Budget Analysis 2011 - 2012

We often see the finance minister carrying a black briefcase. We have also seen it on June
09, 2011. There is a story, better to say, a history behind it.
The history of carrying a briefcase is 150 years old. Its color was red. In 1868, the then British
finance minister came to the House of Commons to deliver the budget speech. Suddenly he
remembered that he had left his red briefcase at home by mistake. After this incidence, it
became a tradition that the finance ministers would carry a briefcase on the day of budget
presentation, with an explicit display of the briefcase to the mass people. Now, carrying this
briefcase has become a parliamentary culture in ours as well as in the other countries.
The National Budget for the fiscal year 2011-2012 was presented in the parliament on June
09, 2011. Finance minister AMA Muhith rolled out the budget for the running fiscal year
amounting Taka 163,589 crore, highest in the history of the country, for the 2011-12 fiscal year,
eyeing a 7 per cent GDP growth rate. The budget was approved by the parliament on June
30, 2011, although in absence of the chief opposition BNP. The Annual Development
Program amounts Taka 46,000 crore and revenue earnings has been set at Taka 118,385
crore, keeping the budget deficit at 5 per cent of the GDP. The deficit has been projected at
Tk 45,204 crore.
Basic Information of the Annual Financial Statement:

Budget 41th, declared on June 09, 2011
Presenter Finance Minister Abul Mal Abdul Muhith
Budget to be in effect From July 1, 2011 to June 30, 2012
Slogan Towards Building A Happy, Prosperous and Caring Bangladesh

Budget Highlights 2011-12 (% of GDP) Increase than 2010-11
Budget size Tk1635.89b (18.2%) 23.77%
Budget deficit Tk452.04b (5%) 14.96%
Revenue expenditure Tk1029.03b 26.28%
Revenue collection target Tk1183.85b (13.2%) 27.51%
Annual Development program Tk406.00b (5.1%) 19.48%
Projected GDP growth 7% 0.4% points
Projected Inflation 7.5% 0.5% points

Macroeconomic Benchmarks for FY12









According to these benchmarks we can analyze our budget.
Allotment on Non-
Development
& Development
Sectors at a Glance by
Chart for FY 2011-12
(Individual Sector)

Lofty revenue
goals from
thinning
pockets
The revenue
target for the
next fiscal
year has been set at Tk1183.85b would
Optimistic
Trends
Revenue
Collection
Export Growth
Private
Investment
Domestic
Demand
Uncertainties

Forex Reserve
Remittance
Foreign Aid
Food Security
Challenges

Inflation
Balance of
Payment
Liquidity
Situation
Deficit Financing
constitute 13.20% of GDP. Of this amount, the National Board of Revenue (NBR) has been
targeted at Tk918.70 (10.20% of GDP) and non-tax and non-NBR receipts have been
estimated at Tk226b (2.50%
of GDP) and TK39.15b (0.4%
of GDP) respectively. In
this proposal budget for
fiscal 2011-12, an expenditure
of Tk1635.89b leaving a
deficit of Tk452.04b or 5%
of the GDP.

Financing of Budget Deficit
in FY12

Share of domestic
financing 60.2%
Tk18,957 crore (69.7%) of
the domestic
financing will
be from the banking
system(74.1% in
RB of FY11)
Tk8,251 crore (30.3%)
will be from non-bank
instruments
(25.9% in RB of FY11)

Share of foreign
financing will be 39.8% in
FY11 (28.7% in RB of FY11)
Gross foreign aid
requirement will
be around USD
3.3b (USD 2.1b in
FY11)a challenging
target in view of only USD 1.4 billion was received during Jul-Apr FY11
The government could not help but rely on bank borrowing.
Budget Revenue, Expenditures, Deficit and Deficit Financing at a Glance:




































Development Sectors allotment:
Development sector includes different sectors and government allocates much to this sector.

















No quick let-up in
heating inflation

One of the major
economic
challenges in the
FY2011-12 will be
controlling the high
inflationary trend in
the back- drop of
high prices of
essential
commodities including food grains at the local as well as international markets. The
government will have to undertake special measures
to increase the production of crops through ensuring
availability of quality inputs (seed, fertilizer) and
subsidies to the farmers. Reduction of various duties
and tariffs on some commodities may be necessary
to ensure affordable supplies. Another major
challenge for the government is to control market
system (and syndication) through effective
monitoring and supervision.
The projected inflation has been assumed at a
surprisingly low level of 7.5% for the FY2011-2012. As per government claims, average inflation
in fiscal 2009-10 was 7.3%. On a point-to- point basis it went up to 10.7% in April of 2011.
Growing inflationary pressure will be the biggest challenge for the government to achieve
the projected 7% GDP growth.

Ambitious ADP on poor implementation record
Even though the ADP for the outgoing fiscal year had to be slashed, apparently for sluggish
implementation, the next years ADP has been targeted at Tk460b, accounting for 31% of
total public expenditure. The government plans to finance Tk273.15b or 59% of the next ADP
funds from local sources and the remaining Tk186.85b or 41% will come from external sources.
Sectors Total allotment (crore) % of ADP
Human Resources 10,304.2 22.4%
Agriculture 8,512.0 18.5%
Power & Energy 8,286.5 18%
Communication 8,054.4 17.5%
Others 10,842.9 23.6%
Total 46,000 100%

Agriculture falling from grace
In the last fiscal year Bangladesh saw a healthy performance in the agriculture sector. Most
of the major rice crops had bumper harvests, while other crops like potatoes & vegetables
etc. also did well. Given all this, pre-budget expectations of the people were for greater fund
allocation for the sector in general but surprisingly the government has proposed to reduce
the agricultural subsidy by 12.19%. Tk45b has been kept as agricultural subsidy during the
FY2011-12, which is 26.66% lower than revised
amount of the last fiscal year budget. This move
may be seen as a diminished prioritization in terms
of allocation, even though the agricultural sector
accounts for about 20% contribution in GDP as
well as ensures food security for the growing
population. The government may have to revisit
the matter sooner than later.
Big dream on energy & power
The government has set Tk83.11b in allocation for
the power and energy sector for the upcoming
fiscal year. The allocation has been increased by
15% from that of the previous year. Tk82.87b is
allocated under the ADP and the remaining amount is for non-development expenditures

Social Safety Net Program (SSNP) shrinking
In 2010, 31.50% Bangladeshi used to live below the poverty line. To accelerate economic
growth, there is no alternative to poverty alleviation measures. For the fiscal year 2011-2012,
the amount allocated under SSNP is Tk225.56b or 13.79% of the national budget. Budget
FY2010-11 endowed Tk194.97b allocation for SSNPs which was later revised to Tk208.93b. The
allocation was 2.64% of GDP of FY2010-11 which is now only 2.51%.

Education
The proposed national budget for FY2011-12 provides for a 12.1% or Tk198.06 b allocation for
the education sector. Last year this allocation was Tk179.59b. A chunk of Tk10b has been
embarked for Prime Ministers Education Assistance Foundation to provide full scholarship and full
free studentship to meritorious students from standard six to undergraduate level. The
government will continue providing stipends amounting Tk40.35b at primary school level until
2013. However, due to lack of adequate monitoring and pervading corruption, the desired
results could not be achieved at earlier instances. A prudent proposal has been made to re-
examine Monthly Payment Order (MPO) system to avoid the pervasive exploitation in this
regard.

Health & Family Welfare
The budget allocates Tk88.69bb for the health
care system, which is 5.4% of the total budget
outlay. The proposed budget has slashed funding
for family planning programs by Tk13m to Tk644m.
It also plans to employ alternative health care
practitioners at different districts and upazila
levels. But no clear direction has been mentioned
on the budget in this regard. Non-prioritization of
family planning delivery service may impact on
the population growth curve which has been slowly but surely rising during past years with
severe consequences on food security and employment scenario.


Food Security and Employment
To counter the increasing population problem
the government undertook some food security
program in FY2009-10 which has been continuing.
Under this program the government has
enhanced the storage capacity of old as well as
new godowns and also expanded the Open
Market Sales (OMS) operation to ensure low
priced food grains for the poor. FY2011-12
allocation for Food Security Program is 4.3% of the
total budget; 31.5% of total SSN budget and 0.8%
as share of GDP which was 5.56% of total budget,
35% of SSN budget and 0.92% as share of GDP in FY2010-11 revised budget. This reduction of
allotment was perhaps due to assuming a fall in inflation and food price in FY2011-12.
Another effort to reduce the poverty level has been proposed in the budget which is the 80
day employment program known as Employment Generation for the Ultra-Poor' that will
employ around 2.73m people in the lean season. Other actions are:

Withdrawal of tax exemption for parliamentarians and government officials but
government is to pay the income taxes of its employees.
Tax rate on interest income from national saving instruments reduced from 10% to 5%.
No changes in corporate tax rates other than for listed tobacco companies reduced
to 35% and for non-listed ones to 42.5% from earlier 45% for either.
10% tax rebate for CSR donation up to Tk80m subject to a limit of 20% of income.
No import duty on essential food items like rice, pulse, wheat, sugar, etc.
VAT on SIM Card of mobile phones reduced by Tk200 to Tk600.
Rate of tax deduction at source from all export proceeds increased to 0.6% for RMG
and 0.7% for others from existing 0.4% and 0.5% respectively.
Increase to 45% (from 20%) supplementary duty on imports of all kinds of fabrics and
RMG articles.
Raw material for medicines.

Technology and Digital Bangladesh:
Technology is interrelated with the term digital Bangladesh. Without technology, we can
never think of a digital Bangladesh. 5.5% of total ADP was allocated for ICT sector in FY2011
(complied with the target mentioned in ICT policy 2009). At least 2,300 crore need to be
spent in FY2012 to comply with the target. The government has already done the following
things to make this project successful:
Formulated rules to introduce digital signature.
Prepared licensing guidelines, audit guidelines, and CPS (Certificate Practice
Statement)
Established CCA (Controller of Certifying Authority)
Introduced e-commerce.
Steps have been taken to bring all the government officers under an integrated IT
network to make successful e-governance project.
Establishment of Community E-Center and Union Information Service Centre.
Establishment of Solar powered information service centers.
Establishment of fully-fledged computer laboratories in educational institutions.
Introducing compulsory computer and technical education at the secondary level
by 2013.
Therefore, it is our duty to raise our hand with the government to make our dream Digital
Bangladesh with the procurement of technology.


Local Government and Regional Development
24% of the development expenditure in FY12 will go towards rural development. This
includes total 68 projects, of which only 5 are new.
All the new projects are under the LGED and mostly for infrastructure development,
including construction of aila-affected rural infrastructure.
Coastal belt, drought-prone and other disaster-prone areas in Bangladesh should get
priority.
Tk.10 crore has been allocated for constructing a housing colony for Dhangar ethnic
community
This is a positive step.
Covering solar systems in the national power grid.
Add 150,000 bio-gas plants by 2016 under National Household Bio-gas and Fertilizer
Program

Transport & Communication

The revised budget allocation (Non-Development and Development) for FY 2008-09 to FY
2010-11 and the proposed allocation (Non-Development and Development) for FY 2011-2012
of Roads and Railways Division are shown below: (Amount in Thousand Taka)

Financial Year Non-Dev. Development Total
2008-09 2366,65,82 1912,17,00 4278,82,82
2009-10 2548,54,33 3030,20,00 5578,74,33
2010-11 2867,25,82 3630,49,81 6497,75,63
2011-12 2954,76,00 4598,25,00 7553,01,00

In FY 2011-12, the following important activities/projects/programs are scheduled to be
implemented:
Eastern Bangladesh Bridge Improvement Project (EBBIP)
4-Laning of Nabinagar-Chandra-DEPZ Road
Construction of Overpass on Jurain Rail Crossing
Construction of Kazirtek (7th Bangladesh-China Friendship) Bridge
Construction of 3rd Shitalakhha Bridge
Procurement of 170 MG Flat Wagons and 11 Break Vans for Container Transportation
Procurement of 100 Single Decker, 300 Double Decker and 50 Articulated Buses

Ministry of Public Administration

The revised budget allocation (Non-Development and Development) for FY 2008-09 to FY
2010-11 and the proposed allocation (Non-Development and Development) for FY 2011-12
of the Ministry of Public Administration are shown below: (Amount in Thousand Taka)

Financial Year Non-Dev. Development Total
2008-09
70,39,967 11,54,800 81,94,497
2009-10
74,88,828 9,17,500 84,06,328
2010-11
94,43,159 12,68,300 1,07,11,459
2011-12
84,80,500 13,96,400 98,76,900

In FY 2011-12, the following important activities/programs/projects are scheduled to
be implemented:
Preparing Citizen Charter to deliver prompt service at field level and taking actions
for implementation
Coordination of development programs and execution of poverty reduction and
safety net programs at field level
Introduction of Performance Based Evaluation System (PBES) on a pilot basis in the
Ministry of Public Administration
Imparting training/higher education to civil servants to enhance their skills and
capacity
Strengthening e-governance in field administration including the Ministry of Public
Administration; and
Creating database of assets of officers, disciplinary actions taken under Conduct
Rules and disposal of audit objections at field level to ensure transparency and
accountability.

Non Development Sectors allotment:
Non development sectors include:


Some Important Ministry Wise Distribution from Non development Budget:

(Taka in Thousands)
Code
Ministry/Division
Budget
2011-12
Revised
2010-11
Budget
2010-11
19 Ministry of Defense 0 1498,00,00 1409,00,00
22 Ministry of Home Affairs 0 300,00,00 123,00,00
48 Food Division 9470,47,14 8698,48,90 7288,01,82
07 Ministry of Public Administration 848,05,80 944,31,59 763,27,99
17 Ministry of Commerce 106,17,00 75,05,77 62,19,54
24 Ministry of Primary and Mass
Education
5450,00,00 4974,71,76 4866,63,82
29 Ministry of Social Welfare 1780,00,00 1676,25,50 1687,68,29
37 Local Government Division 1507,00,00 1504,70,91 1446,80,78
43 Ministry of Agriculture 6373,11,77 7397,10,78 5688,00,00
48 Food Division 10405,76,99 9670,81,53 7695,53,79
50 Roads & Railways Division 2954,76,00 2867,25,82 2870,00,00

Tax experimentation
Major changes
Threshold levels redefined:
For the first time a 10% surcharge has been imposed on disclosed net wealth if it exceeds
Tk20m.

Allocation in the Priority Sectors
Projects Power Natural
Resources
Transport Education Water Supply
&Housing
Health
Carry over 46.7 39.5 21.5 4.3 3.1 22.3
Concluding
in FY12
31.7 56.9 21.5 18.0 47.6 19.4
Continuing 21.1 3.6 54.3 69.9 36.2 53.1
New 0.6 0.0 2.8 7.8 13.1 5.3

Allocation for Padma Bridge accounts for 28.2% of the total allocation for the Transport
sector 78.15 % of this is expected to come from Project Aid.
Money Whitening
Muhith defends, CPD opposes
Finance Minister AMA Muhith defended his decision to allow whitening of black money for
one more year saying the budgetary move aims at having billions of untaxed taka invested.
There is no dearth of wealth in the country and we want to bring the whole money into
investment, he said.
The government, for the fiscal year of 2011-2012, has proposed to allow whitening of black
money through investment only in infrastructure funds and treasury bonds.
Items to get costlier
Cigarettes and chewing tobacco will be dearer as tax on those has been increased.
Four-door double-cabin pick-up trucks have been slapped with tax between 30% and
500% based on engine size.
All fabrics and ready-made garments become costlier as supplementary duty increased
to 45% from 20%.
Glass tube and float glass.

Items to get cheaper
Tax on several industrial raw materials for making containers for compressed or liquefied
gas, LP gas cylinder, LED lamps, rechargeable LED lamps and solar lamps have been
reduced.
Tax on Effluent Treatment Plants has been reduced.
Tax on cell phone SIM cards has been reduced to Tk600 from Tk800 so new mobile.

Features of Budget:
Now we are showing some positive and negative features of budget:

Positive Features

Negative Features


Budget to save our Environment:
In line with the previous two years, Tk.700 crore is allocated for FY12 for Bangladesh Climate
Change Trust Fund (BCCTF).
In FY10 and FY11, total Tk.1, 400 crore was allocated 60 projects (worth Tk.719.61 crore)
initiated under this fund. Tax on chemicals imported for ETP has been reduced to 3% from
higher rates (ranging between 5-12%) a welcome step towards abating industrial pollution.
NBR Revenue, Balance of
Payments, Subsidy Requirement,
Liquidity Situation
June 2010
NBR Revenue, Export, Investment
June2011
Inflation, Export, Energy &
Power, Investment
June 2010
Inflation, Balance of
Payments, Subsidy
Requirement, Energy & Power,
Liquidity Situation
June2011
Other initiatives are
Provision for Green Financing
Internalizing climate change concerns into development projects has not received
any positive nod in the current budget.
An early warning system for disaster management through cell phone networks.
Reducing air pollution management
Take project to clean air and sustainable environment
Controlling industrial pollution and waste management
The Solid waste Management Rules-2011
Bangladesh Environment Court Act-2010
Afforestation program by the year 2015
Bangladesh Environment Preservation (Amendment) Act-2010
ECONOMISTS' REACTION
Noted economists are split over the size of the annual development programme in the
proposed budget but unanimous in suggesting that the government enhance its
implementation capacity.
In an instant reaction after the budget announcement, former finance adviser Mirza Azizul
Islam said the size of the budget and the ADP is bigger this time.
The ADP of Tk 46,000 crore is comparatively bigger but it is unlikely that the government will
be able to spend more than Tk 32,000 crore. I think the priority sectors are alright.
The former adviser to caretaker government said the government would face challenges in
achieving the revenue generation target.
Although our performance has been quite good in the last three years, it will be difficult to
maintain the same rate.
Islam said the economy is under pressure from different fronts such as falling remittances,
depreciation in exchange rate, liquidity crisis in the banking sector and serious decline in
trade balance that are affecting reserves.
The government should have been bold about the loss-making state-owned enterprises
(SoE), The finance minister has only spelt out plans about Bangladesh Jute Mills Corporation.
But we always see that the SoEs approach the government in the middle of a year, plead for
money and get it. The government has already opened two loss-making jute mills. I do not
see any clear indication of a reform of the SoEs, Islam said.
Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), said the
government has rolled out a major investment plan but it has to maintain quality in
investment.
The accomplishment of seven percent economic growth will depend on the country's
capacity to implement the budget in terms of money and quality. If we can give
infrastructure facilities including gas and power supply, the plan can be implemented.
Rahman said it would be challenging to realize tax from non-NBR (National Board of
Revenue) sources.
The CPD top official, however, does not think that the size of ADP is bigger.
A number of new major projects will also be added further. The ADP size is not big, but
again, its implementation will be challenging.
He said many projects, most of which are old, are due to be completed this year, and the
government has to disburse funds on time.
He welcomed the government move to reduce rate on national savings certificate to five
percent from 10 percent. He thinks it will ease pressure on the private sector, as the
government plans to borrow more from internal sources.
The government should even think whether it can be brought down to zero, he said.
Brac Executive Director Mahabub Hossain said the government's reliance on loan woul d go
up further through the budget.
It will impact the poor, he said.
Renowned economist Debapriya Bhattacharya said the budget deficit may increase by 0.5
percent to one percent compared to that of the outgoing fiscal year.
"The income will increase by one percent but the expenditure, more specifically
development spending, will also rise. The question is how the government will meet the
deficiency," he said.
"Our recent experience shows the government takes more and more loans from banks to
meet deficit. This may lead to non-availability of resources for investment from individuals,
and interest rate may shoot up.
Debapriya, also former ambassador to the World Trade Organisation, said another challenge
for the government would be to get funds released from foreign sources.
I have not seen implementation strategy in the proposed budget for any sector.
Fahmida Khatun, chief of the CPD research wing, said the proposed budget would not be
sustainable unless the government enhances employment opportunities or sources of
income for the people.
Special attention should be given to financial and revenue sectors to reduce inflationary
pressure, she said.
Fahmida said the government would have to take effective measures for quick release of
foreign aid to make them available for timely use.

The View of the Finance Minister:
The finance minister Abul Mal Abdul Muhith has taken strong position in favour of the
expansion of areas and rate of tax. Being the chief guest in a seminar titled Bangladesh
Economic Status and Analysis of Budget 2011-2012 on June 9, 2011, the exchequer of
Bangladesh was quoted as The number of rich people has increased in the country but the
revenue collection of the government has not increased proportionately. So, the domestic
manufacturing sector should be habituated to pay taxes. He also added that, The ready-
made garment factory owners earn almost 13 to 14 billion dollars per year. But tax collection
from this sector is very little. Everybody should pay taxes thinking about the welfare of the
society.
In a poor country like Bangladesh, everything would not go with the expectation of the
finance minister. In spite of that, making a balance between will and ability enduring
pressures from various quarters and finally adjusting the financial accounts to prepare a
budget is the prime responsibility of the finance minister. The present government has
prepared a primary script for the sixth Five Year Plan. This plan projects the destination of
Bangladesh economy after ten years.
In this regard, the GDP growth rate has been estimated to scale up to 8% in 2013-2014 fiscal
year. There is also estimation of scaling up the GDP growth up to 10% and 12% in 2017 and
2021 respectively.
Now, if we are to scale up the GDP growth to 8% in 2014, the contribution of investment in
GDP should be 36% - the finance minister opined. It means, we have to add more 12%
investment with the present ratio to GDP. In this 12%, state investment will be 4% and the
private investment will be 8% - this is the estimation.
To increase the state investment, the revenue income should be increased through
enhancement of skill and improvement of collection management of the tax administration.
About the private investment, the finance minister expected that Foreign Direct Investment
(FDI) and Public-Private Partnership (PPP) can pave the way to increase the rate of
investment.
But the fact is that, owing to energy and power crisis accompanied by infrastructural
weaknesses, the Bangladeshi investors are suffering a lot and this situation can hardly attract
adequate FDI. On the other hand, the government could not finalize the PPP policy in the
last one and half a year.
How the finance minister and the government resolve this deadlock is going to give us the
real picture of the economy in the coming years.
Bangladesh Political Culture and Budgeting
There is a book titled Legislative Oversight and Budgeting: A World Perspective published
by the World Bank. This book contains many research and survey reports. One interesting
thing is that, there is a common phenomenon throughout the countries. What the
government presents in the budget, it is approved unchanged. Among 41 countries that
were surveyed, 34% countries approve the budget keeping it the same as the finance
minister proposed. US Congress is much powerful, they can have a new budget prepared,
but they did not do it or actually they did not need it. 63% of those 41 countries make very
trifling changes, resulting only 3% up-down in the budget. What is observable is that the
whole world is pursuing towards the practice of a shadow budget, which is presented
before the parliament much ahead of the final budget.
The former British Prime Minister Gordon Brown introduced the Pre-Budget
Statement/Report (PBR) in 1997.
The World Bank directed a survey on pre-budget statement in 36 countries including
Bangladesh, India and Nepal. 18 countries among these 36 present a PBR in their parliament
four months before the final budget is presented. The fact is that low income countries like
ours are lagging behind in this regard. Still, 21% of the low income countries can make the
PBR four months before the final budget. The irony is that Bangladesh is not in that 21%. What
is more frustrating is that there is no attempt or drive to introduce the practice of PBR. Rather
we see many compromises in such necessary matters related to transparency and
accountability.
We have to understand how much imprudent our political parties are in terms of national
interest. Continuous non-cooperation and hostile attitude fueled by the theme winners take
all have been leading us to an artificial, baseless debate of how national development can
be achieved.
The book published by the World Bank says how the budget will be and how much
transparent it will be depend on the analytical capacity of the parliamentarians. Only a few
of our parliamentarians are well-known in showing this capacity.
The Budget and the Country Scenario

Although there have been enormous amount of plans and indexes regarding economic
development, the number of poor people has not been decreased. Billions of Taka has been
spent by the government and NGOs in thousands of projects but the result is not that good in
the elimination of poverty. 75% of the whole population still lives in mud and bamboo made
dilapidated houses. Lighting at night is still done with kerosene lamp in almost half of the total
number of families. 60% people do not have any radio or television set for entertainment. Less
than one- third students complete the primary schooling.
According to Basic Opportunities Evaluation Survey done by the Bureau of Statistics the
percentage of population below the poverty line is 41.20. The percentage of poor people is
31.9 and the percentage of hard-core poor is 9.30.
The rate of annual economic growth has reached to 6% six years ago. Considering this as an
achievement, we are still left with the question that how the benefit of this growth has been
distributing among the citizens. Especially, the chronic increase of income and regional
discrimination urges more concentration on wealth and resource distribution policies.
Economist Wahiduddin Mahmud said, The economic growth rate should be increased up to
8% in the next six years. But the traditional way of budgeting will not help in this regard. It
needs creative policies. He also added that Brazil, China and other fast growing economies
adopted their own creative policies in recent time and thus ensured higher and sustained
growth.
Conclusion
In the face of macroeconomic headwinds arising from inflation and fiscal and external
deficits, a large sized budget has been prepared to meet the burgeoning demand for
spending. There are political compulsions of fulfilling many promises as the government
reaches the midway point of its term. There will be huge additional expenditures on subsidies
on fuel and power, in addition to agricultural and food subsidies. The government has also to
keep in mind the ambitious targets of the Sixth Five Year Plan, since deviations from the
roadmap right at the beginning will call into question the credibility of the Plan. To meet
these challenges, one would expect strong cost-cutting measures as well as measures for
improving the quality of public spending and the overall public resource management. Such
initiatives are not in sight. But these are not matters only for the finance minister to deal with.
The government has been sustaining the economy by adopting extended fiscal policies. As
a result, the GDP growth has crossed over 6.4% despite smaller private investment. But
adopting the extended expenditure measures, the government has also taken higher
burdens. Salaries of government employees have been increased besides the continuous
provision of subsidies in different sectors. The government has also borrowed from selling
savings certificates at higher interest. That is why the finance minister has to present a huge
budget.
From an overall view, it seems that the GDP growth may increase 0.5% in the new fiscal year.
It will result from mainly the increase in aggregate consumption expenditures. Because, the
upgraded pay-scale for the government employees will be fully implemented in this fiscal
year. Besides, the subsidies for fuel, energy and fertilizer will also increase along with the
strengthening of the social safety net programs. All these will exert an upward effect on the
GDP. So, the question remains for the task of strengthening the manufacturing sector by
enhancing investment. And this is the biggest challenge for the finance minister.
Sources
1. Bangladesh Ministry of Finance
2. CPD
3. Budget analysis by BRAC
4. Aims of Bangladesh
5. Newspapers