Budget shows the government revenue & expenditure (Investment) project for a given fiscal

year (FY 11-12). It has 20 sectors including revenue & expenditure such as NBR-Tax, Non-

Tax, Non-NBR Tax, Domestic Financing, Foreign Financing, Agriculture, Power & Energy,

Industrial & Economics, Public Administration, Education &IT, Interest, LGRD, Defense,

Transportation & Communication, Social Security, Health, Public order & Safety, Recreation

& Culture, Housing & Others. Every sectors & government sanction for these sectors are

based on experience current need, social needs & economical needs. Most of the case the

sanction is government’s policy variable. Through budget we can know in which sector

government emphasis most that is the most important sector to the government. This is also

based on mathematical mechanism used by the economist & financial analyst. In budget its

shows that the amount of VAT collection has been projected at 343.04 billion taka which is

higher than the last fiscal year that indicates people are willing to pay VAT for development

of the country which represents a good trend of our economy. The amount of Non Tax

revenue has increased by 40.07% compared to FY 10-11 RE. The extra amount of non tax

revenue will help the government to reduce budget deficit and infrastructural development of

the country which may bring strong economy. The Non NBR tax revenue during the present

fiscal year projected to increase by 663 Crore taka which indicates that people are more

interested to contribute for well being of the country. In budget FY11-12 the government has

increased allocation in Agriculture, Industrial & Economic, Public administration, LGRD,

Defense sectors & decreased in Power & Energy, Education & IT, Interest, Transportation &

Communication, Social security, Health, Public order & Safety, Recreation & Culture,

Housing sectors rather than the previous year FY10-11 actual budget. But the above

allocation in some cases is higher than the reversed budget of FY10-11 RE. The current Govt.

is trying to meet up the maximum portion of budget deficit around 60% from its internal

sources that are from within the country. At the same time the Govt. has started taking huge

amount of loan from the banking sector which is too alarming situation for our economy to

control. A positive signal from the Govt. is that the rate of paying back loan amount has

increased which indicates that Govt. is trying to finance the budget deficit from the internal

source that’s may reduce the country’s dependence on foreign loans. At the same time the

Govt. is getting more subsidies from foreign countries like World Bank’s climate fund which

is made by developed countries.

Budget?

A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses

and revenues. It is a plan for saving, borrowing and spending.[1] A budget is an

important concept in microeconomics, which uses a budget line to illustrate the trade-offs

between two or more goods. In other terms, a budget is an organizational plan stated in

monetary terms.

In summary, the purpose of budgeting is to:

Provide a forecast of revenues and expenditures, that is, construct a model of how our

business might perform financially if certain strategies, events and plans are carried out.

Enable the actual financial operation of the business to be measured against the forecast.

A government budget is a legal document that is often passed by the legislature, and

approved by the chief executive-or president. For example, only certain types of revenue may

be imposed and collected. Property tax is frequently the basis

for municipal and county revenues, while sales tax and/or income tax are the basis for state

revenues, and income tax and corporate tax are the basis for national revenues.

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 such as infrastructure investment or

research expenditure; and transfer payments like unemployment or retirement benefits.

Highlights of Present Budget of FY12-13

Bangladesh has found its 42nd budget in this fiscal year known as FY12-13. This is the 4 t h

budget of present government. With lots of hopes Finance Minister Abul Maal A. Muhith announce the 42nd Bangladesh National Budget in the parliament on 7, June 2012 for the year 2012-13 which is the 6th budget of this minister. With lots of investment scope & with the priority of power, energy and agriculture sector present government announce its 4th

budget. This budget is passed on 30June, 2012 & implement from 1,July, 2013 for FY12-13.

Budget Summary

Budget No 42nd

Budget Announcement 7th June, 2012

Budget Announcer Abul Maal A. Muhit M.P

Honorable MinisterMinistry of Finance, Peoples’ Republic of Bangladesh

Budget Implementation 1st July, 2011

Total Budget 191738Crore Taka (18.41% of GDP)

Total Income (Revenue & Grants) 145714 Crore Taka (13.99 of GDP, 75.99% of Budget)

Tax Revenue 139670 Crore Taka (13.41% of GDP, 72.8% of Budget)

Foreign Grants 6044Crore Taka ( 0.58% of GDP, 3.15% of Budget)

ADP 55000 Crore Taka (5.2% of GDP)

Total Expense 191738Crore Taka (18.41% of GDP)

Total deficits (with Grants) 46024 Crore Taka (4.4% of GDP, 24.6% of Budget)

Financing 46024 Crore Taka

Foreign Debt 12540 Crore Taka (1.20% of GDP, 6.5% of Budget)

Internal Debt 33484 Crore Taka (3.2% of GDP, 17.46% of Budget)

Total GDP 1041360 Crore Taka

Elevated: GDP growth 7.2% & Inflation 7.5%

Non-Development and development budget: 2012-2013 (TK 1,91,378 crore) Resources coming from:► Tax Revenue (NBR): 58.5% (VAT 36%, Import Duty 12.9%, Income Tax 31.5%, Supplementary Duty 17.8%, Others 1.8%)► Tax Revenue (Non-NBR): 2.4%► Non-tax Revenue: 11.9%► Domestic Financing: 17.5%► Foreign Loan: 6.5%► Foreign Grants: 3.2%

Non-Development and development budget: 2012-2013 (TK 1,91,378 crore) Use of resources:► Education & Information technology: 11.5%► Interest: 12.2%► Transport & Communication: 7%► Local government & Rural development: 7.4%► Energy & Power: 5%► Health: 4.9%► Agriculture: 7.5%► Defense: 6.7%► Public Administration: 12.6%► Social security & Welfare: 5.7%► Public order & Security: 4.8%► Housing: 0.8%► Recreation, Culture & Religious affairs: 0.8%► Industrial & Economic services: 1.4%► Miscellaneous Expenditure: 11.7%

** Sector-wise resources distribution (Including subsidies and pension)

Budget-2012-2013: What's UP, Down

UP

Mobile telephone users have to pay 2 percent more than before.Smokers have to pay more, as supplementary duty has been proposed at 100 percent increase from last year's 60 percent.Mediocre people's dream for air conditioners to wither away with a total of 213 percent taxes compared to 152 percent last fiscal.Price of laundry soap goes up.All fruits except dates to be dearer.Bed sheets, toilet papers, cleaning tissues, sanitary and kitchen wear to be costlier.Undergarments of both men and women will be dearer.Knit fabrics will be costlier.Jams, jellies and juices to be dearer.Private car owners to pay higher fitness tax.Frozen fish and meat to be dearer.

DOWN

Consumption of edible oils including soybean and sunflower to be cheaper.Life-saving drugs, insulin pen and nutritional foods for maternal health to be cheaper.VAT on raw material of newsprint paper has been exempted.Farmers to smile with agricultural machineries at cheaper price.The poor can buy plastic and rubber shoes and sandal at low cost.Info-tech is to thrive with low-cost multimedia projector, flash drive and flash card.Private medical and engineering colleges to get VAT exemption.Pharmaceutical and ceramic industries to enjoy huge tax rebate on imported machineries and raw materials.

An Overview showing by Chart:

Chart: Income segment of Budget (FY12-13) of Bangladesh (In percentage)

Chart: Expense segment of Budget (FY12-13) of Bangladesh (In percentage)

4 ways to look this year Budget

#1.With so many agenda and so many issues, how would a boardroom discussion on the

budget look like?

#4-With dark clouds of a topsy -turvy world economy and a menacing iceberg like current account deficit-the fate of the budget in a choppy sea(i.e. national economy plagued with sharks like corruption, red tape, slow aid disbursement,etc.) was easy to foretell

Analysis of the Budget

The present Budget of Bangladesh for the year FY11-12 has been presented at a time when the Bangladeshi economy is heading towards a high growth trajectory, albeit certain challenges such as elevated inflation, high Current Account Deficit (CAD), and moderating growth of industrial production, lack of capital investment, poor level of power & energy, low level of liquidity, etc. At the current juncture, what was required from the Budget was to address the issue of inflation and support growth momentum, while maintaining the focus on fiscal consolidation and continuing ahead on the reform agenda. Increased allocation of planned resources towards infrastructure projects along with the proposals to direct foreign funds and private saving towards infrastructure sector will unlock much of the growth potential of the sector.

Although the continued force on infrastructure along with power & energy, agriculture and education sectors is expected to provide significant impetus to economic growth in the medium-term, measures to control inflation in the immediate future were missing in the budget announcements.

On the fiscal deficit front, the budgeted fiscal deficit is 4.4% of GDP (including grants) where 5.0% of GDP (excluding grants) for FY12-13. This indicates government will face lot of trouble in near future. This can be reduce through increasing Tax revenue, reduce debt service liability and etc.

Analysis of cost for FY12-13

For FY12-13, total expenditure is budgeted to increase by 18.93% to 191738 Crore Taka as compared to the revised estimates (RE) of 163589 Crore Taka for FY11-12. As in the last budget, the Non-development expenditure received a major boost with an allocation of111675 Crore Taka, an increase of 10.58% over the FY11-12 RE. The development expenditure, however, is budgeted to register a great increase compared to the revised estimates of FY11-12; the expenditure on this front is slated to increase by 31.73%.

Analysis of Revenue for FY12-13

For FY12-13, total income is budgeted to increase by 22.09% to 145714 Crore Taka as compared to the revised estimates (RE) of 119345 Crore Taka for FY11-12. As in the last budget, the revenue received a major boost with an allocation of 139670 Crore Taka, an increase of 21.57% over the FY11-12 RE. The Tax revenue, however, is budgeted to register a great increase compared to the revised estimates of FY11-12; the revenue on this front is slated to increase by 21.96% to 116824 Crore Taka.

Analysis of NBR -Tax for FY12-13

Gross tax revenue for Fy12-13 is budgeted to increase by 21.53% over the FY12 RE, In FY11-12 , indirect taxes account for the major share of total tax revenue and NBR revenue represents around 80.17% of the total revenue. Only 24.1% of the revenue comes from income tax. Up to FY12-13, NBR revenue represents 77.04% of the total revenue

However, this present budget projected to raise tax-GDP ratio to 13.2% with a target to collect1122.59 billion Taka tax revenue & 70.23% of the non-development and development budget.

Critical Analysis

Income tax revenue has reduced by 3.9% compared to last fiscal year which indicates that income has become stable but the price of other utilities become higher compared to last year. It indicates the higher rate of inflation. Government has projected higher Income tax revenue by 65.56 billon taka which cannot be met up during the fiscal year that causes a great increase of Budget deficit. The amount of VAT collection has been projected at 343.04 billion taka which is higher than the last fiscal year that indicates people are willing to pay VAT for development of the country which represents a good trend of our economy. Present budget proposed 1.5% tax at source form all export proceeds which is zero percent during the last fiscal year. It will reduce the gap between the import and export of the total amount of the balance of payment. In a word, the total tax income has increased 21% over the FY 10-11RE.

Fiscal Arithmetic (Non-Tax) for FY11-12Analysis of Non-Tax Revenue for FY12-13

Non-tax revenue, on the other hand, is budgeted to record a significant increase of 22.82% during FY12-13 compared to the RE of FY11-12. This increase is primarily due to substantially higher non-tax revenue collections & taxpaying tendency during FY11-12.

The present budget proposes to collect 22846 Crore Taka in the budget for FY 2012-13which is 2.19% of GDP and 15.67% of the total budget income. The rate is higher than the last year actual budget by 1.87% and also higher than the reversed budget of FY11-12 as well.

Critical Analysis

The amount of Non Tax revenue has increased by 22.82% compared to FY 11-12 RE. The extra amount of non tax revenue will help the government to reduce budget deficit and infrastructural development of the country which may bring strong economy. Although last year, the amount has been increased but the collection of non tax revenue has been decreased which indicates low contribution tendency or a high level of corruption from the officials. Govt. should take needed steps to collect highest non tax revenue

Analysis of Non-NBR Tax Revenue for FY12-13

Non-tax revenue, on the other hand, is budgeted to record a significant increase of 22.79% during FY12-13 compared to the RE of FY11-12 & actual FY11-12. Non- NBR Tax collection increases by 16.34% during the fiscal year.

The present budget proposes to collect 4565Crore Taka in the budget for FY 2012-13which is 0.4% of GDP and 2.4% of the total budget income. The rate is higher than the last year actual budget by 650 Crore Taka and also higher than the reversed budget of FY11-12as well.

Critical Analysis

The Non NBR tax revenue during the present fiscal year projected to increase by 650 Crore taka which indicates that people are more interested to contribute for well being of the country. Compared to last fiscal year actual budget and reversed budget, the rate of non tax revenue is increased by 16.39% which is a record performance in the history of Bangladesh. The increasing rate indicates that people are interested to contribute in sectors such as land paper, non judicial paper, stamp revenue, motor vehicle taxes and narcosis.

Fiscal Arithmetic (Non-Tax) for FY11-12

Analysis of Domestic Financing for FY12-13

Overall budget deficit will reach to Tk. 52068 Crore, which is 5.0 percent of GDP out of which Tk. 33484 Crore (3.2 percent of GDP) from internal sources. Of domestic financing, Tk. 23000 Crore (2.2 percent of GDP) will come from the banking sector & Tk. 10464 Crore (1.00 percent of GDP) from the nonbanking sources.

The present budget proposes to collect 33484 Crore Taka in the budget for FY 2012-13 which is 3.2% of GDP and 22.97% of the total budget income. The rate is lower than the last year reversed budget by 1005 Crore Taka.

Critical Analysis

The current Govt. is trying to meet up the maximum portion of budget deficit around 60% from its internal sources that are from within the country. At the same time the Govt. has started taking huge amount of loan from the banking sector which is too alarming situation for our economy to control.

Analysis of Foreign Financing for FY12-13

This is the combination of both foreign loan & foreign grants of the budget. Foreign loan is refundable financing where foreign grant is not refundable.

Overall budget deficit will reach to Tk. 52068 Crore, which is 5.0 percent of GDP out of which Tk. 18584 Crore (1.78 percent of GDP) from external/foreign sources. Of foreign financing, Tk. 12540 Crore (8.6 percent of budgeted income ) will come from the foreign.

The present budget proposes to collect 20398 Crore Taka from the foreign loan section where7858 Crore Taka will be paid in the budget for FY 2012-13. The collection & paid rate is higher than the last year reversed budget by 6362Crore Taka & 1221 Crore Taka respectively.

Critical Analysis

The amount of foreign loan has been increased compared to FY 11-12 RE which indicates that poor economic situation. A positive signal from the Govt. is that the rate of paying back loan amount has increased which indicates that Govt. is trying to finance the budget deficit from the internal source that’s may reduce the country’s dependence on foreign loans. At the same time the Govt. is getting more subsidies from foreign countries like World Bank’s climate fund which is made by developed countries.

Critical analysis of Agricultural Budget for FY12-13

The amount of subsidy in agriculture sector has decreased which is a positive sign for our total economy because we are dependent on agriculture. This decreasing expense of subsidy may help to reduce the amount of deficit of the total budget. At the same time the poor farmers may face financial problem because govt. reducing subsidy which may result in less production of agriculture goods. Govt also taken the policy of one house one firm, developed farmer club for the purpose of making the country self sufficient in food by 2013.

Fiscal Arithmetic (Industrial & Economic) for FY11-12Critical analysis of Power & Energy Budget for FY12-13

Developing power plant for meeting up electricity may be a good initiative but these plants are dependent on oil, coal etc which is more expensive and will reduce the amount of our natural resources. So government must concentrate on less expensive plant on long term basis like air based plant, solar based plant, nuclear plant etc. Government already reduced tax on solar plant products, started conversation with China & Russia for nuclear plant for support in long term.

Fiscal Arithmetic (Industrial & Economic) for FY11-12

Critical analysis of Industrial & Economic for FY12-13

Proposed rise of SD on imported fabric (20% to 45%) is likely to make domestic textiles more competitive. Although different project has been taken but necessary allocation is

required for land and infrastructure development. For different steps taken by the govt. will increase the aggregate amount of export along with the support of ICT.

Fiscal Arithmetic (Industrial & Economic) for FY11-12Critical analysis of Public Administration for FY12-13

As the budget increased in public administration it has increased govt.’s ability to recruit more employees which will increase productivity of the labor force of our economy.

Critical analysis of Education & IT for FY12-13

The government is trying to develop skill manpower. For this instant they introduce compulsory computer & technical education for secondary level by 2013. Government also taking other steps but to make real man power the government must influence research sector in university level.

Critical analysis of Transport & communication) for FY11-12Critical analysis of Interest for FY12-13

Taking loan from internal sources by the government has affect on total economy for example our inflation has increased and day by day our economy is becoming vulnerable. So government must take initiative to manage its loan for the betterment of our economy.

Critical analysis of LGRD for FY 2012-13

Government wants to develop the overall country. So it has increased the allocation of budget in this sector.

Critical analysis of Defense for FY12-13

As govt. increased allocation in defense sector which is a prudent decision due to the overall condition of the world. By this increase we’ll get safer boarder, army, air force, navy etc which will make a strong position in the world for our country.

Critical analysis of Transport & communication for FY12-13

Government is trying to get a good communication system in our country which will mobilizes the business of the country. For doing this the govt is trying to develop roads & Bridges. But the government must emphasis on railway & water ways for minimizing the traffic jam problem. At the same time the govt must control the corruption in those sectors for long term benefit.

Critical analysis of Transport & communication) for FY11-12

Critical analysis of Health for FY12-13

To build strong health system government has taken several steps. Those are: implement telemedicine system, alternative healthcare, upgrade doctor-nurse-assistant ratio, establish new training center & etc.

Steps has been taken by government is good but the government must try to provide health benefits to the rural area and poor people because they are still deprived of health benefit of the government.

Fiscal Arithmetic (Public order & safety) for FY11-12Critical analysis of Housing for FY12-13

Government has taken several steps. One of this is like that. 10 Crore has been allocated for constructing a housing colony for Dhangar ethnic community. Another is development of workers’ housing facilities in major industrial zones under PPPs should be considered.

Impact:

Government must control the housing sector of the country because this sector is running at its own will; the price is unlimited and more than practical. So govt. must take the reins of this sector for the betterment of our economy.

Conclusion

Budget shows the government revenue & expenditure (Investment) project for a given fiscal year (FY 12-13). It has 20 sectors including revenue & expenditure. Every sectors & government sanction for these sectors are based on experience current need, social needs & economical needs. Most of the case the sanction is government’s policy variable. Through budget we can know in which sector government emphasis most that is the most important sector to the government. This is also based on mathematical mechanism used by the economist & financial analyst. In budget its shows that people are willing to pay VAT for development of the country which represents a good trend of our economy. The amount of Non Tax revenue has increased that may bring strong economy. The current Govt. is trying to meet up the maximum portion of budget deficit around 60% from its internal sources that are from within the country. Taking huge amount of loan from the banking sector is alarming situation for economy. A positive signal is that the rate of paying back loan amount has increased.

Fiscal Arithmetic (Public order & safety) for FY11-12

Bibliography

Articles

Abul Maal Abdul Muhith; ‘Budget Speech’; FY 2011-12. (Ministry of Finance, Government of the people’s republic of Bangladesh).

Web Sites

1. www . m o f .gov.bd 2. www.en.w i kipedia . org 3. www.nbr- b d.org 4. Dialogue on State of the Bangladesh EconomyAnalysis of the National Budget FY2011-12,organized by CENTRE FOR POLICY DIALOGUE (CPD)