Budget Assignment

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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 crore,, highest in the history of the country, for the 2011-12 fiscal year, amounting Taka 163,589 crore 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 Presenter Budget to be in effect Slogan

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

Highlights  Budget Highlights  Budget size Budget deficit Revenue expenditure Revenue collection target Annual Development program Projected GDP growth Projected Inflation

2011-12  (% of GDP)  2011-12  GDP)  Increase than 2010-11 Tk1635.89b (18.2%) 23.77% Tk452.04b (5%) 14.96% Tk1029.03b 26.28% Tk1183.85b (13.2%) 27.51% Tk406.00b (5.1%) 19.48% 7% 0.4% points 7.5% 0.5% points

Macroeconomic Benchmarks for FY12 Macroeconomic

 

 

According Allotment to these benchmarks we can analyze our budget.

& Sectors at a Chart for FY (Individual Lofty revenue goals from thinning pockets The

Optimistic Trends Revenue Collection Export Growth Private Investment Domestic Demand



Uncertainties • •









Forex Reserve Remittance Foreign Aid Food Security



revenue

target the next forfiscal year has been set at Tk1183.85b would

Challenges Inflation Balance of Payment Liquidity Situation Deficit Financing

• •





on NonDevelopment Development Glance by 2011-12 Sector)

 

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 in FY12  FY12   

of

Share of financing   Tk18,957 the be from RB of   Tk8,251 will

be

(25.9%  

Share of financing FY11 (28.7%   Gross be 3.3b FY11)  –  – a target in view of only USD 1.4 billion was received during Jul-Apr Jul -Apr FY11   The government could not help but rely on bank borrowing.

Budget

Deficit

domestic 60.2% crore (69.7%) of domestic financing will the banking system(74.1% in FY11) crore (30.3%) from non-bank instruments in RB of FY11) foreign will be 39.8% in in RB of FY11) foreign aid requirement will around USD (USD 2.1b in challenging

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 heating

let-up in inflation

One of the economic challenges FY2011-12 controlling inflationary the backhigh prices essential

major in the will be the high trend in drop of of

 

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 Human Resources Agriculture Power & Energy Communication Others Total

Total allotment (crore) 10,304.2 8,512.0 8,286.5 8,054.4 10,842.9 46,000

% of ADP 22.4% 18.5% 18% 17.5% 23.6% 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 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 non -development expenditures  expenditures 

 

  Social Safety Net Program (SSNP) shrinking  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%. 2 .51%.

Education The proposed national budget for FY2011-12 provides for a 12.1% or Tk198.06  Tk198.06   b allocation for the education sector. Last year this allocation was Tk179.59b. A chunk of Tk10b has been embarked for  Prime  Minister’s Education Education Assistance 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 reexamine Monthly Payment Order (MPO) system to avoid the pervasive exploitation in this regard. Health & Family Welfare  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 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:

 



   





       

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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%. 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. 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 to project complysuccessful: with the target. The government has already done the following things in to FY2012 make this

   

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Formulated rules to introduce digital signature. Prepared licensing guidelines, audit guidelines, and CPS (Certificate Practice Statement)   Statement) Established CCA (Controller of Certifying Authority)  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‘ Banglade sh‘ with the procurement of technology.  technology. 

Development  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.  new.     All the new projects are under the LGED and mostly for infrastructure development, including construction of ailaaila-affected 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   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)  Taka) 

Financial Year

Non-Dev.

Development

Total

2008-09 2009-10 2010-11 2011-12

2366,65,82 2548,54,33 2867,25,82 2954,76,00

1912,17,00 3030,20,00 3630,49,81 4598,25,00

4278,82,82 5578,74,33 6497,75,63 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 Va ns for Container Transportation Procurement of 100 Single Decker, 300 Double Decker and 50 Articulated Buses

Administration   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)  Taka)  

Financial Year

Non-Dev.

Development

Total

2008-09 2009-10 2010-11 2011-12

70,39,967 74,88,828

11,54,800 9,17,500

81,94,497 84,06,328

94,43,159

12,68,300

1,07,11,459

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:

Code 

Ministry/Division   Ministry/Division

Budget 2011-12 

(Taka in Thousands)  Thousands)  Revised Budget 2010-11  2010-11 

19 22 48

Ministry of Defense Defense   Ministry of Home Affairs Affairs   Food Division Division  

0 0 9470,47,14

1498,00,00 300,00,00 8698,48,90

1409,00,00 123,00,00 7288,01,82

07 17 24

Ministry Minis try of Public Administration Ministry of Commerce Ministry of Primary and Mass Education Ministry of Social Welfare Local Government Division Ministry of Agriculture Food Division Roads & Railways Division

848,05,80 106,17,00 5450,00,00

944,31,59 75,05,77 4974,71,76

763,27,99 62,19,54 4866,63,82

1780,00,00 1507,00,00 6373,11,77 10405,76,99 2954,76,00

1676,25,50 1504,70,91 7397,10,78 9670,81,53 2867,25,82

1687,68,29 1446,80,78 5688,00,00 7695,53,79 2870,00,00

29 37 43 48 50

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 Power

Natural  Natural  Resources

Transport

Education

Water Supply &Housing

Health  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

0.6

0.0

2.8

7.8

13.1

5.3

Projects

New

Allocation for Padma Bridge accounts for 28.2% of the total allocation for the Transport sector   —  78.15  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.  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 contain ers 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 red uced to Tk600 from Tk800 so new n ew mobile. Features of Budget: Now we are showing some positive and negative features of budget:

Positive Features

NBR Revenue, Balance of Payments, Subsidy Requirement, Liquidity Situation • June 2010

NBR Revenue, Export, Investment • June2011

Negative Features

Inflation, Export, Energy & Power, Investment • June 2010

Inflation, Balance Payments, Subsidyof Requirement, Energy & Power, Liquidity Situation • June2011

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).  (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 h as been reduced to 3% from higher rates (ranging between 5-12%) a welcome step towards abating industrial pollution.

 

Other initiatives are

   

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Provision for ‗Green Financing‘  Financing‘  Internalizing climate change concerns into development projects has not received any positive nod in the current budget.  budget.   An early warning system for disaster management through cell phone networks.  networks.   Reducing air pollution management  management   Take project to clean air and sustainable environment  environment   Controlling industrial pollution and waste management  management  The Solid waste Management Rules-2011  Rules-2011   Bangladesh Environment Court Act-2010  Act-2010  Afforestation program by the year 2015  2015   Bangladesh Environment Preservation (Amendment) Act-2010  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 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 the loss-making state-owned enterprises (SoE), The finance minister has only spelt outabout 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.  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. quality . If we can give infrastructure facilities including gas and power supply, the plan can be implemented.‖  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.”  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 w hether it can be brought down to zero,‖ he said. Brac Executive Director Mahabub Hossain said the government's reliance on loan would go up further through the budget. “It will impact the poor,” he 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. 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.”  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.”  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‖ 2011- 2012‖ on June 9, 2 2011, 011, the excheque exchequerr 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 primescript responsibility of the minister. Theprojects presentthe government preparedis athe primary for the sixth Five finance Year Plan. This plan destinationhas 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 Statement/Report‖ (PBR) in 1997.

Gordon

Brown

introduced

the

―Pre-Budget ―Pre -Budget

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 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 an y radio or television set for entertainment. Less than one- third students complete the primary schooling. According to ―Basic Opportunities Evaluation Survey‖ Survey‖ done by the Bureau of Statis Statistics tics 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, of the subsidies for fuel, andAllfertilizer willexert also an increase the strengthening the social safety net energy programs. these will upwardalong effectwith 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.  2.  3.  4.  5. 

Bangladesh Ministry of Finance CPD Budget analysis by BRAC Aims of Bangladesh Newspapers

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