Potential Effects Of Budget Deficit 2008-09 Presented by: Md. Sadiqur Rahman Chowdhury Rayhana Sultana Hafiz-Al-Ashad University of Liberal Arts Bangladesh Supervisor Liton Chakraborty Lecturer, School of Business
Potential Effects Of Budget Deficit 2008-09 Presented by: Md. Sadiqur Rahman Chowdhury Rayhana Sultana Hafiz-Al-Ashad University of Liberal Arts Bangladesh.
Dec 22, 2015
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Potential Effects Of Budget Deficit2008-09
Presented by:Md. Sadiqur Rahman Chowdhury
Rayhana SultanaHafiz-Al-Ashad
University of Liberal Arts Bangladesh
SupervisorLiton Chakraborty
Lecturer, School of Business
Comparison with previous yearEvents FY 2007-08 FY 2008-09
Amounts are according to the Percentage of GDP
Total Budget 15% 16.3%
Budget Deficit 4.2% 5%
Foreign Financing 2.0% 2.2%
Domestic Financing 2.2% 2.8%
School of Business, ULAB 2
Comparison with previous yearEvents FY 2007-08 (Revised) FY 2008-09
Amounts are according to the Percentage of GDP
Total Budget 16.1% 16.3%
Budget Deficit 4.8% 5%
Foreign Financing 2.5% 2.2%
Domestic Financing 2.3% 2.8%
School of Business, ULAB 3
Deficit in Budget 2008-09
School of Business, ULAB 4
Comparison of financing sources
School of Business, ULAB 5
Comparison of Domestic Financing Sources
School of Business, ULAB 6
Consequence of Budget Deficit
S
D
Interest Rate
School of Business, ULAB 7
Consequence of Budget Deficit
D
S
New Interest Rate S’
School of Business, ULAB 8
Consequence of Budget Deficit
D
S
New Interest Rate
S’
D’
School of Business, ULAB 9
Possible Effects of Budget Deficit
• Lending rate may rise• Private Investment may shrink (crowding out) • Unemployment may increase• Price level may boost up• Interest rate on bank deposit may increase
School of Business, ULAB 10
Possible Effects of Budget Deficit
• Capital market activities may be hampered • Banking sector may show monopoly power• Growth rate of economy may slow down• The gap between rich & poor may be
enlarged
School of Business, ULAB 11
Actions could be taken
• Government can urge banks to raise the paid up capitals
• Use capital market instruments• Find useless & unnecessary expenditures
and shift those to meet deficit• Allow undisclosed money to be invested
- Special Bond for Undisclosed money
School of Business, ULAB 12
THANK YOU.
Any question?
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