As Bangladesh perennially fails to collect desired revenue, the visiting International Monetary Fund (IMF) delegation advised the government to take up smaller national budget to minimise the deficit.

The advice in form of suggestion came as an eight-member delegation, led by Chris Papageorgiou, began the second review of the multilateral lenders $4.7 billion loan programme on Wednesday.

The release of the third tranche of the credit support in June will rely on the recommendation of the delegation, which is scheduled to hold separate meetings with several key government institutions, including the finance division, the Bangladesh Bank (BB), and the National Board ofa Revenue (NBR) till June 8.

The finance division presented its projection on the upcoming budget and the revised budget for the current fiscal year before the IMF team on Wednesday.

According to the projection, the size of the budget for 2024-25 will be Tk 7,96,900 crore, which is 4.6 percent bigger than the current budget. Usually, the budgetary allocation is swelled by 12 to 13 percent every year. The budget for 2023-24 is 12.35 percent higher than the previous one.

The IMF mission suggested that the upcoming budget, which will be unveiled in the first week of June, should be smaller than the projection, citing a low revenue collection, according to a number of finance ministry officials who attended the meeting.

In the current context, the budget deficit should be narrowed to contain inflation and meet the IMF targets. More spending control measures are also required..There is a scope for reduction of the budget size by cutting expenditures on subsidies, IMF officials said.

Finance ministry officials told the IMF that they were preparing the national budget in line with the governments political vision, the election manifesto, and the 8th Five-Year Plan. The targets of the loan programme will be monitored separately, they said.

They added the government has already cut the size of the budget for FY25 and spending measures would be tightened. The budget deficit has been targeted at 5.2 percent of GDP for FY24. It is projected at 4.6 percent for the next year.

At the meeting, the IMF officials expressed their disappointment over the slow reform in the revenue sector and voiced concerns that Bangladesh may not be able to achieve the collection target set by the lender for FY24.

The government will have to raise Tk 3,94,530 crore in tax revenue by the end of June. The receipts may stand at Tk 3,80,000 crore in FY24. Collection by the NBR rose 15 percent year-on-year to Tk 259,866 crore in the July-March period of the current fiscal year.

The government initially tasked the NBR with the goal of collecting Tk 430,000 crore in FY24 before revising it down to Tk 410,000 crore. For the 11th consecutive year, NBR missed its tax target in FY23 amidst economic slowdowns and ambitious goals set by the government.

Finance ministry officials admit that although the government attained the IMF targets set for December and March, it may not be able to achieve the June target and fall behind slightly.

In 2022, Bangladesh turned to the global lender after its foreign currency reserves plunged to a critically low level amid higher import bills, leading to a sharp depreciation of the taka and an unprecedented level of inflation, hurting the poor and derailing the economic growth trajectory.