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A Study On The Interpretation of An Article Entitled "The Policy-Led Approach To Budget Planning in Bangladesh and The National Budget of 2009-10"
A Study On The Interpretation of An Article Entitled "The Policy-Led Approach To Budget Planning in Bangladesh and The National Budget of 2009-10"
Submitted
To
School of Business
By:
ID.: 0230022
Letter of Transmittal
October 26, 2010
To
Dr. Dilip Kumar Sen
Professor
School of Business
Independent University, Bangladesh
Dhaka
Subject: Submission of study report on “The Policy-led Approach to Budget Planning in Bangladesh
and the National Budget of 2009-10”
Dear Sir,
It’s my great pleasure to place my study report for your kind approval.
My study report is on the interpretation of an article entitled “The Policy-led Approach to Budget
Planning in Bangladesh and the National Budget of 2009-10”. The observations and result of my
study are embodied on this report. In addition to my careful study, this report has been a worthwhile
review allowing me to go for interpreting about budgetary planning approaches situation. This study
allows to know about the budget planning currently followed by Bangladesh.
I request your kind excuse for the mistakes that may take place in this report instead of my best effort.
Thanking you
Sincerely yours
………………….
Md. Ahsanuzzaman Jewel
ID# 0230022
MBA
Independent University, Bangladesh
e-mail: jolsboy@gmail.com
TABLE OF CONTENTS
Letter of Transmittal i
Executive Summary ii
Introduction 1
Problem definition 2
Objectives 2
Main Issue 3
Recommendation 15
Reference 19
Appendix 21
LIST OF TABLE
Executive Summary
Poverty Reduction Strategy Paper (PRSP) is the approach which playing a
concept has been practiced successfully for a long time in the western countries. In Bangladesh as
a development country it’s a new concept, where it faces a triple challenge in building a road
map for accelerated poverty reduction: firstly, build on past achievements while preventing
priorities, and, thirdly, unlock the agency potentials of the nation through an optimal mix of
public action, private initiatives and community mobilization. The policy triangle on which
such a road map broadly rests is constituted of pro-poor economic growth, human
development and governance. In this study paper seeks to analyse the Poverty Reduction
Strategy Paper (PRSP) as part of this process in Bangladesh. The PRSP process in
Bangladesh clearly indicates the key role played by the bureaucrats in its formulation and
implementation. PRSP introduced & replacing the earlier Five Year Plans did not change
the approach towards dealing with development rather transformed the way to do things. It
is no doubt that better planning and the improved monitoring of their implementation carries
considerable potential for improved poverty reduction as well as economic growth and
development. There is also little evidence to suggest that a return to the Five Year Plan will
have a negative impact upon the formulation and implementation of poverty reduction policies
in Bangladesh. The PRSP process was far from being participatory. This paper also discusses
the use of tools such as MTBF to follow the implementation of the plans; the idea, that
participation that widens the input into the budgetary planning process can be a good thing.
Introduction
Government, the PRSP (Poverty Reduction Strategy Paper) is a relatively new term in
Bangladesh development aid yet it possesses the characteristic of much else in the aid
industry, namely being donor driven, locally produced, and of indeterminate ownership. In
line with a number of other developing countries Bangladesh prepared first an Interim-PRSP
and thereafter a full PRSP, the former draft being finalized in 2005. Subsequently a second
PRSP has been drafted. The government that came to power in the recent elections held in
January 2009 has decided to realign the document with its election manifesto. The process is
about to be completed as has been announced to the press. The new government had declared
in April 2009 that it intended to return to a 5 year planning process in 2011. Thus it appears
that a PRSP and a 5 year plan will co-exist in the coming years. Currently Budget proposed
amount is higher than any other amount announced ever, if comparing with the last year’s
(Financial Year) 2005-2006. This process may considering multi-period rolling budgetary
framework, so the rise and partial fall of the PRSP in Bangladesh is not to be seen as being
merely a temporary pause in the 5 year plan approach to development planning and poverty
reduction. Though their impact is not so apparent, significant changes have occurred and
these together with the way PRSP was adopted and then rejected provide an opportunity to
study this dimension of the new poverty agenda in Bangladesh and to examine it through the
Poverty Reduction is the main theme of PRSP. “Did a PRSP Approach Change the
Framework for Development and Poverty Reduction?” is the core question of the
budgetary planning committee. Two doors are open up for the budgetary planning committee
Option-1: Use PRSP approach for Reducing Poverty for long term planning
Objectives
In introducing the MTBF in Bangladesh, the Government has sought to address the
macro level and also at the ministry levels are based on overall macro, sectoral and
Improve budget discipline and predictability - that budgets are planned and
reallocated away from lower priority towards higher priority public spending
programmes.
utilized more efficiently so that the quality of public services can be improved.
Main Issue
Did a PRSP Approach Change The Framework for Development and Poverty
Reduction?
Create the linkage between the budget Plan and the PRSP, to fulfill of poverty
reduction with the support of four strategic blocks (enhancing pro-poor growth, boosting
critical sectors for pro-poor economic growth, devising effective safety nets and targeted
programs, and finally ensuring social development) and understanding the key point of the
of FYP is a big challenging job for the budgetary planning committee where the core goal set
to reduce the poverty level and accelerate the economic level of a nation. When move from
traditional old budgetary system to Medium Term Budgetary Framework (MTBF), there are
eight specific avenues-four strategic blocks and four supporting strategies-through which the
goal of accelerated poverty reduction will be pursued. These are firstly supportive
balances, improved regulatory environment, higher private investment and increased inflow
of FDIs, effective trade and competition policies, and, poor and gender sensitive budgetary
process; secondly, choice of critical sectors to maximize pro-poor benefits from the growth
process with special emphasis on the rural, agricultural, informal and SME sectors,
thirdly, safety net measures to protect the poor, especially women, against anticipated and
unanticipated income/consumption shocks through targeted and other efforts; fourthly,
human development of the poor for raising their capability through education, health,
sanitation and safe water, nutrition and social interventions; fifthly, participation and
empowerment of the poor, specially women, and other disadvantaged and marginalized
groups such as disabled, ethnic minorities, ecologically vulnerable; sixthly, promoting good
tackling corruption, enhancing access to justice for the poor, and improving sector
governance; seventhly, improving service-delivery in the areas of basic needs; and finally,
The PRSP does point to the multidimensional nature of poverty, stating that the level and
nature of poverty should be seen in a ‘holistic way taking into recognition all credible
quantitative and qualitative evidences’. Furthermore in defining poverty the PRSP document
states: “Poverty is a broad front. It is about income levels. It is about food security. It is about
quality of life. It is about asset bases. It is about human resource capacities. It is about
The I-PRSP was composed of five broad components in which the policy fields for
the poor,
2) Fostering human development of the poor for raising their capability through
4) Improving social protection measures for the poor, especially women, against
anticipated and unanticipated income/consumption shocks through targeted and
other efforts
improving non material dimensions of well being including security, power and
The I-PRSP was composed of five broad components in which the policy fields for
the poor,
II. Fostering human development of the poor for raising their capability through
IV. Improving social protection measures for the poor, especially women, against
other efforts
improving non material dimensions of well being including security, power and
The PRSP presents a medium term strategic agenda with the goal of accelerated poverty
reduction in Bangladesh. In the revised strategies poverty reduction and development are to
education, local governance, maternal health, sanitation and safe water, criminal justice, and
monitoring.
Table 1: Flowchart of Poverty Reduction Strategy Framework
With the full PRSP and with a view to maintaining macroeconomic stability,
accelerating economic growth and poverty reduction, the government now introduced the
Medium Term Budgetary Framework (MTBF) along with Medium Term Macroeconomic
Framework (MTMF) and Ministry Budget Framework (MBF) in fiscal Year 2005-06. The
PRSP does point to the multidimensional nature of poverty, stating that the level and nature
of poverty should be seen in a ‘holistic way taking into recognition all credible quantitative
The sources of increased growth would involve several areas: (i) higher private
investment in all sectors and increased inflow of foreign direct investments(FDIs); (ii)
increased efficiency and technological progress across the economy including promotion of
production and non-farm sector growth; and (v) expansion and diversification of the export
sector. Within the medium term framework, priorities would be given to ensure the
following: (i) stable macroeconomic balances; (ii) strong institutions and improved
governance; (iii) outward oriented growth with strong private sector role; (iv) Government-
private sector (including NGOs) partnership; and (v) gender sensitive macro and policy
Accelerating growth and bringing a pro-poor orientation in the growth process would be
achieved through emphasizing four priority areas: (i) accelerated growth in rural areas and
development of agriculture and non-farm economic activities; (ii) small and medium
manufacturing enterprises; (iii) rural electrification, roads, water supply and sanitation, and
supportive infrastructure including measures to reduce natural and human induced shocks;
and (iv) information and communication technologies. Success on pro-poor growth will not
come from text-book recipes. Exports matter but the importance of parallely mobilizing the
potentials of a burgeoning domestic market cannot be left aside. Indeed, it is arguably in the
synergies of the two foci - export and domestic markets - that the best opportunities for pro-
Consider economic development which promotes poverty reduction has been a stated
objective of all governments that have held power in Bangladesh since the country achieved
independence in 1971. It exists in the Constitution of the country as one of its fundamental
goals, understandably so given the effects of British colonial rule on economic development
in the sub-continent and thereafter the exploitation of the East Pakistan’s economy by West
Pakistan during the period 1947 to 1971. In 1971 it finally emerged as an independent
sovereign country, but ravaged by war, with little by way of industry, an under-resourced
agricultural sector, and the majority of the population in poverty or absolute poverty. It was a
society that had experienced systematic exclusion from power and influence in both the
public and private sectors and it entered into independence with the loss of many from its
relatively small educated elite with their deliberate targeting by the (west) Pakistani army in
the universities and elsewhere during the struggle for independence. For building the new
country economy the base two pillars should be economic growth and poverty reduction, at
least in the policy rhetoric, with the latter perhaps dominating the national and international
agenda in the early period. However this is at the general level; once one begins to look into
the specifics it becomes apparent that defining poverty with the object of policy formulation
for its reduction has been a confused and often contested process, more often than not
conditioned by the context, internal and external, faced by the incumbent government and the
vested interests that those in office have pursued. Between 1973 and 2002 Bangladesh’s
development policies were organized in Five Year Plans apart from one special Two Year
Plan (1978-1980). Then, with the encouragement of the World Bank, the Fifth Five Year Plan
was phased out in 2002 to be replaced by the PRSP approach; PRSPs took on the status of
being the national policy framework for poverty reduction in Bangladesh. This remained the
case until the election of the new government in 2008 and its statement that from 2011 it will
and state regulated economic development with poverty reduction being a principal objective.
From the outset of the Five Year Plans, poverty was declared as the priority issue in a
development strategy where the overarching goals were to accelerate economic growth and to
reduce poverty in terms of both income and consumption indicators. Official measurement of
the incidence of poverty in the country has been based on the Household Income and
Expenditure Surveys that have been conducted regularly since 1973-74. The Report on the
Household Income and Expenditure Survey, 2005, prepared by the Bangladesh Bureau of
Statistics (BBS) indicates a downward trend in income poverty, declining at the national level
from 48.9% in 2000 to 40.0% in 2005. This is based on comparisons of the upper poverty
line. Using the lower poverty line it decreased from 37.7% to 25.5% (Bangladesh Economic
Review, 2006). It must be noted however that the level of poverty is a hotly debated subject
with many experts claiming that the poverty and absolute poverty levels are under-
estimated, the indicators inadequate, and that too many dimensions of poverty are missed.
Nevertheless there is some agreement that the proportion of poor is declining, though the
absolute number might well be rising. Poverty is a broad front. It is about income levels. It is
about food security. It is about quality of life. It is about asset bases. It is about human
about human security. It is about initiative horizons. It is each of these and all of these
together. Below two figures show the changes over the last decade according to World Bank
data, both in percentage and in total number of people living below Bangladesh’s upper and
lower poverty lines, as determined by income and consumption levels. Those living below
the upper poverty line cannot consistently meet their basic human needs, while those living
However, aggregate poverty rates remain dauntingly high. Pockets of extreme poverty
persist. Inequality is a rising concern. Women continue to face entrenched barriers and
Governance weaknesses stand in the way of an acceleration of the growth process. By current
trends, breaking wholly free of the poverty chains remains a distant goal. This is a prospect
that is neither necessary nor inevitable. The struggle against poverty will never succeed if it
continues to be ignoring the list of strategic priority. Poverty is so pervasive that a million
priorities will not exhaust the agenda but to get the momentum going, policy and popular
energies have to be galvanized around a few catalytic agendas built on the policy triangle of
growth, human development and governance. The overriding consideration for choosing such
an agenda will be its relevance to ground realities and its potential to unlock the social and
economic energies of the nation. Such a choice must also be built upon an adequate
understanding of the poverty process. In real life, the move out of poverty is never a one-step
change from being poor to non-poor. The change process is more akin to a ladder built of
distinct rungs or milestones. Construction of anti-poverty strategies must keep in focus all
rungs of the poverty ladder with an overall emphasis on graduation. The Government is
fiscal policy, monetary and exchange rate policies, combined with enhanced supervision and
against adverse external or domestic shocks and create an enabling environment for pro-poor
(FY04-FY08) are to promote economic growth and employment, including small and
medium size enterprise development, in a manner consistent with the poverty reduction goal
sectors and directly poverty reducing activities. The broad objectives of the medium-term
consistent with the poverty reduction goal by channeling an increasing share of government
expenditure into social and infrastructural sectors and directly poverty reducing activities. Key
within the next generation. For this, poverty reduction (with special focus on the removal of
hunger and chronic poverty) and social development (with particular emphasis on gender
equality) have been made the overarching independent strategic goals. The vision proposed
highlights the need for progressive realization of rights in the shortest possible time. It also
takes into consideration Bangladesh’s previous official commitment to achieve the MDGs as
well as social targets set in the PAPR with the ADB and in the reports of the Independent
comprehensive approach and by taking into account the country’s past international and
regional commitments and evolving national realities, the Strategy visualizes that, by the year
Reduce the proportion of people living below the poverty line by 50 percent;
Attain universal primary education for all girls and boys of primary school age;
Reduce infant and under five mortality rates by 65 percent, and eliminate gender
and the disadvantaged groups, especially violence against women and children; and
Finally, policy-switching by Bangladesh as a developing nation with the respect of long term
policies such as MTBF (Medium Term Budgetary Framework) from traditional FYP system to PRSP
Recommendation
The PRS is a new framework then the previously followed traditional framework used for
budget planning, so it’s highly prescribed to monitoring and evaluating the framework,
process and outcomes will be central to the success of the PRS. Monitoring the progress of
PRS will consist of continuous assessment of the flow of inputs and policy changes for the
fulfillment of specific objectives and the appropriate utilization of the inputs to achieve target
outputs. Both intermediate indicators i.e. inputs and outputs, and final indicators i.e.
outcomes and impacts, will be monitored to track the progress of PRS and MDG attainment.
The objectives of monitoring and evaluation (M&E) of PRS will consist of the following:
• The results on the indicators of the system will be used by the Government for
informed decision making, for re-setting priorities and revision of the targets, if
• Public knowledge of M&E results will help improve transparency and accountability
of the Government.
the PRS and the outcomes in terms of achievements of poverty reduction targets can
clarity and put in place a data generation system which can help other related research
The process of monitoring and evaluation of PRS is a continuous one involving a number of
overlapping sets of activities. Major steps of the monitoring & evaluation process will include
the following:
monitoring tasks. While government will take the lead, there will be supplementary
• Progress monitoring on the action agenda spelled out in the policy matrices.
• Data generation for target achievements: census, surveys, qualitative studies and
institutions will have the responsibility and opportunity to generate the relevant data.
For a clearer exposition of the steps of M & E, the process has been shown in the Flow Chart
given below:
For effectively role the process of M & E, the task and functions with responsibility entity shown
below table
Table 4: The task and functions with responsibility entity of the process of M & E
agenda setting of development policy formulation in the last one and half decades and the
bureaucracy remains the strongest player in the Bangladesh policy arena. The description
of the PRSP development and status in the previous sections clearly indicates the key role
of the bureaucrats both in its formulation and implementation processes. The institutional
arrangements to initiate, formulate, review and implement the PRSP. After monitoring and
evaluating current framework the future researcher may focus their study area on the
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Labour Market Perspective, Asian Affairs, Vol.27, No 4.
Bhattacharya, D. (2005), Delivering on the PRSP in Bangladesh: An Analysis of the Implementation
Challenges, Centre for Policy Dialogue Occasional Paper Series, Dhaka.
Bhattacharya, D. and Rahman, M. (2000), “Experience with Implementation of WTO-ATC and
Implications for Bangladesh”, CPD Occasional Paper Series, Paper 7.
Bhattacharya, D. and Titumir, Rashed A.M. (2000), Poverty Reduction in Bangladesh: Absence of a
National Framework, An Abundance of Donors’ Strategies, CPD, Bangladesh.
CPD (2000), CPD Occasional Series 4, CPD, Dhaka, 2000.
CPD (2001), Policy Brief on Administrative Reform and Local Government, CPD Task Force Report,
Dhaka.
CPD (2005), Finalization of the Poverty Reduction Strategy for Bangladesh: A Review of the process
and Interim Measures, CPD: Review of PRSP Preparation Process, CPD, Dhaka.
IMF and IDA-BD (2005), Joint Staff Advisory Note on the Poverty Reduction Strategy Paper, 2005.
Maxwell, Simon (2003), Heaven or Hubris: Reflections on the New ‘New Poverty Agenda’,
Development Policy Review, Vol. 21, pp. 5-25.
Ministry of Foreign Affairs of Denmark (2005), Bangladesh-Denmark Partnership, Strategy for
Development Cooperation, 2005-2009. UNDP, (2000): Poverty Report. New York, UNDP.
World Bank, (2005), Bangladesh PRSP Forum Update: Recent developments and Future
Perspectives.
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