Government Budgeting in Bangladesh

Constitutional and Legislative Aspects of the Budget

The article 87 of the constitution requires that, a statement of the estimated receipts and expenditure of the government in respect of each financial year shall have to be laid before the Parliament. This statement is called Annual Financial Statement and This is the name given to the budget in the Constitution of Bangladesh.

Structure of the National Budget

A n n u a l F in a n c ia l S ta te m e n t/ T he B udget

C o n so lid a te d F u n d R e c e ip ts R evenues G ra n ts L oans N o n -D e v e lo p m e n t E x p e n d itu re s

P u b lic A c c o u n t o f th e R e p u b lic R e c e ip ts D e v e lo p m e n t P aym ent

T ax

N o n -ta x

R evenue A ccount

D o m e stic c a p ita l A c c o u n t R e v e n u e E x p e n d itu re

C a p ita l E x p e n d itu re

C h a rg e d O th e r C h a rg e d O th e r E x p e n d itu re E x p e n d itu re E x p e n d itu re E x p e n d itu re

Consolidated Fund

According to the article 84 of the Constitution all receipts of the government on account of taxes, income from assets, borrowing, repayments of loan, etc. are credited to a single fund called the Consolidated Fund. No money can be withdrawn from the Consolidated Fund except on the basis of the expenditure approved by the parliament.

Public Account of the Republic

All other money received by any government official and not credited to the Consolidated Fund has to be credited to the Public Accounts of the Republic. The government holds this receipts in a trusteeship.

Government Receipts
Major sources of government receipts in Bangladesh are as follows:

Revenues -Tax Revenue -Non-Tax Revenue Grants Loans -Domestic Debt -Borrowing from Banking System -Non-Bank Borrowing
-External Debt

Government Expenditure
The expenditure budget of Bangladesh is divided into following two categories: Non-Development -revenue expenditure -capital expenditure Development -revenue expenditure -capital expenditure

Charged and Other Expenditure

The annual financial statement shows separately the sums charged on the Consolidated Fund; and other expenditures. The parliament can discuss on the estimates of charged expenditures, but they are not subject to vote; Other expenditures require to be submitted as demand for grants and are subject to vote.

Coverage of the Budget

The government budget in Bangladesh includes both revenue and expenditure of the government; The budget covers all government departments/ directorates/field offices and includes all financial transactions of the government. The central government budget does not include financial transactions of local governments or state owned enterprises.

List of Reading

Goode, Richard (1984), Government Finance in Developing Countries, Brooking Institution, Washington. Managing Government Expenditure, ADB, 1999. Jones, R. and Pendlebury, M. (1996), Public Sector Accounting, Pitman Publishing, London. Fiscal Policy for Stabilization and Adjustment in World Development Report 1988, Oxford University Press, 1988. Guidelines for Fiscal Adjustment, IMF,1995 Ministry of Finance, Government of the Peoples Republic of Bangladesh (2004), Budget in Brief,

What is Government Budgeting?

A government budget is a statement of a governments estimated receipts and expenditure for a particular period, normally a year. The budget brings all the governments tax and spending plans together. Financial reflection of government activities or what the government plans to do.

Purposes of Government Budgeting

Ideally a budget serves four main purpose: First, it is a means of policy formulation. Second, it works as an instrument of policy implementation; Third, the budget is an instrument of legal control; and the budget documents are a source of information on government decisions and activities.

Comprehensiveness of Budgeting

A government budget should cover all government departments/agencies; A national government budget should not include financial transactions of local governments or state enterprises; But it should include grants or loans to the local governments, capital subscriptions, loans and subsidies to state enterprises and any dividends, interest and loan repayment from them to the government

Different Systems of Government Budgeting

Traditional Line Item Budgeting Performance Budgeting Planning, Programming, Budgeting System (PPBS). Zero-Base Budgeting (ZBB) Medium Term Budgeting

Traditional Line Item Budgeting

the budget is prepared on a line item basis; the preceding years income and expenditure are accepted as the standard for the next years budget. it becomes impossible to measure the performance or activities of a department;

Traditional Line Item Budgeting

Traditional budgeting does not require policy analysis. its incremental approach fails to consider whether a particular item is still required or the amount currently incurred is reasonable. Once an item appears in the budget its inclusion in future budget is taken for granted and only incremental changes in the item are considered.

Performance Budgeting

Traditional budgeting does not relate inputs or costs with outputs and performance. Performance budgeting emphasizes outputs and performance rather than inputs; Output is measured in terms of the amount of goods and services produced, the number of cases handled, the number of persons affected. Efficiency is usually measured in terms of

Planning, Programming, Budgeting System (PPBS)

Also known as program budgeting; Like performance budgeting, PPBS emphasizes outputs; PPBS creates scope for selection of the most efficient alternative and enable the decision-makers to allocate resources on the basis of benefit/cost relationships.

Zero-Base Budgeting (ZBB)

Zero-base budgeting means preparation of budget from a zero base. The concerned organization might be an old or a new one, it is assumed that it is starting as a new organization. Previous patterns of expenditures are not taken as the basis and each existing item of expenditure has to be annually re-justified;

Medium Term Budgeting

A new Budgeting approach generally known as Medium Term Expenditure Framework (MTEF). A Whole-of-government strategic policy expenditure framework within which ministers and line ministries are provided with grater responsibility for resource allocation decisions and resource use. to balance what is affordable in aggregate against the policy priorities of the country. consists of a top-down resource envelop, a bottom-up estimation of the current and medium-term cost of existing policies and matching of these cost with available resources.

MTEF: the Basics

Rational approach covering 3-5 years Covers both expenditure and income Covers both capital and recurrent Less detailed than budget Sets resource envelopes for each sector/ministry through medium-term Budget should be first year of MTEF Rolling approach updated annually Plans for year 2 onwards dont have same legal force as budget

Standard Government (Fiscal) Account

Revenue and Grants
Taxes Non tax Grants

Expenditures and Net Lending Recurrent

Capital Net Lending
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Overall Balance (Surplus/Deficit)

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Financing
Foreign (net) Domestic Bank Non bank

Revenues and Grants

Revenues: all non repayable receipts (i.e. receipts which do not give rise to an obligation of repayment), except grants
- Tax revenues: compulsory and unrequited receipts collected by the government for public purposes (Income Tax, Custom Duty, VAT, Excise Duty etc.). - Non tax revenues: Dividend/profits from public financial and non-financial enterprises; interest, fees and charges, property income.

Grants: unrequited receipts from other governments or

international institutions.

Expenditures and Net Lending

Expenditures: - Recurrent or Current Expenditure: wages

and salaries; goods and services; interest payments; subsidies and current transfers. - Capital Expenditure: acquisition of fixed assets (government investment); capital transfers (transfers for the purpose of acquiring capital asset)

Net Lending: loans given by government minus

repayments made by respective borrowers (e.g. loans to government employees, public enterprises, local bodies)