Bangladesh Budget 2010-2011: Submitted To: Dr. Mohammad Ayub Islam Submitted By: Ahmad Mufassir Masum ID: 0821037

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BANGLADESH BUDGET 2010-

2011
Submitted To: Dr. Mohammad
Ayub Islam
Submitted By: Ahmad Mufassir
Masum
ID: 0821037
Submission Letter

28th June, 2010

Dr. Mohammad Ayub Islam

Course Instructor

Management Accounting-I

School of Business

Independent University, Bangladesh

Subject: Submission of summary and analysis of fiscal year 2010-


2011 Bangladesh budget
Sir,

I am glad to inform you that I have successfully completed the


summary and analysis on fiscal year 2010-2011 Bangladesh budget.
The report has been submitted herewith.

I was assigned to go through the fiscal year 2010-2011 Bangladesh


budget and prepare a summary and analysis. I tried to work with
extreme focus and caution. I am thoroughly thankful for all your
support. I tried to give the best of what I could. However, there
were limitations to what I could bring out and I hope that you would
kindly look into the report and consider any mistakes that I have
committed beyond my knowledge.

I would like to thank you again for your support.

Thank you.

Yours sincerely,

Ahmad Mufassir Masum 0821037

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Contents

Contents..................................................................................................................... 3

AN OVERVIEW............................................................................................................. 4

A GLIMPSE AT SOME SOURCES OF REVENUE INCOME ...............................................5

A GLIMPSE AT SOME SOURCES OF EXPENDITURE.......................................................6

POSSIBLE EFFECTS OF THE 2010-2011 FISCAL YEAR BUDGET...................................9

ANALYSIS....................................................................................................................9

CONCLUSION............................................................................................................11

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AN OVERVIEW
A national budget of Tk. 1.32 trillion for the Fiscal Year 2010-2011 was
revealed by the Finance Minister AMA Muhith of the 10th of June 2010. In this
budget, finance minister emphasized on an economic growth of 6.7 percent
which is to be achieved through augmenting revenue collection, increased
private sector investment through ADP implementation, continued growth in
agriculture, sustaining inflation at 6.5 percent and many others.

In the budget, Finance Minister said that the total estimated revenue income
is Tk. 92,847 crore which is 11.9 percent of the GDP. From the given revenue
income Tk.76, 042 crore is to come from tax revenue and Tk. 16,805 crore is
to come from non tax revenue. Compared to the budget of Fiscal Year 2009-
2010 there is a heavy increase in value added tax and income tax which
might be a cause of major burden to the middle class people.

Following up on the budget Finance Minister estimated the total expenditure


to be at Tk. 1, 32,170 crore which is 16.9 percent of GDP and 19.6 percent
more than the Fiscal Year 2009-2010 budget. Non development and ADP
expenditure is to rise by 14.2 percent and 35.1 percent respectively. 15.4
percent of the non development budget is actually development budget and
is to be used for various safety net programs. The total development
expenditure is 6.8 percent of GDP.

The estimated budget deficit of Tk. 39,323 crore, which is 5 percent of GDP,
is to be met from external sources and domestic sources. Tk. 15,643 crore
will come from external sources and Tk. 23,680 crore is to come from
domestic sources which include banking and non-banking sources. Tk.
15,680 crore will come from banking sources and the rest from non banking
sources.

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A GLIMPSE AT SOME SOURCES OF REVENUE
INCOME

Tax Revenue (NBR)

2.6
12.7 Foreign Grants

Foreign Loans
17.9
Domestic Financing
54.9
NonTax revenue
8.2
3.6 Tax Revenue (Non
NBR)

Figure: Budget Income

Finance Minister AMA Muhith emphasized heavily on income tax and value
added tax. Compared to Tk. 16,560 crore in the previous Fiscal year budget,
this budget of Fiscal Year 2010-2011 expects to earn Tk. 21,005 crore from
income taxes. Although the tax rate has not changed but Finance Minister
hopes to bring in 500,000 more tax payers under the tax net. Real estate
developers, institutional investors in the capital market and those keen on
evading taxes are some of his major sources for taxation.

The value added taxation has been increased from Tk. 22,795 crore to Tk.
27,092 crore. He proposed to introduce online VAT registration and return
submission. A specific software (Bangladesh VAT system, e-VAT) will be
used for this purpose which will be developed by a private firm under the
direct supervision of NBR. He provided a number of proposals to increase the
collection from VAT, which includes

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• to include under VAT any purchase of goods or services through tender
by government organizations, semi government organizations,
autonomous bodies, NGO, bank, insurance company or any other
financial institutions, limited companies and educational institutions.

• to withdraw shortened base value for some services and to include


some goods and services under VAT net.

• to increase tariff value in some cases.

• a rational enhancement of price-slab and supplementary duty of


cigarettes.

• to enhance the rate of minimum VAT.

There is also a significant rise in import and supplementary duties. He stated


that about 38 percent of domestic revenue income still comes from import
stages. His proposals relating to import duty were maintaining zero tariff for
major food items, medicine, cotton and fertilizer; protecting domestic
industries by continuing the 5 percent regulatory duty for another one year;
rendering assistance to domestic transport industry and increased rate of
duty on raw sugar and refined sugar at the rate of Tk. 2,000 and Tk. 4,000
per metric ton respectively.

A GLIMPSE AT SOME SOURCES OF EXPENDITURE


Education & 13.2 % Interest 11.1 %
Technology

Communication & 6.3 % Rural Government & 8.1 %


Transport Development

Energy & Power 4.6 % Health 6.0 %

Agriculture 5.4 % Defense 6.1 %

Public Administration 7.1 % Social Welfare & 7.0 %


Security

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Law & Order 4.6 % Housing 0.9 %

Entertainment, 1.2 % Education & Financial 1.1 %


Culture & Religion Services

Pension 3.1 % Subsidy 5.8 %

Others 8.2 %

Figure: Budget Expenditure

The total amount of expenditure is to be Tk. 1, 32,170 crore of which 33.3


percent will be allocated to social infrastructure, 30.4 percent will be
allocated to physical infrastructure and 21.1 percent will be allocated to
general service. The rest 15.1 percent will be spent for interest payment and
net lending.

From the 33.3 percent allocated to social infrastructure, 23.9 percent will go
to human development sources like education, health, science and
technology etc.

16.9 percent of the total physical expenditure will be allocated for


agricultural and rural development, 7 percent to overall communication and
4.6 percent to power and energy i.e. 21.2 percent of the total Annual
Development Program (ADP) will go to overall agricultural sector, 15.70
percent to power and energy, 15 percent to communication and 24.2 percent
to human resources.

9.6 percent of the total general service expenditure will be allocated for PPP
projects, cash incentives etc.

The major investment is to be in education which is 13.2 percent of the total


followed by interest which is 11.1 percent. The government gave top priority
to the sector considering education as one of the core strategies to alleviate
poverty and facilitate development.

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7.1 percent has been allocated for public administration since he urged for
the need to have a modern, efficient, corruption-free and service-oriented
public administration to implement the charter for change.

7.0 percent has been allocated to public welfare and social security. He
stated that poverty reduction and employment generation are the most
important programs to ensure public welfare in Bangladesh.

6.0 percent has been allocated for defense which is Tk.10,695 crore and is Tk.
1,512 crore higher than the allocation of previous fiscal year. This allocation is to
enhance the defense capability of the country by restructuring the defense system
which includes higher training facilities, modern military hardware and many others.

5.4 percent has been allocated for agriculture. He mentioned that a program
has bee undertaken to distribute organic, green and bio fertilizers to 97 lakh
families in the country to popularize the use of natural fertilizers in kitchen
farming with a view to increase agricultural production. A subsidy budget of
Tk. 4,000 crore has been allocated in agricultural sector.

4.8 percent has been allocated to law and order and according to the
Finance Minister the government has taken a firm stance against the
extreme communal forces and militants.

Finance minister has allotted 4.6 percent to energy and power in an effort to
secure the gap between the demand and supply of electricity. According to
the Finance Minister, 9425 megawatt electricity could be produced by the
year 2015 with 5 percent power generation aided by natural sources like air,
waste and natural sources and the remaining from diesel and furnace oil.

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POSSIBLE EFFECTS OF THE 2010-2011 FISCAL YEAR
BUDGET
The national budget of the fiscal year 2010-2011 might lead to a fall as well
as increase in some goods. Prices of domestic made motorcycle, energy
saving bulb, coconut oil, vacuum cleaner, LCD/LED panel, textile
machineries, yoghurt milk, chocolate milk etc could come down. Again prices
of car, flat, cigarettes, sugar, tiles, mosaic, perfumes, aluminum foil, juice etc
could go up. The ongoing price hike, followed by this heavy taxation and
inflation would mean that people of every class, especially middle class fixed
income group people would have to spend more to maintain their standard
of living.

ANALYSIS
13.2 percent allocation to education and technology lead to significant
worries regarding the proportion of allocation to technology and research
itself. Current discovery of the gene structure in Jute have lead to an
expectation of higher profit from Jute. However, if fruits of this sort are to be
enjoyed then emphasis should be given to research and technology as well
and significant amount of investment should also be allocated. However, we
do not find any specific allocation of this sort to research programs.

Our foreign loan for this fiscal year is 8.2 percent. However, the interest that
we have to pay off is 11.1 percent which is higher than the amount of loan
that we are going to take. Under this scenario, focus should be given to
ensure that the amount of loan that we are taking are invested in projects
that give us good return i.e. investment should be made to profit as you earn
projects. This would reduce the amount of foreign loans that we rely on in
future.

Allocation to rural government and development is 8.1 percent. This amount


has been allocated for purposes of rural electrification, pure drinking water,
rural housing etc. From the past experience we find that the roads in rural
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areas once constructed or repaired do not remain in proper shape even for a
year. It happens because of use of third class bricks, bitumen etc. It means
money used in these projects is totally wasted. So, proper monitoring to
implement these projects is very important. For sanitation, pure drinking
water etc people’s awareness is important. To achieve these goals and to
increase people awareness budget should have detailed specification.

Budget shows 6.1 percent has been allocated for defense purposes. On the
other hand allocation for agriculture is 5.4 percent and power and energy is
only 4.6 percent. Our country is suffering from shortage of power and
electricity for the last 3-4 years and foreigners who want to invest are not
coming forward because of electricity problem. Our annual gross income
mostly depends on agriculture, but in spite of fertile land we have failed to
generate more income from agriculture. Defense is important to country’s
existence. From the past experience we find that this country has utilized the
man power of defense in case of major disaster like flood, mud slide and
other natural calamities. The modern and sophisticated war planes,
battleships, tanks etc which have been purchased for defense purposes have
not given any benefit to the people of this country. Therefore, in this context
without spending more money on defense we should increase investment on
energy and power and particularly agriculture.

6.3 percent have been allocated to communication and transport. However,


throughout the budget the investment expenditure for this purpose have not
been specified. Roads have been improperly constructed and as a result
these often break down and no new roads are being planned for
construction. Except for some exceptions like the interconnecting roads
between Chittagong, Sylhet, Dhaka and some other areas, communication
has been a major problem for this country, especially in rural areas.
Furthermore, the vehicles used as a means of transportation are often
criticized to be of poor quality and service which wears down soon. So
specific investment decisions should have been mentioned in the budget
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which should include the roads that are to be constructed and the
improvement in transportation that are to be taken.

If we analyze our taxation history we see that advance taxation has been
rooted deep in our policies. People saving their money in banks with a desire
to earn some money through interest have to bear the burden of taxation
even for the smallest amount of income. In addition, those who rely on
savings certificate will now have to pay taxes as well. Advance taxation is
also a problem for those involved in imports. If we can not say for certain
that a specific import would be beneficial to the one involved then to what
extent is it justified to impose tax on the one bringing in the goods? If
government is to go forward with this heavy double taxation, then they
should also stipulate the sources of extra income for the sufferers especially
the fixed income group i.e. the middle class people.

CONCLUSION
The national budget for the fiscal year 2010-2011 is one of the most high
value budgets of all times. This higher spending budget will have a sound
impact on the macroeconomic scenario of our country. Inflation would
further increase as a result of this high expenditure. This would be a major
burden for a country like ours where almost half of the people are still
earning less than a dollar a day.

However, apart from so many debates people still expect that this budget is
going to shape up our economy meticulously.
There is no doubt that the government needs to formulate this budget with
greater commitment and high projected vision. Previous budgets did not
have full effect on our economy. It is an easy task to formulate a big size
budget, but the success lies in the implementation of the proposed budget.
Proper planning can make all the differences that address development
issues on short- mid- and long-term basis. The real challenge of this budget

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will be to allocate money to implement all the development activities within
the stipulated time.

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