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The honourable Finance Minister has just placed the budget for 2013-14 fiscal year before the parliament. An analysis of the budget can take different routes. One may approach it with a human rights perspective, one may try to analyze its potential sectoral impacts, one could also view it from a poverty alleviation angel and so on. However, the budget being a balance-sheet of the governments income and expenditure accounts, probably the most basic approach is to analyze it from the perspective of its financial soundness, which is what this article intends to do. The new budget shows an estimated expenditure of Tk 2,22,450 crore in the next fiscal year. This is nothing special given the fact that it is about Tk 31,000 crore more than the last years budget and we have seen similar increases before. At the same time, this increase in expenditure is not going to impact on budget deficit that much, as indicated by around Tk 2,000 crore increase in the overall deficit in the new budget. What this means is that we are anticipating a growth in income (revenue earnings) impressive enough to offset the increase in expenditure almost fully. The budget shows around 20% growth in income and 16% increase in expenditure. Again, this figure is nothing special as similar (and even higher) income growth has been achieved in the recent years. The budget for 2012-13 fiscal year also targeted 18% growth in income. However, one may ask how and why the government is expecting a trend growth in income when imports are falling and private investment is stagnating. As a note, revenue collection from imports still constitutes a significant share in total public income. From the revenue estimates in the new budget, the government is also not expecting import duties to contribute in its income growth. Only 0.4% of the additional revenue (compared to the budget for 2012-13) is expected to come from import duties with a minuscule growth of 0.7%. Then the question that arise is, are we expecting a structural shift in revenue earnings in the coming year? If so, in which direction? Whos going to contribute? Indeed, as detailed revenue targets reveal, the budget expects an extraordinary shift. Overall Expenditure Structure: Table 10
Now, I would like to give a brief outline of the overall expenditure (development and non- development) structure of the proposed budget. We have classified different ministries/divisions into three groups based on their functions
1. Social infrastructure. 2. Physical infrastructure. 3. General Service sectors.
In the proposed budget, 23.17 percent has been allocated to social infrastructure sector, of which 19.6 percent has been proposed for human resource (education, health, and other related sectors), 30.18 percent of total allocation has been proposed for physical infrastructure sector, of which 14.50 percent has been proposed for overall agriculture and rural development, 8.66 percent for overall communication sector and 5.1 percent for power and energy sector. 22.45 percent of total allocation has been proposed for general services sector. 3.29 percent of total allocation has been proposed for Public Private Partnership (PPP), financial assistance for different industries, subsidy, and equity investment in nationalized banks and financial institutions. 12.47 percent has been proposed as interest payments. Remaining 8.44 percent will be spent for net lending and other expenditures. Hopefully, the budget framework proposed in view of the domestic and global perspectives will support growth, contain inflation and reflect aspirations of the mass people.
Overall Income of Bangladesh Budget:
Of the revenue, Tk 1, 36,090 Crore is predictable from National Board of Revenue (NBR) tax revenue, Tk 5,129 Crore from non-NBR tax revenue and Tk 26,240cr from non-tax revenue. The govt. looks ahead to Tk 6,670cr in foreign funding. Copmparison in Expenditure of 2012-13 and between 2013-2014 1. Public Administration 2. Education and Information Technology: 3. Transport and Communication: 4. Agriculture: 5. Local Administration and Rural Development
Public Administration: During the Fiscal Year 2011-12 the budget allocation for the public administration sector was Tk. 23,980 which was 14.6% of total budget allocation of this year. But for the Fiscal Year 2012- 13 the budget allocation for this sector is 24.111 which is 12.6% of the total budget allocation. Year Type 2011-12 2012-13 2013- 14 Graph Development 2,335 2,934
Non-Development 21,625 21,177 Total 23,980 24,111 Percent of total budget 14.6% 12.6% Education and I nformation Technology: 23, 900 23, 950 24, 000 24, 050 24, 100 24, 150 1 2 Ser i es1 Educated and skilled human resource is the main drives of development of an economy. Our Govt. is attaching highest priority to education as the most strategic tool for education of poverty and development. Govt. have formulated and education policy, 2010.
Transport and Communication: During the Fiscal Year 2011-12 the budget allocation in the Transport and Communication sector was Tk. 11,280 cores and in current Fiscal Year it is 13,317 which is not satisfactory for the current circumstances Year Type 2011-12 2012- 13 2013- 14 Graph Development 7,744 9,475
Non-Development 14,444 14,743 Total 20,316 22,145 Percent of total budget 12.4% 11.5% 19, 000 19, 500 20, 000 20, 500 21, 000 21, 500 22, 000 22, 500 1 2 Ser i es1 Total 11,280 13,317 Percent of total budget 6.9% 7.00%
Agriculture:
Year Type 2011- 12 2012- 13 2013- 14 Graph Development 3462 4358
Non- Development 9054 10,099 Total 12,516 14,457 Percent of total budget 7.7% 7.5% Local Administration and Rural Development
Year 2011- 12 2012- 13 2013- 14 Graph 23, 900 23, 950 24, 000 24, 050 24, 100 24, 150 1 2 Ser i es1 Type Development 3462 4358
Non- Development 9054 10,099 Total 12,516 14,457 Percent of total budget 7.7% 7.5%
Income Sector:
taxes on income and profit (income tax):
VAT (on local business and at the import stage:
Comparison in income of 2012-13 and between 2013-2014 The budget is 16 % upper from the current fiscal year. 23, 900 23, 950 24, 000 24, 050 24, 100 24, 150 1 2 Ser i es1 The governments income or revenue earnings come mostly from five heads taxes on income and profit (income tax), VAT (on local business and at the import stage), import duties, supplementary duties and non-tax revenue sources (profit from different government services). As mentioned earlier, import is not going to contribute in the anticipated income growth. So is not the revenue earned from supplementary duties (only about 3%). Of the remaining three heads, non-tax revenue is going to contribute in a significant manner. While this head has been struggling in the recent past to post any growth at all (only 1% growth target was there in 2012- 13 budget), the budget for the next year expects it to grow by about 15%! Therefore, over 12% of the additional revenue in 2013-14 fiscal year is expected to come from profits emanating from enhanced efficiency in public service delivery! As for VAT, which is the single largest (about 30%) income source of the government, this revenue head is expected in the budget to contribute over 34% in the additional income next year. Two things about VAT collection are of importance here. Firstly, almost 40% of VAT comes at the import stage and we noted earlier that import is not expected to grow in the coming fiscal year. Therefore, it is likely that the growth (of over 23%) in VAT collection has been anticipated mostly at the local stage. Secondly, increase in VAT has been highly dependent on bringing untapped business activities within its coverage in the past and ample opportunities to do so remains. As such, the contribution expected out of VAT will again be dependent on the governments performance in tapping more businesses. The last remaining contributor is income tax. It is to be noted that revenues from income tax has been growing at an impressive pace during the recent years. But the new target of an almost 37% growth in this head will take it to a new height, contributing almost 47% of the additional income in 2013-14 fiscal year. At the same time, like VAT, growth in income tax will also be primarily depending on bringing in more tax-eligible people/companies in the tax net; here too, one needs to note that plenty of opportunities remain. However, being able to do so will once again hinge on the performance of the government and its mechanism which is, in this case, the NBR. Bringing it altogether, to a significant part, 80% to 90% of the expected increase in income in 2013-14 will rely on improved governance efficiency!