budget. INDIA takes it SDR rights and put it to good use. INDIA sovereign guaranteed debt (public debt) is only $100 billion.

Bloody ignorant nuts!!! Read the wiki citation below to know how much India has taken loans from foreign sources, the external debts.

"India’s external debt was US$570 billion at the end of March 2021. It recorded an increase of US$11.6 billion over its level at end of March 2020. The external debt to GDP ratio increased to 21.1% at end of March 2021 from 20.6% a year ago".[1]

 

[Protest_again]

Bloody ignorant nuts!!! Read the wiki citation below to know how much India has taken loans from foreign sources, the external debts.

"India’s external debt was US$570 billion at the end of March 2021. It recorded an increase of US$11.6 billion over its level at end of March 2020. The external debt to GDP ratio increased to 21.1% at end of March 2021 from 20.6% a year ago".[1]

lol. ignorants by definition are Bangos. I said public external debt as in debt that governments are liable to. India's external debt is dominated by the corporate external debt which GOI is not responsible to pay.

 

[UKBengali]

No idea why we are having silly arguments about this.

Indian government is able to raise more tax revenue and its rating is investment grade and so more easily able to issue bonds than BD, hence it can finance its budget on its own.

BD needs extra help due to the costs of dealing with Covid-19.

IMF is offering a loan at cheap rate and so BD is taking it. Better this than cut vital spending from the budget.

This in no way says anything about the state of the BD economy.

 

[bluesky]

lol. ignorants by definition are Bangos. I said public external debt as in debt that governments are liable to. India's external debt is dominated by the corporate external debt which GOI is not responsible to pay.

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External debts are always external debts. And for India, it is a staggering $570 billion. It seems another SL is unfurling itself to become the laughing stock of all other countries.

Why do you camouflage your heavy debt burden with so many explanations that I already lost count of them? Be honest to your country that India is heavily under external debts that it cannot probably pay back.

BD is sooo different!!!! Everything is under control.

 

[Wood]

External debts are always external debts. And for India, it is a staggering $570 billion. It seems another SL is unfurling itself to become the laughing stock of all other countries.

Why do you camouflage your heavy debt burden with so many explanations that I already lost count of them? Be honest to your country that India is heavily under external debts that it cannot probably pay back.

BD is sooo different!!!! Everything is under control.

You don't understand the difference between sovereign and private debt? Think you are trying to be intentionally dense just to win a pointless internet spat