Critically Budget Analysis FY11-12

Term Paper of FIN-3101:

Business Taxation

Term Paper On

Critically

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alyze th

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resent b

udget

of B

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nd its

sectors

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Md. Omar Faruque Assistant Professor

Department of Finance

Faculty of Business Studies

Jagannath University, Dhaka

Sultan Ahmed Khan Representative of the group

Epimetheus

BBA 3rd Batch


Faculty of Business Studies

Jagannath University, Dhaka.

Submitted by

Submitted to

Group Name: Epimetheus

Group No:

Name of the members of the group:

Serial No: Name of the members of the group Roll Number

01 Sultan Ahmed Khan 091597

02 Md. Mynul Islam 091633

03 Mamunur Rashid 07882747

04 Md. Anik Mahmud 091636

05 Sharjil Ahmed 091623

06 Protiva Talukder 091602

07 Md. Mehedi Hassan 091590

08 Md. Mofazzal Hossen 091615

09 Mohammad Didarul Islam Khan 091613

10 Mohammad Mahmudul Hasan 091534

Group Representative: Sultan Ahmed Khan.

Group Coordinator : Md. Mynul Islam.

Contact : [email protected]

January , 2012

The Course Instructor

Md. Omar Faruque

Assistant Professor


Jagannath University, Dhaka.

Sub: Thanks giving letter to the respective faculty member.

Sir,

We are the student of Department of Finance (3rd batch) of Jagannath University, Dhaka & also from the group named Epimetheus. We are very much enthusiastic about our presentation. We are really happy to have such a presentation of challenging and interesting like this presentation & also thanks to you for making us worthy for corporate. Our topic is Critically analyze the present budget of Bangladesh and its sectors impacts. We have learned many things from this topic which will help us in future to conduct as a finance official. There were some obstacles we have faced at the time of collecting data about our topic. But we have overcome all the obstacles by the endeavor effort by each member of our group and tried our best to give an overview of our topic.

We the group Epimetheus tried our best to make this term paper impeccable, interesting, informative and enjoyable by the help of electronic and print media in association with our honorable teacher, mentor, counselor, instructor and advocate Md. Omar Faruque. We are really grateful to him. We had limitations at the time preparing presentation. So mistakes may occur in our demonstration of our presentation. We hope that, you will exempt our mistakes.

Thanking in anticipation,

Yours Fidel,

Sultan Ahmed Khan Group Representative,

Group-Epimetheus

BBA 3rd Batch


Jagannath University,Dhaka.

First of all we would like to thank the Almighty for giving us the strength, and the aptitude to complete this report within due time. We are deeply indebted to our course teacher, mentor, and counselor, Md. Omar Faruque for assigning us such an interesting topic named Critically analyze the present budget of Bangladesh and its sectors impacts. We also express the depth of my appreciation to our honorable course teacher for his suggestion and guidelines, which helped us in completing this term paper.

We are also grateful to the following person who has helped us a lot

Azizur Rahman Personal Officer to Secretary

Bank & Financial Institutions Division

Ministry of Finance,

Government of the Peoples Republic of Bangladesh

Budget shows the government revenue & expenditure (Investment) project for a given fiscal year (FY 11-12). It has 20 sectors including revenue & expenditure such as NBR-Tax, Non- Tax, Non-NBR Tax, Domestic Financing, Foreign Financing, Agriculture, Power & Energy, Industrial & Economics, Public Administration, Education &IT, Interest, LGRD, Defense, Transportation & Communication, Social Security, Health, Public order & Safety, Recreation & Culture, Housing & Others. Every sectors & government sanction for these sectors are based on experience current need, social needs & economical needs. Most of the case the sanction is governments policy variable. Through budget we can know in which sector government emphasis most that is the most important sector to the government. This is also based on mathematical mechanism used by the economist & financial analyst. In budget its shows that the amount of VAT collection has been projected at 343.04 billion taka which is higher than the last fiscal year that indicates people are willing to pay VAT for development of the country which represents a good trend of our economy. The amount of Non Tax revenue has increased by 40.07% compared to FY 10-11 RE. The extra amount of non tax revenue will help the government to reduce budget deficit and infrastructural development of the country which may bring strong economy. The Non NBR tax revenue during the present fiscal year projected to increase by 663 Crore taka which indicates that people are more interested to contribute for well being of the country. In budget FY11-12 the government has increased allocation in Agriculture, Industrial & Economic, Public administration, LGRD, Defense sectors & decreased in Power & Energy, Education & IT, Interest, Transportation & Communication, Social security, Health, Public order & Safety, Recreation & Culture, Housing sectors rather than the previous year FY10-11 actual budget. But the above allocation in some cases is higher than the reversed budget of FY10-11 RE. The current Govt. is trying to meet up the maximum portion of budget deficit around 60% from its internal sources that are from within the country. At the same time the Govt. has started taking huge amount of loan from the banking sector which is too alarming situation for our economy to control. A positive signal from the Govt. is that the rate of paying back loan amount has increased which indicates that Govt. is trying to finance the budget deficit from the internal source thats may reduce the countrys dependence on foreign loans. At the same time the Govt. is getting more subsidies from foreign countries like World Banks climate fund which is made by developed countries.

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Executive Summary

Chapter- 01

Introduction

Introduction 01

Rational of the study 01

Objective of the study 02 Scope of the study 02

Methodology of the study 02

Limitations of the study 02

Chapter- 02

Body of the term paper

Budget 03

Highlights of present budget 06

Analysis of the budget 07

Fiscal Arithmetic cost & revenue 07

Fiscal Arithmetic NBR Tax 08

Fiscal Arithmetic Non-Tax & Non-NBR Tax 09

Fiscal Arithmetic Domestic & Foreign Financing 10

Fiscal Arithmetic all allocation 11-20

Chapter-03 Findings of the study 21

Conclusion 22

Bibliography 22

Chapter- 01

Introduction

A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods.

The purpose of budgeting is to provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out & Enable the actual financial operation of the business to be measured against the forecast. Fundamentally, the budget of a government is a summary or plan of the intended revenues and expenditures of that government.

In this report we tried to show that how Government faces the challenges in the field of budget & how they solve it with completeness & how important it is for the economy.

Rational of the Study

The case study is assigned by our course teacher Md. Omar Faruque as a part of our Business Taxation course. The topic of our term paper is Critically analyze the present budget of Bangladesh and its sectors impacts. By conducting this report we can enhance our knowledge and skill to apply various research methods in professional life on higher educational life. The report has given us a chance to raise our quality in developing research instrument and its applications. By doing so, we can boost our acceptability in economy and develop our real life knowledge.

Objective of the Study

Primary objective The main objective of the study is to analyze the present (FY11-12) budget of Bangladesh & show its sectored impact.

Secondary objective: The case study has the following objectives:

To know about Budget.

To know the nature & practice of Budget.

Analyze the FY11-12 BD budget.

Impact of the budget in the economy

Scope

There were huge scopes to work in the area of this Report. Considering the dead line, and exposure of the paper has been wide-ranging. The study Critically analyze the present budget of Bangladesh and its sectors impacts has covered overall scenario of macro economy of Bangladesh. It deals with the financial capability, proper investment & measures these qualities. We got a chance to work on the one of the top most document of the government which supplies the forecast information of a present or selected financial year. By doing the assignment, we are able to know that the importance of budget for the government to assess how the government of a country implement the economic planning. In the report we have showed how the sectored impact of the budget.

Methodology

We have used the concept of the course, information of the report published by Ministry of Finance.

Sources of Data

Here the secondary sources of information were used. The secondary sources are:

Books.

Website.

Limitations

While conducting the report on Critically analyze the present budget of Bangladesh and its sectors impacts, some limitations were yet present there:

Because of time shortage many related area cant be focused in depth.

Website in different organization of Bangladesh contains poor information.

Recent data and information on different activities conducted by Ministry of Finance are restricted.

Lack of latest studies of Ministry of Finance in different sector.

Chapter-2

Budget

A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending.[1] A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.

Enable the actual financial operation of the business to be measured against the forecast.

A government budget is a legal document that is often passed by the legislature, and approved by the chief executive-or president. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues.

The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are derived primarily from taxes. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits.

Chart-I: Income segment of Budget (FY11-12) of Bangladesh (In percentage)

Chart-II: Segmention of NBR Tax (56.2%)

Chart-III: Expense segment of Budget (FY11-12) of Bangladesh (In percentage)

Highlights of Present Budget of FY11-12

Bangladesh has found its 41st budget in this fiscal year known as FY11-12. This is the 3rd budget of present government. With lots of hopes Finance Minister Abul Maal A Muhith announce the 41st Bangladesh National Budget in the parliament on 9th June, 2011 for the year 2011-12 which is the 5th budget of this minister. With lots of investment scope & with the priority of power, energy and agriculture sector present government announce its 3rd budget. This budget is passed on 30th June, 2011 & implement from 1st July, 2011 for FY11-12.

Budget Summary

Budget No 41st

Budget Announcement 9th June, 2011

Budget Announcer Abul Maal A Muhit M.P

Honorable Minister Ministry of Finance, Peoples Republic of Bangladesh

Budget Implementation 1st July, 2011

Total Budget 163589 Crore Taka (18.2% of GDP) Total Income (Revenue & Grants) 123323 Crore Taka (12.55 of GDP, 73.9% of Budget) Tax Revenue 118385 Crore Taka (13.2% of GDP, 72.4% of Budget) Foreign Grants 4938 Crore Taka ( 0.5% of GDP, 3% of Budget) ADP 46000 Crore Taka (5.1% of GDP) Total Expense 163589 Crore Taka (18.2% of GDP) Total deficits (with Grants) 40266 Crore Taka (4.4% of GDP, 24.6% of Budget) Financing 40266 Crore Taka

Foreign Debt 13058 Crore Taka (1.4% of GDP, 7.9% of Budget) Internal Debt 27208 Crore Taka (3% of GDP, 16.6% of Budget) Total GDP 899670 Crore Taka

Elevated: GDP growth 7% & Inflation 7.5%

Analysis of the Budget

The present Budget of Bangladesh for the year FY11-12 has been presented at a time when the Bangladeshi economy is heading towards a high growth trajectory, albeit certain challenges such as elevated inflation, high Current Account Deficit (CAD), and moderating growth of industrial production, lack of capital investment, poor level of power & energy, low level of liquidity, etc. At the current juncture, what was required from the Budget was to address the issue of inflation and support growth momentum, while maintaining the focus on fiscal consolidation and continuing ahead on the reform agenda. Increased allocation of planned resources towards infrastructure projects along with the proposals to direct foreign funds and private saving towards infrastructure sector will unlock much of the growth potential of the sector.

Although the continued force on infrastructure along with power & energy, agriculture and education sectors is expected to provide significant impetus to economic growth in the medium-term, measures to control inflation in the immediate future were missing in the budget announcements.

On the fiscal deficit front, the budgeted fiscal deficit is 4.4% of GDP (including grants) where 5.0% of GDP (excluding grants) for FY11-12. This indicates government will face lot of trouble in near future. This can be reduce through increasing Tax revenue, reduce debt service liability and etc.

Fiscal Arithmetic (Cost) for FY11-12

For FY11-12, total expenditure is budgeted to increase by 25.83% to 163589 Crore Taka as compared to the revised estimates (RE) of 130011 Crore Taka for FY10-11. As in the last budget, the Non-development expenditure received a major boost with an allocation of 102903 Crore Taka, an increase of 23.72% over the FY10-11 RE. The development expenditure, however, is budgeted to register a great increase compared to the revised estimates of FY10-11; the expenditure on this front is slated to increase by 27.84%.

Fiscal Arithmetic (Revenue) for FY11-12

For FY11-12, total income is budgeted to increase by 24.05% to 123323 Crore Taka as compared to the revised estimates (RE) of 99411 Crore Taka for FY10-11. As in the last budget, the revenue received a major boost with an allocation of 118385 Crore Taka, an increase of 24.37% over the FY10-11 RE. The Tax revenue, however, is budgeted to register a great increase compared to the revised estimates of FY10-11; the revenue on this front is slated to increase by 21.17% to 95785 Crore Taka

Fiscal Arithmetic (NBR-Tax) for FY11-12

Gross tax revenue for FY11-12 is budgeted to increase by 21% over the FY11 RE, In FY10-11, indirect taxes account for the major share of total tax revenue and NBR revenue represents around 83.6% of the total revenue. Only 24.1% of the revenue comes from income tax. Up to FY11-12, NBR revenue represents 67.1% of the total revenue. Only 20.0% of the revenue comes from income tax. The revenue projection in the case of Income Tax for the next fiscal year FY11-12 is 275.61 billion Taka, up by 65.56 billion Taka from the original budget for the outgoing fiscal. The earnings from VAT have been projected at 343.04 billion Taka, up by 72.12 billion Taka from that of the original budget for the current fiscal. The present budget has brought an end of tax holiday facility for readymade garments (RMG), textile and many other traditional sectors. Present budget has proposed 1.50% tax at source from all export proceeds, which is zero now for all export earrings other than RMG.

However, this present budget projected to raise tax-GDP ratio to 13% with a target to collect 918.70 billion Taka tax revenue & 56.2% of the non-development and development budget. The income tax collection target has been set at 275.61 billion Taka while 343.04 billion Taka target has been set for VAT and 126.34 billion Taka for import duty.

Impact

Income tax revenue has reduced by 3.9% compared to last fiscal year which indicates that income has become stable but the price of other utilities become higher compared to last year. It indicates the higher rate of inflation. Government has projected higher Income tax revenue by 65.56 billon taka which cannot be met up during the fiscal year that causes a great increase of Budget deficit. The amount of VAT collection has been projected at 343.04 billion taka which is higher than the last fiscal year that indicates people are willing to pay VAT for development of the country which represents a good trend of our economy. Present budget proposed 1.5% tax at source form all export proceeds which is zero percent during the last fiscal year. It will reduce the gap between the import and export of the total amount of the balance of payment. In a word, the total tax income has increased 21% over the FY 10-11 RE.

Fiscal Arithmetic (Non-Tax) for FY11-12

Non-tax revenue, on the other hand, is budgeted to record a significant increase of 40.07% during FY11-12 compared to the RE of FY10-11. This increase is primarily due to substantially higher non-tax revenue collections & taxpaying tendency during FY10-11. Although the amount of this revenue increased, the collection of Non-Tax revenue decreases by 12.3%.

The present budget proposes to collect 22600 Crore Taka in the budget for FY 2011-12 which is 2.5% of GDP and 13.8% of the total budget income. The rate is higher than the last year actual budget by 1.1% and also higher than the reversed budget of FY10-11 as well.

Impact

The amount of Non Tax revenue has increased by 40.07% compared to FY 10-11 RE. The extra amount of non tax revenue will help the government to reduce budget deficit and infrastructural development of the country which may bring strong economy. Although, the amount has been increased but the collection of non tax revenue has been decreased by 12.3% which indicates low contribution tendency or a high level of corruption from the4 officials. Govt. should take needed steps.

Fiscal Arithmetic (Non-NBR Tax) for FY11-12

Non-tax revenue, on the other hand, is budgeted to record a significant increase of 13.41% during FY11-12 compared to the RE of FY10-11 & actual FY10-11. Non- NBR Tax collection increases by 17.5% during the fiscal year.

The present budget proposes to collect 3915 Crore Taka in the budget for FY 2011-12 which is 0.4% of GDP and 2.4% of the total budget income. The rate is higher than the last year actual budget by 463 Crore Taka and also higher than the reversed budget of FY10-11 as well.

Impact

The Non NBR tax revenue during the present fiscal year projected to increase by 663 Crore taka which indicates that people are more interested to contribute for well being of the country. Compared to last fiscal year actual budget and reversed budget, the rate of non tax revenue is increased by 13.41% which is a record performance in the history of Bangladesh. The increasing rate indicates that people are interested to contribute in sectors such as land paper, non judicial paper, stamp revenue, motor vehicle taxes and narcosis.

Fiscal Arithmetic (Domestic Financing) for FY11-12

Overall budget deficit will reach to Tk. 45,204 Crore, which is 5.0 percent of GDP out of which Tk. 27,208 Crore (3.0 percent of GDP) from internal sources. Of domestic financing, Tk. 18,957 Crore (2.1 percent of GDP) will come from the banking sector & Tk. 8,251 Crore (0.9 percent of GDP) from the nonbanking sources. The present budget proposes to collect 27208 Crore Taka in the budget for FY 2011-12 which is 3% of GDP and 16.6% of the total budget income. The rate is higher than the last year reversed budget by 2391 Crore Taka and also higher than the actual budget of FY10-11 by 3528 Crore Taka as well.

Impacts

The current Govt. is trying to meet up the maximum portion of budget deficit around 60% from its internal sources that are from within the country. At the same time the Govt. has started taking huge amount of loan from the banking sector which is too alarming situation for our economy to control.

Fiscal Arithmetic (Foreign Financing) for FY11-12

This is the combination of both foreign loan & foreign grants of the budget. Foreign loan is refundable financing where foreign grant is not refundable.

Overall budget deficit will reach to Tk. 45,204 Crore, which is 5.0 percent of GDP out of which Tk. 17996 Crore (2.0 percent of GDP) from external/foreign sources. Of foreign financing, Tk. 13058 Crore (8.0 percent of budget) will come from the foreign loan & Tk. 8,251 Crore (3.0 percent of budget) from the foreign grants. The present budget proposes to collect 18685 Crore Taka from the foreign loan section where 5627 Core Taka will be paid in the budget for FY 2011-12. The collection & paid rate is higher than the last year reversed budget by 7765 Crore Taka & 490 Crore Taka respectively and also higher than the actual budget of FY10-11 by 2717 Crore Taka & 493 Crore Taka respectively.

Impact

The amount of foreign loan has been increased compared to FY 10-11 RE which indicates that poor economic situation. A positive signal from the Govt. is that the rate of paying back loan amount has increased which indicates that Govt. is trying to finance the budget deficit from the internal source thats may reduce the countrys dependence on foreign loans. At the same time the Govt. is getting more subsidies from foreign countries like World Banks climate fund which is made by developed countries.

Fiscal Arithmetic (Agriculture) for FY11-12

The total plan outlay for agriculture sector is 24787 Crore Taka. The present budget proposes to allocate Tk. 7,411 Crore, for the development and non-development combined, for the Ministry of Agriculture in the budget for FY 2011-12.

The target agricultural credit is proposed to be raised to 13,800 Crore Taka for FY11-12 from 12,617 Crore Taka. This is 14.9% higher than that of the corresponding period of the last year. The agriculture subsidy in proposed budget has been estimated at 45 billion Taka, which was 57 billion Taka in the last fiscal year FY10-11.

With the aim is to achieve self-sufficiency in food by 2013, the government introduce Farmers Marketing Group and Farmers Club throughout the country in order to ensure that the farmers get fair prices for their produces.

Beside that government with a view to developing the agricultural sector as a whole, the National Agriculture Policy 2011 will be finalized in the first half of the next fiscal year after making necessary amendments.

In the next fiscal year, another 5,000 acres of khas land have been targeted to be distributed among 20,000 landless families across the country where the government has already distributed 24, 069 acres of khash land among 6, 3941 landless families which will raise production of agriculture.

ADB allocation for the overall agriculture sector (agriculture, rural development and rural institutions, and water resources) is 18.5% equal to 8512 Crore Taka. Overall expense for this sector is 24787 Crore Taka which is 15.2% of total budget & 2.8% of GDP.

Impact

The amount of subsidy in agriculture sector has decreased which is a positive sign for our total economy because we are dependent on agriculture. This decreasing expense of subsidy may help to reduce the amount of deficit of the total budget. At the same time the poor farmers may face financial problem because govt. reducing subsidy which may result in less production of agriculture goods. Govt also taken the policy of one house one firm, developed farmer club for the purpose of making the country self sufficient in food by 2013.

Fiscal Arithmetic (Power & Energy) for FY11-12

Although government are trying solve the issue about the power sector but failed to conduct that that due to system defective. With 29 under contraction power plant, government plan to produce 7,800 MW electricity by 2013. The main energy for these plant is coal, diesel and furnace oil, dual fuel & LNG which may increase the production but rise a question if these come to end what will happen in that future.

The subsidy in the power sector has been increased to 52 billion Taka for FY11-12, which was 42 billion taka in the last fiscal year FY10-11. Although the allocation has been decreased to 5.1% from 5.6% but Power & Energy sector received a total allocation of Tk.8311Crore in FY11-12. Of which, Tk.8286.5 Crore is allocated under the ADP and the remaining Tk.24.5 Crore is meant for non-development expenditure which is 15% higher than the last years allocation.

As the FY11-12 budget doesnt support such a big push in energy consumption, this may pose a challenge in achieving the GDP targets projected in the SFYP. The target of an additional gas production of 1,920mmcfd by 2013 appears to be rather high, as the production of 1,000mmcfd gas by the IOCs is quite uncertain.

One of the cheerful news is that government target to generate 5 percent and 10 percent of total power production by 2015 and 2020 respectively from renewable energy sources. Positive news is two wind powered power plants with 1 MW capacity each have been built to supply electricity to coastal belts of Kutubdia and Feni & steps have been taken to set up 10-15 MW solar energy based power stations at 4 different places in the country.

The government has targeted to generate 5% power (610MW) from renewable energy sources by 2015. This may appear to be difficult given that such a target will require huge resource allocation as renewable energy generation is costlier. The proposals for cutting import duty on LED lamps (12% from 25%) and withdrawal of 60% supplementary duty on solar powered lamp is praise worthy.

Impact

Developing power plant for meeting up electricity may be a good initiative but these plants are dependent on oil, coal etc which is more expensive and will reduce the amount of our natural resources. So government must concentrate on less expensive plant on long term basis like air based plant, solar based plant, nuclear plant etc. Government already reduced tax on solar plant products, started conversation with China & Russia for nuclear plant for support in long term.

Fiscal Arithmetic (Industrial & Economic) for FY11-12

The present budget proposes to allocate 1472.3 Crore Taka in the budget for FY 2011-12 which is 0.9% of the total budget. The rate is as same as the last year actual budget but higher than the reversed budget of FY10-11. This is 28.57% higher than that of the corresponding period of the last year.

With the aim is to achieve self-sufficiency in this sector, the government introduce tax incidence that is like that. For, Chemical (raw material) -0.6%, for Particle Board (raw material) -0.6% which were at -7.7%, for RMG 70% from 38%, for Glass 14.8%, Light engineering 22.5% from -0.6% & for Furniture 14.8%

Project on "Garment Palli has been included as unapproved and unallocated project in the ADP for FY12. Withdrawal of tax-holiday over textile industry is a contradictory step considering the current pressure on the sector. Rise of tax deduction at source for all export proceeds from 0.40% or 0.50% to 1.5% will contribute to governments revenue Export of SMEs may be considered at the existing rate.

Extension of the timeline for renewal duration of bond licenses from 1 year to 2 years will reduce barrier for exporters. Exclusion of Jute industry from the Tax holiday facility does not live up to the stance adopted in the Industrial Policy 2010.

For undertaking technological restructuring in the jute sector, special Technology Upgradation Fund is needed. Digitization of the National Trade Portal is a good sign for the traders.

Tax exemption facility for ICT services has been extended till 2013. This facility should be extended further till 2018 as per ICT Policy 2009.

Allocation for the Ministry of Civil Aviation and Tourism has fallen (23.32%) in FY 2011-12. Reduction in income taxes on real estate companies in case of registration of apartment. Substantial rises in taxes in case of registration of commercial spaces.

Increase food distribution to the RMG and textile workers at a reduced price through OMS and other distribution mechanisms. No tax on capital gains in order to discourage short term speculation in the secondary market.

A number of measures have been announced which if implemented would positively contribute to financial reporting of listed companies and would ensure better governance in the capital market.

Impact

Proposed rise of SD on imported fabric (20% to 45%) is likely to make domestic textiles more competitive. Although different project has been taken but necessary allocation is required for land and infrastructure development. For different steps taken by the govt. will increase the aggregate amount of export along with the support of ICT.

Fiscal Arithmetic (Public Administration) for FY11-12

The allocation for this sector is 10.2% of the budget which is equal to 16686.08 Crore Taka. Although the allocation specified at the previous rate but the allocation for the public services for FY11-12 is equal to 14.7% which is higher from the last year actual budget rate 14.2%. In this year allocation has been done showing separate section of subsidies, pension & interest. Total development & non-development allocation for public services is set to increase by 1.4 times, driven partly by subsidies (including for export), PPP, lump allocation for development programs finance from the revenue budget. The changing rate for this section FY11-12 over FY10-11R is 140.1% equal to 13992 Crore Taka.

Impact

As the budget increased in public administration it has increased govt.s ability to recruit more employees which will increase productivity of the labor force of our economy.

Fiscal Arithmetic (Education & IT) for FY11-12

The present budget proposes to allocate 19303.5 Crore Taka in the budget for FY 2011-12 which is 11.8% of the total budget. The rate is lower than the last year actual budget and lowers than the reversed budget of FY10-11 as well. Although this section reflects the previous rate allocation but the total allocation for this sector for present fiscal year is equal to 12.4% including some subsector which is also lower from the FY10-11R at 14.3%.

A fund will be created under this foundation titled Prime Minister's Education Assistance Foundation with public private financing, where government will provide a portion of the seed money.

Beside this government takes some initiative for the betterment of this sector. That is: reducing teacher student ration; primary education development program; establishing new school & etc.

For improvement of the IT sector government introduce National ICT Policy & try to ensure optimum use of ICT in government sectors. To build strong IT sector government takes some steps those are: Build strong IT infrastructure with High-Tech Park Authority, stating E-commerce by 2012, introducing new program in graduation & post graduation level for the research purpose under National ICT program.

Impact

The government is trying to develop skill manpower. For this instant they introduce compulsory computer & technical education for secondary level by 2013. Government also taking other steps but to make real man power the government must influence research sector in university level.

Fiscal Arithmetic (Interest) for FY11-12

The present budget proposes to allocate 17997 Crore Taka in the budget for FY 2011-12 which is 2% of the GDP 11% of the total budget of which 10 percent accounts for interest payment on foreign borrowing and the rest 90 percent on internal borrowing. The rate is lower than the last year actual budget and lowers than the reversed budget of FY10-11 as well.

This is believed that higher the portion of interest higher the curse for the government. The total interest segment in two sections that is internal & external. The internal interest amount is 16519 Crore Taka & 1478 Crore Taka for external sources. Both are non-development rate.

SME foundation has introduced Credit Wholesaling Program to disburse loans on easier terms and at low interest rates.

As the rate of return on the saving instruments are fixed, the differential between the interests on bank deposits and that on saving instruments influences the overall interest rate structure. This in turn enhances the cost of fund in general. Considering all these factors, Government have taken steps to determine a consistent rate of return on savings certificates with a provision for social premium to keep the market interest rate structure stable and investment-friendly.

Impact

Taking loan from internal sources by the government has affect on total economy for example our inflation has increased and day by day our economy is becoming vulnerable. So government must take initiative to manage its loan for the betterment of our economy.

Fiscal Arithmetic (LGRD) for FY11-12

The present budget proposes to allocate 11741 Crore Taka; development and non-development budget combined, in the budget for FY 2011-12 which are 7.4% of the total budget. The rate is 18% higher than the reverse allocation for FY10-11. This section reflects the previous rate of allocation which shows the growth trends of the allocation. But it is lower than the actual allocation of FY 10-11 at 8.2%

The total allocation including some subsectors for this sector is 12271 Crore Taka which is 7.5% of the budget. Under this the total development expense is 10300 & left is for non-development purpose. The change in this fiscal year is 17% over the FY10-11R which is equal to 1783 Crore Taka.

Impact

Government wants to develop the overall country. So it has increased the allocation of budget in this sector.

Fiscal Arithmetic (Defense) for FY11-12

The present budget proposes to allocate 12134 Crore Taka in the budget for FY 2011-12 which is 6.5% of the total budget. The rate is higher than the last year actual budget of FY10-11 by 1216 Crore Taka.

The total allocation including some subsectors for this sector is 11951 Crore Taka which is 7.3% of the budget which is higher than the FY10-11R at 7.2%. The change in this fiscal year is 28.3% over the FY10-11R which is equal to 2633 Crore Taka.

Under this sector there have 15 development programs with the budget of 4005 Crore Taka for FY11-12 where last fiscal year budget was 1875 Crore Taka for this program.

To build strong defense government start to build new defense institution (School, College, etc.), improve exciting institutions especially NDC, infrastructural develop of ISSB, improvement of Digital Mapping System of Survey of Bangladesh, etc.

Impact

As govt. increased allocation in defense sector which is a prudent decision due to the overall condition of the world. By this increase well get safer boarder, army, air force, navy etc which will make a strong position in the world for our country.

Fiscal Arithmetic (Transport & communication) for FY11-12

The transport sector of Bangladesh consists of a variety of modes. The country being a flat plain, all three modes of surface transport, i.e. road, railway and water are widely used in carrying both passengers and cargo. Government gives importance to the integrated development of communication sector.

Dhaka Transport Coordination Authority Act 2011 has been introduced by the authority. Several steps have been taken to build strong communication those are: Road Master Plan, Road transport and Traffic Act, Elevated Express way, MRT, etc.

The present budget proposes to allocate 9798 Crore Taka, development and non-development budget combined, in the budget for FY 2011-12 for Roads and Railways Division and Bridges Division, which is 6.6% of the total budget. The rate is 29% higher than the last year revised budget of FY10-11.

Impact

Government is trying to get a good communication system in our country which mill mobilizes the business of the country. For doing this the govt is trying to develop roads & Bridges. But the government must emphasis on railway & water ways for minimizing the traffic jam problem. At the same time the govt must control the corruption in those sectors for long term benefit.

Fiscal Arithmetic (Social Security) for FY11-12

In fiscal year FY11-12 the scope of social security has been extended. It has maintained every scope of budget of FY10-11. At the same time the number of beneficiary has increased.

The present budget proposes to allocate 10142.52 Crore Taka in the budget for FY 2011-12social security, which is 6.2% of the total budget. The rate is lower than the last year actual budget of FY10-11.

Although this section reflects the previous rate allocation but the total allocation for this sector for present fiscal year is equal to 6.8% including some subsector which is also lower from the FY10-11R at 8%. The rate is 29% higher than the last year revised budget of FY10-11.

Fiscal Arithmetic (Health) for FY11-12

Government proposes an allocation of Tk. 8,889 Crore for FY2011-12, development and non-development budget combined, which is 5.4% for the Ministry of Health and Family Welfare. This rate is lower than from the actual budget 6.2% of FY10-11 and reverse budget 5.9% of FY10-11R as well. The changing rate for this section FY11-12 over FY10-11R is 16.4% equal to 1252 Crore Taka.

To build strong health system government has taken several steps. Those are: implement telemedicine system, alternative healthcare, upgrade doctor-nurse-assistant ratio, establish new training center & etc.

Impact

Steps has been taken by government is good but the government must try to provide health benefits to the rural area and poor people because they are still deprived of health benefit of the government.

Fiscal Arithmetic (Public order & safety) for FY11-12

Government proposes an allocation of Tk. 8454 Crore for FY2011-12, development and non-development budget combined, which is 5.2% of the total budget including some subsectors. Subtracting the subsectors this allocation rate is 4.6% of the present fiscal year. This rate is lower than from the actual budget 5.2% of FY10-11 and reverse budget 5.8% of FY10-11R as well.

The changing rate for this section FY11-12 over FY10-11R is 12.2% equal to 921 Crore Taka.

Fiscal Arithmetic (Recreation & Culture) for FY11-12

Government propose a total allocation of Taka 237 Crore, development and non-development combined, which is 1% for FY2011-12 for the implementation of the new program in addition to those undertaken in FY2010-11 under the revenue budget. This rate is lower than from the actual budget 1.2% of FY10-11 and reverse budget remain same.


Fiscal Arithmetic (Housing) for FY11-12

Government propose a total allocation of Taka 2189 Crore, comprising development and non-development combined, which is 0.9% for FY2011-12 for land management and housing sector. This rate is lower than from the actual budget 1% of FY10-11 and reverse budget remain same.


Government has taken several steps. One of this is like that. 10 Crore has been allocated for constructing a housing colony for Dhangar ethnic community. Another is development of workers housing facilities in major industrial zones under PPPs should be considered. Impact:

Government must control the housing sector of the country because this sector is running at its own will; the price is unlimited and more than practical. So govt. must take the reins of this sector for the betterment of our economy.

Fiscal Arithmetic (Others) for FY11-12

Government proposes a total allocation of Taka 15213.8 Crore which is 9.3% for FY2011-12 for miscellaneous expense. This rate is higher than from the actual budget 3.9% of FY10-11 and reverse budget 6.7% of FY10-11R as well.

Chapter-03

Findings and conclusion

Finding of the Study

The intension of this study is to know about Critically analyze the present budget of Bangladesh and its sectors impacts. The major findings of the overall study are discussed below:

Analysis of the budget of FY11-12 compare to last fiscal year.

Segmentation of Income and Expense.

Impacts of different decision

Financial arithmetic of different sectors

Know about the amount of budget deficits & its financing sources.

Financing tendency of the government during this fiscal year.

Conclusion

Budget shows the government revenue & expenditure (Investment) project for a given fiscal year (FY 11-12). It has 20 sectors including revenue & expenditure. Every sectors & government sanction for these sectors are based on experience current need, social needs & economical needs. Most of the case the sanction is governments policy variable. Through budget we can know in which sector government emphasis most that is the most important sector to the government. This is also based on mathematical mechanism used by the economist & financial analyst. In budget its shows that people are willing to pay VAT for development of the country which represents a good trend of our economy. The amount of Non Tax revenue has increased that may bring strong economy. In budget FY11-12 the government has increased allocation in Five (5) sectors & decreased in Nine (9) sectors rather than the previous year FY10-11 actual budget. But the above allocation in some cases is higher than the reversed budget of FY10-11 RE. The current Govt. is trying to meet up the maximum portion of budget deficit around 60% from its internal sources that are from within the country. Taking huge amount of loan from the banking sector is alarming situation for economy. A positive signal is that the rate of paying back loan amount has increased.

Bibliography

Articles

Abul Maal Abdul Muhith; Budget Speech; FY 2011-12. (Ministry of Finance, Government of the peoples republic of Bangladesh).

Web Sites

1. www.mof.gov.bd 2. www.en.wikipedia.org 3. www.nbr-bd.org

Documents

Critically Budget Analysis FY11-12