Executive summary

In modern industrial economies, the budget is the key instrument for the execution
of government economic policies. A government budget is often passed by the
legislature, & approved by the chief executive-or president. For example, only
certain types of revenue may be imposed & collected. Property tax is frequently
the basis for municipal & county revenues, while sales tax &/or income tax are the
basis for state revenues, & income tax & corporate tax are the basis for national
revenues.

The two basic elements of any budget are the revenues & expenses. In the case of
the government, revenues are derived primarily from taxes. Government expenses
include spending on current goods & services, which economists call government
consumption; government investment expenditures such as infrastructure
investment or research expenditure; & transfer payments like unemployment or
retirement benefits.

Introduction

The budget announcement is an important event in a country’s political and

economic calendar. The budget has been announced with eight major objectives
including creating employments, maintaining prices of essentials at a tolerable
level, ensuring food security and extending social safety net. In Bangladesh, public
focus on the budget is still confined to a few weeks in June. The incumbent
politicians and allied pundits hail the document as visionary and pro-people, the
opposition denounces it as anti-poor and anti-people, and then, after a few weeks,
nothing more is heard of it.

This is not conducive to democratic policymaking. With little review of the

previous year’s budget, there is little accountability for the government if it fails
to implement what was announced, or change course if announced policies
produce undesirable outcomes. By requiring the finance minister to regularly
update the parliament on budget implementation, the Public Moneys and Budget
Management Act, 2009 should improve both the economic policy and our
democratic culture.

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Methodology & Limitation

At the time of preparation of this assignment, data are collected from three sources.
For doing the job, we took the help of the Financial Ministry’s official website and
National Board of Revenue’s official website. Then we took the help of our text
and analyzed the national budget for last few years as well as website. We also
went to public library for collecting information related to National Budget.

Concepts of Budget

A budget is a financial plan and a list of all planned expenses and revenues. A
Government budget is a legal document that is often passed by the legislature and
approved by the chief executive or president. The two basic elements of all kind of
budget are: revenues and expenses.

A. Basis of Budget

 Budgets have an economic, political and technical basis.

 Unlike a pure economic budget, they are not entirely designed to allocate
scarce sources for the best economic use.
 They also have a political basis wherein different interests push and pull
in an attempt to obtain benefits and avoid burdens.
 The technical element is the forecast of the likely levels of revenues and
expenses.

B. Budget Cycle

1. Budget preparation phase: The first phase of the budget cycle involves
preparation by the departments/agencies, ministries and finally ministry
of Finance.
2. Legislative approval phase: Typically the legislature has the power to
approve or reject a proposed budget. They review it and vote. If
approved, it moved into the implementation phase.
3. Implementation and Execution phase: It is the duty of the executive
branch – primarily involves distributing the budgeted resources to their
designated recipients within the government and spending it as planned.
4. Budget monitoring and Inspection phase: Finally a budget is typically
monitored and reviewed following implementation to evaluate the
efficiency and effectiveness in order to guide future budgeting decisions.

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 C. Types of Budget (By Income-Expenditure Relationship)

1. Traditional incremental budgeting: It justifies only variances versus

past year actual expenditure, based on the assumption that the
“baseline” is automatically approved.
2. Zero based budgeting: Here every line item of the budget must be
approved, rather than only changes. During the review process, no
reference is made to the previous level of expenditure (Reverse to
Traditional).
3. Performance based budgeting: It is the practice of developing budget
based on the relationship between program funding levels and
expected results from that program.
4. Medium term budget framework: It is a budgeting approach that links
Government’s policy priorities to resource allocations to performance.
Emphasizes the efficient use of limited public resources and accounts
for the results.
5. Program budgeting: It is developed by U.S. President Lyndon
Johnson, describes and gives the detailed costs of every activity or
program that is to be carried out in a budget. Objectives, outputs and
expected results are described fully as are their necessary resource
costs, for example: raw materials, equipment and staff. The sum of all
activities or programs constitutes the program budget.

D. The Principles of the Budget Process

The budget process consists of several broad principles. These principles

encompass many functions that cut across a governmental organization.
These principles are following:
1. Establish Broad Goals to Guide Government Decision Making: A
government should have broad goals that provide overall direction for
the government and serve as a basis for decision making.
2. Develop Approaches to Achieve Goals: A government should have
specific policies, plans, programs, and management strategies to
define how it will achieve its long-term goals.
3. Develop a Budget Consistent with Approaches to Achieve Goals: A
financial plan and budget that moves toward achievement of goals,
within the constraints of available resources, should be prepared.
4. Evaluate Performance and Make Adjustments: Program and financial
performance should be continually evaluated, and adjustments made,
to encourage progress toward achieving goals.

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 5.
AN OVERVIEW OF NATIONAL BUDGET IN BANGLADESH

Government forecast of a governmental expenditures & revenues for a specific

period of time. The period covered by a budget of the government of Bangladesh is
a financial year that starts on 1 July of a calendar year & ends on 30 June of the
next calendar year. Government budget contains the strategies for mobilization,
allocation & disbursement of public money by means of fiscal & monetary
operations with due consideration of political, economic, & bureaucratic decision
making process. It developed in Bangladesh on the basis of legal requirements,
economy’s management needs, conventions, functional conveniences as well as
accounting & auditing requirements, including transparency & accountability.

The Constitution of Bangladesh, however, does not use the term budget. Instead, it
uses an equivalent term ‘Annual Financial Statement’, which is to show the
estimated receipts & expenditures of the government for a particular financial year.
Government budget in the country has two parts: Revenue & Development. The
former is concerned with current revenues & expenditures ie, maintenance of
normal priority & essential services, while the latter is prepared for development
activities. Formulation of the two budgets follows different procedures. Their
financing pattern & the delegated authorities of incurring expenditure in different
tiers in them are also different. Receipts in revenue budget are: domestic receipts
(tax & non-tax); foreign grants; capital receipts (foreign loans); domestic capital
(net of current receipts & expenditures in public accounts); extra-budgetary
resources (debenture of autonomous bodies, their self-financing & accumulated
balance, & materials at stock); & domestic loans & advances (net).

Receipts in development budget are grouped as public & private receipts. Public
receipts are the revenue surplus (revenue receipts minus revenue expenditures),
incomes through new measures (such as new taxes), net domestic capital, & extra
budgetary resources. A special form of public receipts is the foreign aid (project
aid, counterpart fund from commodity aid & net food aid). Receipts under the
private head for development budget are generated through direct private
investment, borrowing from banking system & foreign private investment.
Revenue budget is prepared by the Finance Division & the agency to prepare the
development budget is the Planning Commission.

Preparation of the revenue budget is a multi-stage process implemented under a

time schedule. The first stage is the printing of departmental estimates, which is

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followed by printing & distribution of Budget Forms (Estimating Officer’s
forms) for supply to the accounts officers concerned, who fill them up with
estimates from all controlling offices & send consolidated estimates to the ministry
of finance. The ministry of finance then examines the estimates, receives schedule
of new expenditures & information on actual expenditures of agencies &
organizations in last six months, reviews new estimates on the basis of these
information, & prepares a rough edition of the budget & the schedule of new
expenditures. The ministry also collects forecasts of foreign development
assistance & development programs from ministry of planning & after making
necessary adjustments, prepares the budget documents for presentation in the
JATIYA SHANGSHAD (Parliament) for discussion & approval.

Two constituent parts of the government budget are the consolidated funds (Fund)
& the public accounts (Account). These are not separate entities but are
distinguished by differences in receipts & disbursements. Consolidated Fund
includes all receipts of the government, all loans & grants received from domestic
& foreign sources & the recoveries of loans & interest thereon. Receipts in Public
Accounts of the Republic represent the part of the exchequer, which do not
constitute the Consolidated Fund. These relate mostly to transactions, in respect of
which the government acts as custodian or banker in trust. These receipts include
provident funds of government employees, post office savings deposits, various
deposit accounts (local funds, judicial deposits, foreign aid deposits etc.), &
adjusting heads like suspense & remittances.

Stages of budget procedure in Bangladesh are preparation, approval,

implementation, & follow-up. Policy components of the budget are:

(a) Fiscal measures or revenue policy;

(b) Expenditure proposed for basic functions of the government,
(c) Development or public investment, i.e. ADP;
(d) Money budget, commonly called credit & liquidity program; &
(e) Authorization for implementation of these policies.

The finance minister places the budget before parliament in June. It accompanies
an introductory speech known as budget speech consisting of two parts. Part one
deals with the overall financial & economic conditions prevailing in the country &
government economic performance during the last one year & government
economic plans & programs & the budgetary allocation. Part two deals with
taxation measures. After budget discussions, money bills, supplementary bill, &
appropriation bill are placed before the parliament. If, for any reason, it is not
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possible to pass the appropriation bill within 30 June, a vote on account bill has to
be placed before the parliament. Usually, through this bill an amount equivalent to
two months expenditure is sanctioned.

Implementation of the approved budget is carried out through various rules &
orders embodied in General Financial Rules, Treasury Rules & the Delegation of
Financial Orders issued by the finance division of ministry of finance.
Authorizations embodied in the Appropriation Act constitute the outer framework
of a control, while expenditure sanction & disbursement by executive authority at
various levels follows a given pattern of delegated financial powers. Budget
implementation also involves balancing of government incomes & expenditures.

Legal Framework of Budget in Bangladesh

The Constitution of the People’s Republic of Bangladesh 1972 provides the basic
legal framework for the governmental budgeting process. Articles 81 to 92 of the
Constitution outline the requirement of the budgetary procedures. In particular:

 Article 87 relates to the laying before Parliament of statement of receipts and

expenditure for financial year in form of an Annual Financial Statement.
 Article 88 indicates charged (i.e. non-voted) items of expenditure or
consolidated fund.
 Article 89 indicates that other items of expenditure are submitted to
Parliaments in the form of demands for grant or may be voted upon.
 Article 90 deals with the bill for the appropriation out of consolidated fund
to meet requirements.
 Article 91 deals with supplementary budget requirements for the current
year.

Institutional Framework of Budget in Bangladesh

Ministry of Finance mainly responsible to prepare and place the budget before the
Parliament. There are three divisions involved:
1. Finance Division
2. Economic Relations Division
3. Internal Resources Division (National Board of Revenue)

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Budget Calendar of Bangladesh

Serial No. Particulars Due Date

1 Printing of departmental estimates 31 July
2 Printing and distribution of budget (estimating 31 August
officer’s forms and controlling officer’s forms)
3 Preparation, printing and supply of budget form to the 30 September
Accounts officer concerned
4 Submission of estimates by estimating officers 10 October
5 Receipt of estimates in the Accounts office and the 31 October
Ministry of Finance from controlling officers with
tree months accruals
6 Receipt of consolidated estimates in the Ministry of 25 November
Finance with three months accrual from the Accounts
Officer
7 Completion of examination of budget estimates in the 20 January
Ministry of Finance
8 Receipt of schedule of new expenditure in the 22 January
Ministry of Finance
9 Receipt of six months accruals 15 February
10 Completion of review of estimates on the basis of six 28 February
months accruals
11 Preparation and dispatch of first edition of the budget 1 march
and the schedule of new expenditure
12 Receipt back of the first edition of budget from press 10 March
and dispatch to ministries/divisions
13 Forecast of foreign assistance for development 14 March
program
14 Completion of discussion on estimates with 28 March
administrative ministries/divisions
15 Receipt of final annual development program from 28 March
the ministry of planning
16 Preparation and printing of budget documents Any day of
May

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Budget making process

 Bangladesh started implementing MTBF in 2004-05 and completed over 5

years.
 At the helm is the BMRC (Budget Monitoring & Resource Committee)
 Headed by the Minister of Finance and performs the functions of co-
ordination of the overall resources and programs of the government.
 Finalizes the estimates of domestic resources. After determination of
requirements for the non-development budget, the remaining internal
resources are set aside for the development budget.

MTBF: Different stages of preparation

 Firstly, Finance Division issue BC-1 with Preliminary Indicative

Expenditure celling for each Line ministry.
 Secondly, Line Ministry prepares Ministry Budget Framework (MBF) with
the help of departments/agencies (up to district level).
 Thirdly, Finance Division and Planning Commission jointly review and
finalize agreed Budget numbers and MBFs.
 Fourthly, Finance Division issue Budget Circular-2 with Ministry-wise
Indicative Expenditure Ceilings.
 Fifthly, the estimates are reviewed and finalized by FD.
 Finally, Budget is presented to the Parliament.

Core budget documents placed before the parliament

 Budget Speech of the Finance Minister

 Budget in brief
 Annual Financial Statement
 Supplementary Budget (additional demand for grant for the ongoing year)
 Combined demand for Grants
 Consolidated fund receipt
 Medium term budget framework
 Detailed budget
 Annual Development Program (ADP)
 General Budget
 Bangladesh Economic Review

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Ministry Budget Framework (MBF): Overview

Ministry Budget framework (MBF) is divided into two major parts and five
sections:

Part-A of the MBF:

Section 1
 Mission statement of the Ministry/Division

 Major function of the Ministry/Division

Section 2
 Medium – Term Strategic objectives and key activities

Section 3
 Impact of Strategic objectives on poverty reduction and
women’s advancement

 PR&WA related spending

Section 4
 Priority spending areas

 Key performance indicator

Part-B of the MBF:

Section 5
 Recent achievements

 Key activities, output related to the activity

 Output indicators and targets

 Forward budget estimates

 List of project and programs

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Implementation agreements

There are following key organizational units responsible for the MTBF
implementation in ascending order of hierarchy:

 Budget wing/branch/section to prepare drafts of MBF with budget

allocations
 Budget Working Group (BWG) to the support the Budget Management
Committee (BMC) for decision making on MBF
 Consists of representatives of organizational units of the Ministry and of
Finance Division and Planning Commission
 BMC - the budget approval authority within the Line Ministry
 Led by the secretary and
 Consists of additional and joint secretaries, organizational heads,
representatives of FD, PC, IMED & CAO.

Financial Oversight

Parliament is the custodian of public fund according the constitution budget

discussed and approved in the parliament cannot be placed before a parliament
committee performs oversight functions on the execution and implementation
through-

Public Accounts Committee

Public Undertakings Committee
Estimates Committee
Committee on Ministry of Finance
Standing Committees on different Ministries

Conclusion

Budget is a complex issue dealt by the finance people and always kept away from
general mass. In Bangladesh discarded old incremental budget making process
having no connection to plan and performance. To prepare a good budget
performance indicator prior to budget should be defined because it helps to
measure performance of the budget and redefine priorities.

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