Letter of Transmittal

22 November, 2019
Kazi Noor-E-Jannat
Senior Lecturer
Faculty of Business Administration
Cox’s Bazar International University

Subject: To submit an assignment on “Budget of Bangladesh”

Dear Ma`am,
This is to inform you that I have completed my report on “Budget of Bangladesh” Here I
tried my best to give an overview of Budget of Bangladesh and finally some findings.
In preparing this report I have followed the instructions of yours. I will be glad to clarify any
discrepancy that may arise.

Thank you for your co-operation.

Sincerely,

Md.Khurshed Alam
ID 19OO92000100
RMBA 9thBatch
Faculty of Business Administration
Cox’s bazaar International University

1|Page
Acknowledgement:

In preparation of my assignment, I had to take the help and guidance of some respected
persons, who deserve my deepest gratitude. As the completion of this assignment gave me
much pleasure, I would like to show my gratitude Kazi Noor-E-Jannat. Course Instructor,
on Cox`s Bazar International University for giving me a good guidelines for assignment
throughout numerous consultations. An assignment to be submitted on 22 November, 2019.  

I have made a detailed analysis on my assigned topic– “Budget of Bangladesh”. I would

also like to expand my gratitude to all those who have directly and indirectly guided me in
writing this assignment.

Many people, especially my classmates have made valuable comment suggestions on my

paper which gave me an inspiration to improve the quality of the assignment

Prepared By

Md. Khurshed Alam

ID: 190092000100
Masters of Business Administration
Faculty of business Administration
Cox`s Bazar International University.

2|Page
Executive summary:
In the processes of budgeting, it is also imperative for the management or the
organization heads to make sure that the budget allocation will be utilized and can
cover all the requirements and specifications of the program or project plan. This is
why a budget executive summary is essential to be developed.
The specified document helps evaluate the effectiveness and efficiency of previous
budgeting decisions and activities that can serve as a guide in the development of new
budget processes and regulations.
Forecast of governmental expenditures and revenues for the ensuing fiscal year. In modern
industrial economies, the budget is the key instrument for the execution of government
economic policies. Because government budgets may promote or retard economic growth in
certain areas of the economy and because views about priorities in government spending
differ widely, government budgets are the focus of competing political interests.
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. I am having a hard time completing this budget of Bangladesh. Overall, I
have tried to discuss about the budget of Bangladesh. In this assignment, I have contained
some topics such as Overview of the Budget of Bangladesh, Presentation and Legislation of
the Budget in Parliament, Institutions Influencing Budget Formulation and Implementation,
Documents Related to Bangladesh Budget, Explanatory Note on Budget Terminology,
Comparison among Budget of Last Three Years, An Analysis of the National Budget for
FY2019-20, Interpretation, Conclusion and Recommendation at all.

3|Page
 Overview of the Budget of Bangladesh
Introduction:
In a nutshell a budget is a financial plan for a defined period often one year. It includes the
planned sales volumes and revenues, resource quantities, cost and expenses, assets, liabilities
and cash flows. The governments, companies, families and other organizations use it to
express strategic plans of activities or events in measurable terms. A Budget is the sum of
money allocated for a particular purpose and the summary of intended expenditures along
with proposals for how to meet them. It may include a budget surplus, providing money for
use at a future time or a deficit in which expenses exceed income.
Here we will illustrate about the Government Budget of Bangladesh with reference to the last
03 years budget i.e. FY 2017-2018, FY 2018-2019 and FY 2019-2020. Thus what is a
government budget? A government budget is a document prepared by the government
presenting its anticipated revenues and proposed spending for the coming Fiscal Year (FY).
In Bangladesh the budget is declared in the parliament by the Minister of Finance often in
June every year. In Bangladesh the Fiscal Year (FY) is calculated from 1 st July to 30th June of
next year. The two basic elements of any budget are the revenues and expenses. In the case
of the government, revenues are derived primarily from taxes. Government expenses include
spending on current goods and services, which economists call government consumption,
government investment expenditures, retirement benefits etc.
Budget of Bangladesh:
According to an article published on The Daily Star on June 08, 2018, Bangladesh’s first
budget was passed for FY 1972-73 in the Parliament of Bangladesh which worth Tk.786.00
crore. Since independence in 1971 Bangladesh’s budget has also risen significantly in the last
few decades. On June 13, 2019 Bangladesh Parliament has passed the TK.253,190.00 crore
national budget for the fiscal year (FY) 2019-20 which is till now the largest ever budget in
the country’s history.
Structure of Bangladesh Budget:
The Government Budget in the country has two parts: Revenue and Development. The
former is concerned with current revenues and expenditures i.e., maintenance 2 of normal
priority and essential services, while the latter is prepared for development activities.
Formulation of the two budgets follows different procedures. Their financing pattern and the
delegated authorities of incurring expenditure in different tiers in them are also different.

4|Page
Development Budget:
Development budget of the government of Bangladesh is a result of a continuous process of
identifying new projects, review of project concept papers (PCPs), and vetting of the projects
in ministries and in the Executive Committee of the National Economic Council. Usually by
December, the Economic Relations Division prepares aid memorandum, circulates it to the
ministries for their comments, and based on domestic resource projections by National Board
of Revenue (NBR) and the Internal Resources Division, the ERD revises the aid
memorandum.
Documents Related to Bangladesh Budget
Budget Document
Budget Speech:
It is an introductory speech consisting of two parts. Part I deals with the overall financial and
economic conditions prevailing in the country, government economic performance during the
last one year and government economic plans and programmes and the budgetary allocation.
Part II deals with taxation measures.
Annual Financial Statement:
It provides summary of Budget Estimates of receipts and expenditure of the government for a
particular financial year and Revised Estimates and Budget Estimate of the previous financial
year. It provides statements of receipt, developmental and non-developmental expenditure
from the Consolidated Fund and receipt and payment from the Public Accounts of the
Republic.
Annual Development Programme (ADP):
The ADP details the financial allocations of sectoral development project to be undertaken
by the government in a financial year and their financing pattern in terms of, amount of
resources available locally and amount of project aid. In addition, it also shows the amount of
allocation to be transferred to local bodies and other government bodies to carry out
developmental activities.
Monthly Fiscal Report:
Monthly Fiscal Reports provide details of the revenue targets achieved, revenue expenditure
incurred on all sectors, development expenditure incurred across sectors and overall balance
of the budget till the reporting month.

5|Page
Budget Implementation Status:
The document provides a glimpse of the implementation status of the budget till the month of
December of the financial year. It reports status of revenue generation at the end of third
quarter of the year with an economic analysis of the progress made. It also details the
progress of revenue and development budget for the financial year till the month of
December.
Poverty & Budgets:
The document shows allocation on poverty alleviation from the National Budget across all
Ministries/Divisions of the government.
ADP Implementation Status:
It provides the details of the financial progress of the projects undertaken as part of the ADP.
The document provides information across sector, Ministries/Divisions and also fund
utilization pattern for the projects as per their sources of financing.
Explanatory Note on Budget Terminology
Accounting Systems:
Accounting systems record financial transactions. The two major accounting systems are cash
accounting and accrual accounting. Cash accounting systems recognize transactions and
events when cash is received or paid; they do not recognize non-cash events. Accrual
accounting systems, on the other hand, record payments and receipts when parties enter into a
commitment, not when cash changes hands
Capital Expenditure:
A government’s assets could be financial or physical. Almost all financial assets provide
future monetary benefits, while some of the physical assets may also provide monetary
benefits in future. On the other hand, a government’s liabilities are by nature financial and
they are amounts owed to other parties. Capital Expenditure incurred by any government is
usually meant for increasing the government’s assets or reducing its liabilities.
Debt:
Government debt is the outstanding amount that the government owes to private lenders at
any given point in time. Governments borrow when they run deficits, but reduce outstanding
debt when they run surpluses. Thus debt essentially represents the total of all annual deficits,
minus any annual surpluses, over the years. Governments can borrow by taking out a loan
directly from a financial institution, such as a bank.

6|Page
Expenditure:
This refers to government spending. Expenditures are made to fulfill a government
obligation, generally by issuing a check or disbursing cash. Expenditures may pay for
obligations incurred in previous fiscal years or in the current year. Expenditures are
sometimes distinguished between capital and current. Capital expenditures are investments in
physical assets, such as a roads and buildings that can be used for a number of years. Current
expenditures reflect spending on wages, benefit payments, and other goods or services that
are consumed immediately.
Finance Accounts:
Finance Accounts, sometimes called Annual Accounts of the government, is compiled by
controller general of accounts. It incorporates comprehensive accounts of receipts and
expenditures of the government. It classifies transactions under respective heads pertaining to
all approved heads of government accounts and is kept in two parts. Part one comprises the
accounts of total receipts and expenditures, the resultant revenue surpluses or deficits, the
capital expenditures, including transactions related to temporary and permanent debts, deposit
transactions, and money adjustments.
Fiscal Deficit:
Fiscal Deficit of a government is the gap between its “Total Expenditure and its “Total
Receipts. Thus, Fiscal Deficit indicates the borrowing to be made by the government in a
particular year for which the Budget is meant. If Total Receipts exceed Total Expenditure of
the government, then there would be a Surplus for the government, and hence, no need for
borrowing.
Fiscal Policy:
Fiscal policy refers to government actions with respect to aggregate levels of revenue and
spending, and the resulting surpluses or deficits. Fiscal policy is the primary means by which
the government influences the economy. An “easy” fiscal policy is intended to stimulate
short-term economic growth by increasing government spending or reducing revenues.
Fiscal Year:
The fiscal year is the government’s 12-month accounting period; it frequently does not
coincide with the calendar year. The fiscal year is named after the calendar year in which it
ends.

7|Page
GDP (Gross Domestic Product):
This is the total value of final goods and services produced in a country during a calendar
year. Economic growth is measured by the change in GDP from year to year.
Grants:
Grants are funds that the national government disburses directly to lower levels of
government, corporations, non-profit organizations, and individuals. Some grants are given
for specific purposes, requiring the recipients to meet certain conditions or requirements. In
other cases, the grants may be used for whatever purpose the recipient deems important.
Revenue Expenditure:
Revenue Expenditure incurred by the government generally does not have anything to do
with creation of assets or reduction of liabilities of the government. Most kinds of Revenue
Expenditures are recurring or current expenditures, since the government incurs those
expenditures periodically from every Budget.

Comparison among Budget of Last Three Years:

Bangladesh budget 2019-20: An overview
Parliament today passed the Tk 5,23,190 crore national budget for 2019-20 fiscal
themed as “Bangladesh on a Pathway to Prosperity: Time is Ours, Time for
Bangladesh.”  
Finance Minister AHM Mustafa Kamal placed the Appropriations Bill, 2019 seeking a
budgetary allocation of Tk 6,42,478.27 crore which was unanimously passed by voice vote.
Following the proposal mooted in the House by the finance ministry for parliamentary
approval of appropriation of fund for meeting necessary development and non-development
expenditures of the government, the ministers concerned placed justifications for the
expenditures by their respective ministries, through 59 demands for grant.
Earlier, parliament rejected by voice vote a total of only 484 cut-motions that stood in the
name of opposition members on 59 demands for grants for different ministries.
A total of nine MPs from the main opposition Jatiya Party and BNP submitted their cut-
motions on the budget.
They were allowed to participate in the discussion on Secondary and Higher Education
Division, Health Ministry, Agriculture Ministry and Disaster Management and Relief
Ministry.
Later, Speaker Shirin Sharmin Chaudhury applied guillotine to quicken the process of
passing the demands for grants for different ministries without giving the lunch break.

8|Page
Opposition and independent MPs were present at the house when the Appropriation Bill was
passed in parliament and they did not raise any voice against passing of the bill.
Finance Minister AHM Mustafa Kamal on June 13 placed a Tk 5,23,190 crore largest-ever
budget for the 2019-20 fiscal with a focus on developing communications infrastructure and
human resources and achieve the 8.2 percent GDP growth.
The finance minister proposed allocating, from the annual development programme, 27.4
percent for human resource (education, health and related others), 26 percent for
communication (roads, rails, bridges, and related other communications), 21.5 percent for the
overall agriculture sector (agriculture, rural development, water resources, and related
others), 13.8 percent for power and energy sector and 11.3 percent for other sectors.
Allocation proposed for the social infrastructure sector in the proposed budget is Tk 1,43,429
crore, and Tk. 1,64,603 crore for physical infrastructure sector of which Tk. 66,234 crore will
go to overall agricultural and rural development, Tk 61,360 crore to overall communications,
and Tk 28,051 crore to power and energy.
The overall budget deficit will be Tk 1,45,380 crore, which is 5 percent of GDP like the
previous year. In financing the deficit, Tk 68,016 crore will come from external sources and
Tk. 77,363 crore from domestic sources.
Of the financing from domestic sources, Tk 47,364 crore will come from the banking system
and Tk 30,000 crore from savings certificates and other non-bank sources.
The total revenue collection has been estimated to be Tk 3,77,810 crore where the National
Board Revenue (NBR) will contribute Tk 3,25,660 crore tax revenue from non-NBR sources
have been estimated at Tk 14,500 crore. Besides, non-tax revenue is estimated to be Tk.
37,710 crore.
The total allocation for operating and other expenditures is Tk 3,20,469 crore, and allocation
for the annual development program is Tk. 2,02,721 crore, while Tk 100 crore has been
proposed to provide startup capital to promote all types of startup enterprizes among youths.
A total of Tk 1,23,641 crore has been proposed for general services, which is 23.63 percent of
total allocation. Tk. 33,202 crore is proposed for public-private partnerships (PPP), financial
assistance to different industries, subsidies and equity investments in nationalized
corporations, banks, and financial institutions.
The budget also proposed to introduce insurance for the expatriate Bangladeshi workers and
their families as they often face financial losses and risks due to accidents and various other
causes.

9|Page
For the sake of a strong capital market which is required for any strong economy, the Finance
Minister proposed to make tax free dividend income from the listed companies' upto Tk.
50,000.
Along with the standard VAT rate of 15 percent, there will be reduced rates of 5 percent, 7.5
percent and 10 percent for specific goods and services. As a special measure, considering the
sensitivity of the product, the rate of VAT at the trading stage of pharmaceutical and
petroleum products shall be 2.4 percent and 2 percent respectively.
A total of Tk 79,486 crore was allocated in the proposed budget for the education and
technology sector, which was 15.2 percent of the Tk 523,190-crore budget.
The finance minister said necessary funds have been earmarked in the proposed national
budget for 2019-20 fiscal year for enlisting new schools in the Monthly Pay Order (MPO)
scheme which remained suspended for a long time.
He proposed allocating Tk. 24,040 crore for the primary education sector, Tk. 29,624 crore
for the secondary and higher education sector and Tk. 7,454 crore in FY 2019-20 for
technical and madrasa education.
Earlier, on Saturday the Parliament passed the Finance Bill 2019 with some changes in the
proposals over the capital market, VAT and handloom industry, and scrapping the
opportunity to invest black money to buy land.
The proposal for legalizing undisclosed money through investing in land was proposed in the
Finance Bill 2019, placed in parliament on June 13.
The Parliament also reduced tax on retained earnings and reserves of companies to 10 percent
from initially-proposed 15 percent in the face of outcry from businesses, who argued that the
step would discourage business expansion and investment.
It also passed the proposal to cut tax on stock dividend to 10 percent.
The government initially proposed to impose 15 percent tax on stock dividend to encourage
listed companies to pay cash dividend to protect interest of small investors.
In the budget proposal, the government sought to slap 15 percent tax on the retained earnings
and reserves of a company if the amount exceeds 50 percent of the paid-up capital. It also
said stock dividend by listed companies will be subject to 15 percent tax.
Parliament also passed proposal to impose specific tax at Tk 4 for each kilogram of yarns
used by weavers instead of previously proposed 5 percent VAT.

10 | P a g e
Bangladesh budget 2018-19: An overview
The Jatiya Sangsad today passed the Tk 4,64,573 crore national budget for 2018-19 fiscal
setting the GDP growth target at 7.8 per cent in a bid to further alleviate poverty, reduce
inequalities and bring basic and qualitative changes in the living standards of the country’s
people.
Finance Minister AMA Muhith moved the Appropriations Bill, 2018 seeking a budgetary
allocation of Taka 571833,82,92,000 which was passed by voice vote.
Following the proposal mooted in the House by the Finance Ministry for parliamentary
approval of appropriation of fund for meeting necessary development and non-development
expenditures of the government, the ministers concerned placed justifications for the
expenditures by their respective ministries through 59 demands for grant.
Earlier, the House rejected by voice vote a total of 448 cut-motions that stood in the name of
opposition and independent members on the 59 demands for grants for different ministries.
A total of nine lawmakers, including MPs from opposition Jatiya Party and independent MPs,
submitted the cut-motions.
Following discussion between the treasury and opposition bench, Speaker Shirin Sharmin
Chaudhury allowed MPs to participate in the discussion on Higher Secondary and Higher
Education Division, Health Ministry, Local Government Division, Disaster Management
Ministry and Railways Ministry.
Participating in the cut-motion, independent and opposition MPs lambasted Education
Minister Nurul Islam Nahid for his failure to develop the quality of education.
JP MP Fakhrul Imam claimed that GPA-5 certificates are being sold in exchange of money.
The claim, however, was rejected by the minister.
Opposition MPs also came down heavily on LGRD Minister Khandker Mosharraf Hossain
for his failure to resolve water logging problem in Dhaka city.
Speaker later applied guillotine to quicken the process of passing the demands for grants for
different ministries without giving the lunch break.
Opposition and independent MPs were present in the House when the Appropriation Bill,
2018 was passed in the parliament and they did not raise any voice during passage of the bill.
Finance Minister AMA Muhith on June 7 unveiled a Tk 4,64,573 crore budget for FY2018-
19 which will come into effect from June 1.
Earlier yesterday, the House passed the Finance Bill-2018, with some changes in VAT and
tariff rates, aiming to boost the ICT sector and promote local industries.

11 | P a g e
Finance Minister AMA Muhith, who placed his 10th consecutive budget for the AL-led
government, well projected the economic developments achieved over the past one decade
with the present AL-led alliance in power.
The budget for the next fiscal showed that government's revenue earnings would largely
depend on tax (Tk 2,96,201 crore) generated by National Board of Revenue (NBR), followed
by other sources like non-tax revenues (Tk 33,352 crore) and non-NBR tax (Tk 9,727 crore).
Still, there will be an income-expenditure mismatch of Tk 1,25,293 crore.
As per the finance minister's budget speech, an amount of Tk.54,067 crore (2.1 per cent of
GDP) will be financed from external sources while an amount of Tk.71,226 crore (2.8 per
cent of GDP) will come from domestic sources.
Of the domestic sources, Tk 42,029 crore (1.7per cent of GDP) will be borrowed from the
banking system while Tk.29,197 crore (1.2 per cent of GDP) from National Savings Schemes
and other non-bank sources.
Muhith gave a relief to certain company tax by reducing it down to 37.5 per cent from
existing 40 per cent but belying public expectation he preferred keeping the tax-exemption
ceiling intact at Tk. 2.5 lakh.
In his sector-wise budget allocation plan, Muhith kept aside the biggest chunk of 14.6 per
cent for education and technology, followed by 12 per cent for transport and communication,
11.1 per cent for interest payment, 7.1 per cent for subsidies and incentives, 7 per cent for
local government and rural development, 6.3 per cent for miscellaneous expenditure, 5.6 per
cent each for three sectors -- defence, public order and security and pension, 5.4 per cent for
energy and power, 5.1 per cent for social security and welfare, 5 per cent for health, 3.7 per
cent for agriculture and 3.1 per cent for public administration.
In the Tk 1,79,669 crore development budget, the finance minister attached most importance
to transport and communication by proposing to allocate 26.6 per cent of development budget
followed by 16.3 per cent for education and technology, 15.7 per cent for local government
and rural development and 13.8 per cent for energy and power.
Bangladesh Budget 2017-18: An overview
The Jatiya Sangsad (JS/national legislative assembly) on Thursday passed the national budget
for fiscal 2017-2018 (FY).
The budget, according to BSS, is aimed “to accelerate the pace of development and achieve a
higher growth for transforming Bangladesh into a developed nation by 2041”.
Bangladesh is now on the wheels of achieving the middle-income status by 2021 as enshrined

12 | P a g e
in the Vision-2021 of the present government of prime minister Sheikh Hasina, said the state-
run news agency.
On 1 June, finance minister AMA Muhith rolled out a Taka 4,00,266 crore national budget
for fiscal 2017-18, setting the GDP growth target at 7.4 percent and outlining a set of plans-
strategies to build a prosperous, happy and peaceful country by 2041.
According to the budget documents for FY18, Taka 2,41,253 crore has been allocated for
non-development expenditure, including other expenses and Taka 1,53,331 crore has been
earmarked for Annual Development Programme (ADP). The overall revenue collection target
for the next fiscal has seen set at Taka 287,990 crore of which Taka 248,190 crore will come
from the NBR sources.
The Jatiya Sangsad on Thursday passed the Appropriation Bill 2017 unanimously. Concerned
ministers placed 60 demands for grants while the main opposition party and independent
lawmakers brought 352 cut motions to clear the legal basis. However, the demands for grants
were approved by the House by voice votes.
The finance minister moved the appropriation bill seeking budgetary allocations for meeting
development and non-development expenditures of various ministries and the government.
The JS passed the Finance Bill 2017 on Wednesday in an amended form with some changes
to the tax-duty and Value Added Tax (VAT) proposals. With the adoption of the Finance
Bill-2017 and the Appropriation Bill-2017 today, the process of the JS passing the national
budget for FY 2017-2018 has been completed.
The opposition and independent lawmakers proposed a total 352 cut motions, but they only
spoke on the motions for six demands for grants, which were rejected by voice votes.
Ministers in charge of the concerned ministries placed their proposals for expenditures
through 60 demands for grants, which were passed by voice votes.
Leader of the House, prime minister Sheikh Hasina, leader of the
opposition in parliament Begum Rawshan Ershad, finance minister Abul Maal Abdul Muhith,
ministers, treasury, opposition benches and independent members took part in the discussion
on the budget for FY 2017-18.
Five opposition and four treasury bench members also discussed for 1 hour and 36 minutes
on the supplementary budget for FY 2015-16 in 20 working days from 6 June.
In the budget for the FY 2016-17, the GDP growth target was at 7.2 per cent and the inflation
rate at 5.8 per cent.In his budget speech, Muhith presented strategies and plans on
implementation of the budget for the FY 2017-2018.
Also, UNB adds: the 16th session of the 10th Jatiya Sangsad was adjourned on Thursday

13 | P a g e
after the passage of the budget for fiscal 2017-18.
Speaker Shirin Sharmin Chaudhury adjourned the session till 5pm on 9 July.
Passes year Total Taka Total GDP Growth
Budget2020-19FY 5,23,190 Crore 8.2
Budget2019-18FY 4,64,573 Crore 7.8
Budget2018-17FY 400266 Crore 7.4

From the above last three years, the budget 2020-19FY is all of the best financing year of
budget of Bangladesh. It is the largest budget of Bangladesh and a good achievement for our
economic growth.

An Analysis of the National Budget for FY2019-20

Macroeconomic Perspective
Confronting challenges originating in global economy
 Global economic growth -projected to slow down from 3.6% in 2018 to 3.3% in 2019
(IMF, 2019)
 Global economy likely to slow down to 2.9% in 2019 as trade, investment weaken
(World Bank, 2019)
 Fertilizer prices –expected to increase further (World Bank, 2019)
Confronting opportunities originating from global economy
 US-China trade war, suspension of trade benefits by US to Turkey and India may
create export opportunities for Bangladesh
 RMG, leather and leather products, IT and other services could be key beneficiaries
Growth, investment and inflation
 The GDP growth rate shows consistent improvement (8.13% in FY19,
provisional) over the years which already exceeded the FY19 target for 7FYP
(7.6%).The GDP growth target for FY20 has been set at 8.2% compared to 8%
target in 7FYP.
 Total investment (as 9% of GDP) sluggishly improved mostly due to public.
 Inflation is expected to remains the “5.55% as FY19

14 | P a g e
 Fscal framework
Broad fiscal framework for FY20
 Revenue (19.3%) projected to grow faster than public expenditure (18.2%)
 Development expenditure (22.0%) programmed to grow faster than operating
expenditure (16.3%)
 ADP: 38.7% of total public expenditure (37.7% in the RBFY19)
 Budget deficit has been projected at 5.0%of GDP (same as RBFY19)
 Balance in financing the budget deficit is likely to be restored through limited foreign
financing and increased bank borrowing

Revenue mobilization:
Budget FY20 targets an additional Tk. 61,197 crore revenue with a 19.3% growth over
RBFY19
Public expenditure:
Public services and interest payments for 46.2% for total incremental expenditure
Subsidy and incentives:
Total allocation for FY20: Tk. 43,230 crore (8.3% of budget and 1.5% of GDP)

Power and Energy:

BPDB received Tk. 9,500crore due to increased demand (3.3% increase from RBFY19)

Annual Development Programme

 ADP of Tk. 2,02,721 crore has been proposed for FY20

 Project Aid (PA) to finance 35.4% of total ADP in FY20 (30.5% in RADP of FY19)

 41 new projects are included in FY20 (112 in FY19): 0.4% of total ADP allocation
(4.1% in FY19) –positive sign!

15 | P a g e
 Fiscal measures
Personal Income Tax (PIT):
 No change in the tax slabs or tax rates of personal income tax
Wealth Surcharge:
 Minimum net wealth exemption limit has been increased to Tk. 3 crore from Tk. 2.25
crore.

Corporate Tax:

Corporate tax structure remains unchanged

Tax holiday:
The proposed changes in tax holiday facilities will be beneficial in terms of balanced regional
development and domestic industry support.

Tax deduction at source (TDS):

 TDS on the bill of contractors and suppliers has been rearranged by reducing the
number of slabs from 6 to 4 and also the rates for the highest slab has decreased from
7% to 5%
 Tax exempted yearly turnover limit for SMEs raised to Tk. 50 lakh from Tk. 36 lakh .
 Rate of TDS on export subsidy in every recipient sector has been increased from 3%
to 10% .

Tax exemption:

 Tax exemption of export earnings from handicrafts is to continue till 2024.

 New tax exemption provisioned for income of institutions earned by educating or

training physically challenged persons –a positive initiative.

16 | P a g e
Tax rebate:
5% rebate on total tax introduced for taxpayers who employs physically challenged persons
for at least 10% of the workforce –welcome move to promote inclusivity in the workforce.

Tax credit on investment:

 Rate of tax credit on investment has been changed to flat rate 15% if total income
does not exceed Tk. 15 lakh; and flat rate 10% otherwise.
 Tax liability will be higher for the richer tax payers with total taxable income more
than Tk. 15 lakh –progressive taxation .

Tax measures to boost capital market:

The adopted measures might encourage small investors, encourage non-resident companies to
invest in the Bangladeshi stock market, encourage companies to distribute cash dividends and
consequently benefiting the shareholders, and might result in more revenue collection.

However, proposed 15% tax on listed company’s retained earnings and reserves (in excess of
50% of the paid up capital)

Introduction of new VAT law-new developments:

 Coverage of VAT had been widened.
 VAT will be based on market price
 Online service for VAT and Turnover Tax registration, tax payment, return
submission, refund
 VAT registration threshold has been increased from Tk. 80 lakh to Tk. 3 crore
 Tariff value provisions have been kept for some products
Selected Electoral Issues:
Agriculture:
 Allocation for Agriculture and Allied Sectors (AAS) is projected to rise by 11.8% in
BFY20 compared to that of RBFY19. Allied sectors include: 1) Ministry of Fishery
and Animal Resources; 2) Ministry of Environment and Forest; 3) Ministry of Land;
4) Ministry of Water Resources.

17 | P a g e
  The proposed budget has announced to introduce a ‘crop insurance’in order to save
farmers from the financial loss caused by natural calamities -very much needed
 Election manifesto mentioned a number of commitments: continuation of subsidy,
agricultural tools at minimum cost, mortgage free loans for tenant farmers, increasing
allocation for R&D and better facilities for fisheries sector.

Education:
 Education budget decreased as a share of total budget from 12% in FY09 to 11.7% in
FY20
 Allocation as share of GDP remains stagnant (2.1%) in BFY20 and BFY19
 Figures remained below the standards set by 7FYP (3% of GDP) and Education 2030
Framework for Action of UNESCO (4-6% of GDP)
 Implementation of overall education budget in FY18 (85.8%) is lowest in the last
decade!
 In hard to reach areas, instead of formal primary education, madrasah education is
made more available

Health:
 Allocation for health as share of total budget has fallen(from 5.1% in BFY19 to 4.9%
in BFY20)
 Government budget for health (as a share of GDP) is considerably lower than the
targets stipulated in the 7FYP and WHO benchmark
 Per capita allocation for health sector (in nominal terms) has
 A detailed description on different activities of the health sector has been mentioned
in the budget document

Social Safety Net:

 Allocation for social safety net (SSN) has been increased by 15.5% from BDT 64,404
crore in budget FY19 to BDT 74,367 crore in budget FY20

 Although total SSN allocation has increased, budget allocation for a number of safety
net programmes have fallen short of the targets set out in the National Social Security
Strategy (NSSS).

18 | P a g e
  The budget speech for FY2019-20, just like the previous budget speech, has
mentioned the intention of the government to introduce a Universal Pension Scheme.

Power and Energy:

 Total allocation for the power division has been increased from BDT 22,936 crore in
budget FY19 to BDT 26,064 crore in budget FY20 -a 13.64% increase

 Total budgetary allocation for the energy and mineral resources division has been
increased from BDT 1,985 crore in FY19 to BDT 1,986 crore in FY20, which is only
a 0.05% increase

Climate Change:
Climate allocation as share of total budget has decreased to 7.8% in FY20 (8.1% in FY19)

Defence:
The budget allocation for Defence in FY20 is Tk. 32,101 crore, which is 10.4% higher than
the allocation for the previous year

An Analysis of the National Budget for FY2018-19

MACROECONOMIC FRAMEWORK
GDP, investment and inflation:
 For FY19, GDP growth target has been set at 7.80% (7.65% in provisional estimates
for FY18, 7.28% in FY17)
 Moderate improvement in GDP growth and marginal increase (0.2 percentage point)
in public investment have been considered. Private investment has been estimated to
be 25.1% of GDP: a 1.9 percentage point increase from FY1
 ICOR is expected to be 4.3 inFY19 – productivity of capital to decline (4.1 in FY18)
 Inflation is assumed to be stable at 5.6%
Poverty and inequality:
 Poverty and employment estimates pose questions regarding the quality of attained
growth in recent years (2010-16)
 The situation was more equitable between 2005 and 2010

19 | P a g e
  Rich are getting richer, while the poor are getting poorer
Erosion of real income of labour:
 Between 2013 and 2015-16, over three years, average real monthly income per
worker had declined by (-) 3.9%
 Compared to 2015-16, average real monthly income had suffered an erosion of (-)
2.5% in 2016-17
 This is observed at a time when wages of formal labour force had been adjusted,
particularly for those working in the public sector
Domestic savings:
 Except for two atypical years (FY16 and FY17) Gross Domestic Saving has been
around 22%-23% of GDP since FY13
 Global literature suggests that one of the common reasons for declining domestic
savings is the falling real income and decreasing income growth is this the case for
Bangladesh?
 For Bangladesh, declining Gross Domestic Saving (as % of GDP) might be
attributable to the rising dissaving at the lower decile households
Public debt:
 Public debt as share of GDP is at a reasonable state for Bangladesh (30.8% in FY17,
29.8% in the revised target for FY18)
 Currently about 60% of the public debt is attributable to domestic debt
 Government needs to use low-cost borrowings –which has not been the case in recent
years
 Interest payments for domestic debt has already risen significantly
Monetary and external sector:
 A stable outlook is perceived for the monetary and external sector during FY19 to
FY21
 Growth of credit to private sector is moderate (16.5%) for FY19, which is expected to
reach 16.9% in FY21
 Growth target for export has been set at 10.0% in FY19
 Growth target for import has been set at 12.0% in FY19

20 | P a g e
 FISCAL FRAMEWORK
Supplementary budget:
 A total of Tk. 400,266 crore was allocated to 62 ministries/division
 In revised budget, allocation increased by Tk. 15,339.83 crore for 24
ministries/divisions where combined allocation (additional) share of Prime Minister’s
Office and Power division is 47.41%
 Allocation decreased by Tk. 46,055.66 crore for 35 ministries/divisions
 Overall budget allocation decreased by Tk. 28,771 crore (7.2%) and stood at Tk.
371,495 crore
Medium Term Outlook:
 Compared to RBFY18, both revenue and total expenditure (as share of GDP) is
expected to grow by about 1.8 percentage points in FY19
 No reflection on implication of revenue mobilisation related reforms (e.g. VAT and
SD Act 2012 to be implemented in FY20 according to the revised timeline)!
 Foreign assistance to finance budget deficit in FY19 is expected to be 2.1% of GDP –
same as RBFY18
Broad fiscal framework:
 Revenue (30.8% against trend growth rate of 16%) projected to grow faster (to collect
additional Tk. 79,826 crore) than public expenditure (25.1% against trend growth rate
of 14.7%)
 Development expenditure (16.9%) programmed to grow slower than operating
expenditure (29.8%): 77% of total incremental budget allocation for operating
expenditure
 ADP: 37.2% of total public expenditure (39.9% in the RBFY18)
Revenue mobilisation:
 Budget FY19 targets an additional Tk. 79,826 cr. revenue with a 30.8% growth over
RBFY18
 NBR to take the lead role (accounting for 89.2% of incremental revenue) with 31.6%
growth
 Non-NBR revenue (non-tax plus non-NBR tax) growth for FY19 is relatively lower
(25.0%)
 Import duty collection growth target is 22.7%

21 | P a g e
Subsidy and incentives:
 Total allocation for FY19: Tk. 31,700 crore
 In FY19, no subsidy (loans) was allocated to BPDB or BPC whereas Tk. 13,700 crore
(43.2%) was given to ‘others’
 Industry sector which includes BTMC, BSFTI, BCIC, BJMC had been in consecutive
loss – a major concern!
ANNUAL DEVELOPMENT PROGRAMME
Annual Development Programme:
 ADP of Tk. 1,73,000 crore has been proposed for FY19
 6.8% of GDP in FY19 (same in FY18)
 12.8% higher than ADP and 16.6% higher than RADP for FY18
Ageing projects:
 Out of 1,225 investment projects, 586 (47.8%) are at least 2 years old
 Average age of these 586 projects are 4.6 years
 11 of these 586 projects are 10-16 years old while 4 of them are more than 15 years
old
FISCAL MEASURES
Personal Income Tax (PIT):
 No change in the tax slabs and tax rates of personal income tax
 Tax-free income threshold for personal income stays same at Tk. 2.5 lakhs – does not
consider the added pressure of the rising food inflation and decreasing average
monthly real wage
 Tax-free income will be Tk. 50,000 (previously Tk. 25,000) higher for parents or
legal guardians of persons with disabilities
Wealth Surcharge:
 Minimum net wealth exemption limit remains at Tk. 2.25 crore Wealth surcharge
coverage expanded: owners of at least two cars or at least 8,000 sq. ft. of housing
property– welcome move to increase revenue and from equity perspective
 Minimum wealth surcharge applicable for net wealth exceeding Tk. 10 crore has been
increased to Tk. 5,000 (previously flat rate Tk. 3000 was applicable)

22 | P a g e
Corporate Tax:
 The tax rate for banks, insurance and financial institutions has been reduced by 2.5%
which leads to the following:
 Publicly traded institutions and the ones approved by government in 2013: 40% to
37.5%
 Non-publicly traded institutions: from 42.5% to 40%
 Reduction may lead to loss of revenues worth about Tk. 1000 crore
 Wrong signal: No distinction made based on performance
 Hardly likely to increase liquidity
Special Tax incentives:
Tax exemption on taxed dividendto be received by a company resident in Bangladesh.
Tax exemption for
 income from operation of day care home (for elderly and children)
 income from the operation of an educational or training institution run exclusively for
persons with disability
 Remittance earning from proceeds of sales of software and services to a foreigner
VAT-related Developments:
 Changes in the Value Added Tax Rule 1991 to facilitate online return submission
 VAT Online system to be introduced
 15% standard rate of VAT to continue according to VAT Act 1991
 Turnover tax rate remained unchanged at 4% for traders with turnover threshold
between Tk. 36 lakh and Tk. 1.5 crore
 Truncated VAT rates are reduced from 9 to 5 rates for FY19
Development of local industries:
 VAT and surcharge exemption have been proposed on local manufacture of mobile
phone. At the same time, imports of mobile handsets are to be discouraged with
imposition of 2% surcharge on the import - expected to incentivise the industry and
attract investment
 Exemptions and concessionary rate of import duties for some pharmaceutical raw
materials including cancer medicines and Active Pharmaceutical Ingredients (APIs) –
will reduce production cost
 VAT exemption on motorcycle parts – will benefit local import-substituting
manufacturers

23 | P a g e
Duties at import stages:
 Duty to be changed only on a few products (270)
 Advanced Trade VAT rate has been increased across the board (both at import and
trade stages) from 4% to 5% - will generate additional revenue at import stage
 Existing (six) slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%) will remain
unchanged
 Supplementary duties and regulatory duties have been newly imposed on a number
products - to generate more revenue
 Attempt to provide protection to selected domestic industries, incentivize export, and
to rationalize tariff structure by reducing prevailing discrepancies
SELECTED SECTORAL ISSUES
Agriculture:
 Allocation for Agriculture and Allied Sectors (AAS) increased by 7% in BFY19
compared to that of RBFY18.
 Highest allocation of budget is in Ministry of Agriculture.
 However, share of AAS in total budget has continued to decrease over time (5.7 per
cent in BFY19) due to low cost of fertiliser.
 Moreover, growth of actual budget declined from 12.3% in AFY16 to –5.5% in
AFY17.
Education:
Budgetary allocation for education has increased
 Allocation in BFY19 is Tk 53,504 crore while it was Tk 46757 crore in RBFY18
 Largest incremental share for education was in Secondary and Higher Education
Division.
 Although allocation is on the high side, share of allocation in budget and GDP is
worrying
Health:
Budgetary allocation for health has increased in nominal terms
 Tk 23,383 crore has been allocated for BFY19, which was Tk 20,014 crore in
RBFY18
 Largest incremental share for health was in Health and Service Division

24 | P a g e
Social Protection:
 In the proposed budget for FY2018-19, three praiseworthy changes were made in line
with CPD’s budget recommendations in April 2018
 The budgetfor social protection excluding pensionwas made1.6% of GDP
 A digital databaseof all social protection beneficiaries isbeing create
 However,sucha databasemust be publicly available in orderto ensure transparency
 Direct transfer of social protection benefits from government to people (G2P) through
electronic fund transfer(EFT) hasbeenstarted
Social Protection:
 The coverage and allocation for 8 out of the 10 largest social protection programmes
has increasedfrom the previousyear
 However, per capita allocation for maternal, neonatal, child, and adolescent health
programme has decreased by 19%
 Per capita allocations for 3 out of the 10 largest programmes increased by only 3%,
while per capita allocation for 5 out of the 10 largest programmes remained
unchanged
Child Budget: – steady allocation, low transparency in expenditure
 Two additional ministries are now associated with child budget. Total number of
child-centric ministries have gradually increased to 7, 13 and 15 in FY 2016-17, FY
2017-18 and FY 2018-19 respectively.
 The government has targeted to allocate20% of total budget for children by 2020.
 Encouragingly,child budget as percentage of GDP has increased from 2.50% to
2.59%.

Interpretation of last three years Budget:

As depicted in the table above followed by the analysis it is evident that the budget during
last 03 years is in upward trend. During FY 2018-19 the amount of total budget was more
than Tk.1,00,000 crore that of FY 2017-18 budget. And current FY budget is Tk.80,649 crore
more of the previous budget. The reason behind the increase in budgetary amount is
increasing recurrent expenditure, capital expenditure and the amount of loans given by the
government. It is evident that during FY 2018-19 the recurring expenditure rose to almost
40% more than that of FY 2017-18. However, that trend has gone in opposite direction in
FY2019-20 which is just 16% of previous FY. But the amount has increased significantly.
The capital expenditure during last 03 FY has been in upward trend. In FY2018-19 it was

25 | P a g e
almost 50% more than that of FY2017-18. The trend continued during current FY as well
which is 70% more than that of previous FY. However, during this current FY the
government has reduced its lending which plummet more than 50% comparing to last
FY2018-19. Expenditure on development purpose has also increased during the last 03 years
even though the trend is decreased in FY2019-20. The government allocated more budget on
development expenditure during FY2018-19 which is more than 42% that of FY 2017-18.
This is evident in the various mega project initiatives taken by the Government such as
Padma Setu Project, Dhaka-CTG 4 lane project, Ruppur Nuclear Power Project, Karnafully
Tunnel project and various mega projects that are under process at the moment.
On the other hand let us explain how the government financed its expenditures during the last
03 FY. As stated earlier, government finances most of its expenditures from revenues and
grants received from abroad. During FY2017-18 the total revenues received was Tk.2,17,424
crore which rose to about 47% during FY2018-19 amounting to Tk.3,20,399 crore. However,
during FY2019-20 it amounts just 19% even though the volume of revenues increased
Tk.61,579 crore. Tax revenue during FY2018-19 rose to almost 60% than that of FY2017-18
but increased only 16% in FY 2019-20 compared to previous FY. However, the government
has constantly increased its revenue through Non-Tax Revenues which was just 22% increase
in FY 2018-19 but significantly rose to 37% during FY2019-20. This increase implies that
the government is intending to collect more revenues from sale of government land, charges
or economic services, profit and dividend from State Owned Enterprises and other
government organizations, fines and penalties and stamp duties. The striking feature of
increase in foreign grants in FY2018-19 is justified by the donations and grants received from
various organizations, governments and billionaires to the huge influx of Rohingya Refugess
in later part of 2017. This saw a significant increase in grants which is 336% more than that
was in FY2017-18; but during FY2019-20 government intends to get Tk.4,168 crore of grants
from abroad which is just 10% increase than that of FY2018-19.
During the FY 2017-18 the government financed its deficit of Tk.1,04,438 core from foreign
and domestic borrowings. The amount of borrowing has risen to almost 17% during FY2018-
19 and slightly decreased in FY2019-20 compared to last FY. But the amount of borrowings
has certainly increase, just that it borrowed 1% less than that of last FY.

26 | P a g e
Recommendation:
 There are some suggestion to collect the resources accurately and improving the
Budget decision.
 Simplification of VAT registration
 Maintain the current momentum of revenue mobilization
 Emphasis on assesses-friendly institutional issues
 Form a Task Force for accelerated disbursement of held-up project aid
 Avoid volatility in bank borrowing to avoid pressure on private borrowing.
 Enhanced public-private and government-NGO partnership.
 Quality must be ensured while including new projects.
 To gear up foreign aided projects
 Focus on power sector
 Public-private partnership to monitor progress in key areas.
 Computerization of tax mobilization activities.
 Generation of regular and periodic updates on key budget related indicators.

27 | P a g e
Conclusion:
Having analyzed and interpreted the budget of last 03 years it is evident the budget is in
upward trend indicating that every year the government expenditure in various sectors such
as development, health, agriculture, industry sectors etc is increasing in rapid pace. Keeping
in line with the increase in government expenditure government revenues and the borrowings
are also rising. This increase in government expenditure on various sectors is creating
employment opportunities, mobilizing the money from surplus sector to the deficit sector
resulting in growth in Gross Domestic Product in Bangladesh. The GDP growth of
Bangladesh is raising significantly as a result of those expenditure initiatives from 2015.
During 2015 the GDP growth was 6.55% which rose to 8.1% in 2019. The economy of
Bangladesh is developing market. It is the 39th largest in the world in nominal terms and 29th
largest by purchasing power parity. It is classified among the Next Eleven emerging market
middle income economies and a frontier market. However, having achieved significant GDP
growth rate over the last few years Bangladesh Government should be cautious about falling
into the vicious circle of debt since its dependence on infrastructural development mainly on
borrowings from foreign and local organizations. It must handle its foreign debts very
cautiously.

28 | P a g e
Bibliography
Website
www.nbr-bd.org
www.cpd-bangladesh.org
www.banglapedia.net
www.bangladeshnews.com
www.prothom-alo.com
www.ittefaq.com
www.bangladeshobserver.com
www.newagebd.com
www.prothom-alo.com

29 | P a g e