A critical review of budget for the fiscal year

2017-2018 and a proposed budget for the

fiscal year 2018-2019
 Report
On
A critical review of budget for the fiscal year 2017-2018 and a proposed
budget for the fiscal year 2018-2019

Submitted to:
Mr. Shah Ridwan Chowdhury
Assistant Professor
Department of Management
Faculty of Business Studies
University of Dhaka

Submitted by:
Group name: Scintilla & Optimist
No. Name ID
1. Jamima Akter 024-004
2. Johora Banu 024-015
3. Razia Sultana 024-016
4. Halima Afrin 024-032
5. Tanjil Hossain 024-035
6. Md. Kamruzzaman 024-036
7. Mst. Swarnali Khanom 024-056
8. Rokaiya Rosul Itu 024-076
9. Emon Barua 024-079
10. Suma Akhter 024-099

Batch: BBA 22nd, Section: A

Department of Management
Faculty of Business Studies
University of Dhaka

Date of Submission: October 31, 2017

October 26, 2017

Mr. Shah Ridwan Chowdhury

Assistant Professor
Course: Macroeconomics
Department of Management
Faculty of Business Studies
University of Dhaka

Subject: Submission of the Report on A critical review of budget for the fiscal year 2017-
2018 and a proposed budget for the fiscal year 2018-2019

Dear Sir:

We have the pleasure to submit our report on A critical review of budget for the fiscal year
2017-2018 and a proposed budget for the fiscal year 2018-2019 is prepared for the
purpose of knowing about the national budget of Bangladesh.

This report helped us to know the implementation of Bangladesh national budget on the
economy of our country. We the members of Group Scintilla and Optimist have tried our
level best to collect the information for the report. We hope that the information given in
this report will clearly represent the critical review of budget for the fiscal year 2017-2018
and a proposed budget for the fiscal year 2018-2019. We wish that you would be very
pleased to accept our report and will consider our shortcomings while you evaluate our
report and oblige thereby.

Sincerely yours,

___________

Tanjil Hossain

&

___________

Razia Sultana

(On behalf of the group members)

 Acknowledgment
At first, we would like to convey my heartiest gratitude and total devotion to the almighty
Allah for blessing us with the ability, strength, and patience as well keeping us active in
performing this study.

We wish to express our special thanks of gratitude to our teacher Mr. Shah Ridwan
Chowdhury, Department of Management, University of Dhaka who has given us an
opportunity to do this wonderful report on the topic of A critical review of budget for the
fiscal year 2017-2018 and a proposed budget for the fiscal year 2018-2019 which has also
helped us in knowing a lot of information and we have come to know about the national
budget and how it is implemented on the economy of Bangladesh and also how to make a
budget.

Secondly we would also like to thank our friends and group members who have helped us a
lot in finishing this report within the limited time.

We are making this report not only for marks but also for expanding our knowledge.
Thanks again to all who have helped us.
 Table of contents
Figure No. Title Page No.
Executive Summary VII
1 Analysis of current budget fiscal year 2017-2018 8-9
1.1 Sector Wise Allotment 8
1.2 Sector Wise Income 9
1.3 Deficit 9
2 Criticism of the current budget fiscal year 10-11
2017-2018
3 Positive sides of the current budget fiscal year 12
2017-2018
4 A Demo budget for the fiscal year 2018-2019 13-18
4.1 Expenditure of Demo Budget 14-16
4.2 Areas of Money Inflow 17
4.3 Deficit 18
5 Recommendation and Conclusion 19-20
5.1 Recommendation 19
5.2 Conclusion 20
Reference 21

Abbreviation
 NBR National Board of Revenue
FY Fiscal Year
RB Reverse Budget
VAT Value Added Tax
IMF International Monetary Fund
JICA Japan International Cooperation Agency
BRTC Bangladesh Road Transport Corporation
CPD Center for Policy Dialogue
ADP Annual Development Program

Executive Summary
Budget is an estimation of revenue and expense over a specified future period of time. It is
one of the most administrative tools, a plan of action for achieving objectives, standard for
measuring performance and a device for coping with foreseeable adverse situations. The
finance minister has said that he has given the best budget this year over his life. Basically
this budget has both negative and positive impact on economy of Bangladesh.

The current budget target is Tk. 4, 00,266 crore and inflow of money is Tk. 2, 93,494 crore
and the deficit is Tk. 1, 06,772 crore. The expenditure of development sector is Tk. 1, 55,252
crore and the expenditure of non-development sector is Tk. 2, 45,014 crore.
The negative impacts of the budget are that of increasing personal tax rate, allotment for
transportation and communication is not good enough for development, allotment for
agricultural is not satisfactory, reducing private sector investment, increasing price of some
products, increasing gas and electricity bills, allocation of housing is not enough, inadequate
allocation in education sector and more depending on foreign aid and loan.

One the other hand the budget has positive sides too and these include reduction of import
tax on some raw material, reducing the taxes of hybrid car, allocation for agricultural sector
has increased, allocation for health sector has increased, reducing corporate tax and
inspiring green industrialization.

Based on this budget we have proposed a demo budget for fiscal year 2018-19.We have
given areas of expenditure and areas of total revenue for this demo budget. Areas of
expenditure are that of education and technology sector, transportation and
communication, Heath sector, banking and insurance, investment sector, agricultural sector,
defense, industry. We have given areas of revenue earning too. Income from income tax,
corporate tax, excise duty and other sources.

After considering the budget we may offer some recommendations for the betterment of
the budget and economy. We may recommend to increase investment in agricultural sector,
in industry, in education, in profitable investment sector, to allocate resources for the
development of research sector, not to more dependent on foreign aid and loan, and
increase tax on tobacco, cigarette, alcohol and wine.

VII
01. Analysis of current budget fiscal year 2017-2018
1.1: Sector Wise Allotment

Sectors Million Tk. Percentage of Budget

Education & Technology 65,643 16.4
Public Administration 54,436 13.6
Transportation & 50,033 12.5
Communication
Interest Payment 41,627 10.4
Local Government & Rural 27,618 6.9
Development
Defense 25,617 6.4
 Agriculture 24,416 6.1
Social Security & welfare 24,015 6.0
Public Order & security 22,815 5.7
Fuel & Electricity 21,214 5.3
Health 20,813 5.2
Others 10,813 2.7
Industry & Economic Service 4,002 1.0
Housing 3,605 0.9
Entertainment, Culture & 3,605 0.9
Religion
Total 4,00,266 100.00

Analysis of Expenditure: A total expenditure for FY 17-18 has been estimated at Tk. 4,
00,266 crore. Allocation for education and technology sub sector (TK 65,444) has jumped up
by 30%. Allocation for the health sector is TK 20,652 crore which is 6.2% of the total ADP.
Allocation in defense is 10.9% higher than previous budget. Allocation for agriculture and
allied sector has increased by 22%. Tk. 30,614 crore is allocated for FY 17-18 which is 19.9%
of total ADP.

1.2: Sector Wise Income

Sector Million Tk. Percentage of Budget

Taxes
Value Added Tax (VAT) 91,254 22.80
Tax from Income & Profit 85,176 21.28
Import Tariff 30,023 7.50
Supplementary Tariff 38,401 9.59
Other Tax of NBR 3,335 0.83
Taxes outside NBR 8,622 2.15
Revenue without Tax 31,179 7.79
Foreign Donation 5,504 1.40
Foreign Loan 46,420 11.60
 Loan from Domestic Bank 28,203 7.03
Loans outside Bank 32,149 8.03
Total 4,00,266 100.00

Analysis of Revenue: The revenue generation target has been set at Tk. 2, 93,494 crore. The
NBR would have to generate Tk. 2, 48,190 crore of the targeted amount which is 11.2% of
GDP. Revenue collected through taxes outside NBR is 8622 million taka and without tax is
31,179 million taka. The revenue target is expected to be achieved due to recent initiatives
for revising fees or rates in consistence with market rates and improved monitoring system.

1.3: Deficit

The overall budget deficit will be 1, 06,772 lakh crore which is 28% of the total budget. This
is estimated to be 5% of GDP. The deficit Tk. 46, 420 crore will be collected from external
source of foreign loan and domestic source will provide Tk. 60,352 crore. Of domestic
financing Tk. 28,203 crore will come from the banking sector and the remaining Tk. 32,149
will come from savings certificate and other non-banking sources.

9
02. Criticism of the current budget fiscal year 2017-2018
The finance minister has said that he has given the best budget this year over his life.
Basically this budget has both positive and negative impacts. So obviously it has good sides
and also bad sides. The criticism of this budget are described below:-

1. Increase in taxes: The government plans to increase National Board of Revenue collected
taxes by 34.16% as per the currently put budget for financial year 2017-18 in compared to
the revised budget of 2016-17. This increased amount of money is going to be directly
imposed upon general businesses and individuals. It hampers the business.

2. Transport & Communication: We can see that there is allocation for Transport 12.5%
which is not enough. At present, the condition of our communication system is very poor. A
rainy day deteriorate the road and highway. Water can’t pass. As a result, many more
accidents occur. So in this sector, more amount of money should be allocated.

3. Agricultural sector: In the budget of fiscal year 2017-2018 there is a little part which has
been allocated in the agricultural sector. It’s only 6.1% of the total budget. This is not good
for the development of our economy. Bangladesh is an agricultural country. The future of
the agricultural sector will be bright if we properly concentrate on this sector.

4. Reducing private sector investment: The government is planning to borrow Tk. 28,203
crore from banks and another Tk.32, 149 crore from non-bank domestic sources, which will
reduce available fund for private sector investment. Government is also planning to collect
another Tk.51, 924 crore from foreign sources to cover budget deficit. These loan will affect
the business operation.

5. Increasing the price of some products: Fast food, snacks; Foreign salt; Baby food;
Crushed milk, butter; Dry grapes, any kind of fresh fruit; Exotic sweet biscuits and biscuit like
foods Mineral water soft drinks, energy drinks. Auto rickshaw, electric battery-powered
motor vehicle, CC vehicle, four-door double cabin pickup, two and four stroke auto-
rickshaw; Battery used in private car, oven etc.

6. Housing: Accommodation is one of the main problems of our country. But the allocation
of money in this sector is too much poor. It is only .9%. Here should be allocated more

10

7. Increase of gas and electricity price: The price for fuel and power is increasing two fold at
the beginning of the financial year 2017-18. Hike of the gas price is being effective and at
the same time imposition of 15% VAT on gas and power price are going to take the cost of
fuel and power to a new peak. There are many business who earn little profit, this rise may
hamper their operation in the field of business. Government has set the target of increasing
non tax revenue and receipts by 96.6 percent. This increase is also likely to be imposed on
businesses and public as payments of bills of different services.

8. An election budget: The proposed budget of honorable prime minister is taka 4.00 trillion
with an annual development plan of about taka 1.55 trillion. The size of the total outlay and
ADP are both the ever highest in Bangladesh budgets. Critics called it an election budget to
manage everybody. Few criticisms came with crueler words like to cut mass peoples pocket
and collect election expenditure of the party.

9. Negligence on healthcare sector: In budget allocation healthcare sector is really poor

only 6.1% of budget that stood at the 6 th position of the ADP. It could get the 2 nd or 3rd
highest priority. Because till now there is only one child hospital in Bangladesh for 160
million people. The capital city is the only way out for treating many serious diseases.   The
government healthcare sector is overloaded to bear the demands of 160 million
populations. Private healthcare facilities are just out of reach to 80% of the citizens. In such
a situation healthcare sector deserves more budgetary allocation to establish more seats in
the existing district level government hospitals. Establishing specialized hospitals at the
divisional or district level is a justified demand of the mass people.

10. Inadequate Allocation in education sector: The size of the national budget is increasing
every year and the budgetary allocation to education sector also rises. In the budget of
2017-2018 Govt. has increased 14% budgetary allocation for education sector than previous
budget. The proposed amount is 50,432 which is 2.2% of the GDP & 12.6% of the total
outlay. But the share of the education budget has been remaining almost static over the
years, both as percentage of GDP and as a share of total outlay. The ratio of education
budget to GDP stood around 2% over 15 years which is lower than many Asian countries like
Nepal, Vietnam.

11. Over dependency on foreign aid and foreign loan: This budget has an over dependency
on foreign aid and foreign loan. There are many examples of our inefficiency in utilizing
existing foreign assistance. But in the proposed budget these sources have shown a 3 times
growth. How such a large amount of foreign assistance will be managed and how we could
utilize those with our existing project implementation capacity remains a big question.

11

03. Positive sides of the current budget fiscal year 2017-2018

The finance minister has said that he has given the best budget this year over his life.
Basically this budget has both positive and negative impacts. So obviously it has good sides
and also bad sides. The positive sides of this budget are described below:-

1. Cutting corporate tax for garment sector: One positive side of current budget is the
reduction of corporate tax of garment sector to 15 percent from the existing 20 percent.
The corporate tax for green garment factories has also been reduced to 14 percent, as they
 are contributing in saving energy, water and environment. The much-talked about source
tax will be 1 percent for the next fiscal year.

2. Reduction of import tax of some raw materials: In budget the import tax of importing
raw materials of products like medicine, ceramic and leather has been decreased. This is a
good initiative as we export these products so through this reduction the production of
these products will be increased.

3. Reducing the tax of importing hybrid cars: The tax for importing hybrid cars has been
decreased. This is a good initiative as people will be more interested in these environment
friendly cars. Also the subsidiary tax on 2750-3000 cc cars has been decreased to 200% from
50%.

4. Others: Some others positive sides are given below in a brief:-

 Allocation for ‘Agriculture & allied’ has been increased by 22% compared to RB FY
17-18
 Allocation for ‘education & Technology’ sub sector has jumped up by 30% during FY
17-18
 Allocation for the health sector has increased by 39.3% over that of RB FY 17-18
 The budget allocation for ‘Defense’ for FY18is 10.9 higher than the allocation for
previous year.
 The second highest budget allocation goes to the ‘Education & Technology’ sector
but it is not sufficient.
 Government has reduced corporate tax rate and inspiring green industrialization.

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04. A Demo budget for the fiscal year of 2018-2019

Tk. Tk. Budget Tk. Tk. Budget

Sector crore crore 2017- crore Crore 2018-
2018 2019
Revenue received 2,87,910 3,23,857
Taxes
NBR Earnings 2,48,190 2,85,583
Non NBR tax 8622 9312
Non tax revenue 31,178 28,962
Foreign donation 5504 5508

TOTAL 2,93,494 3,29,365

(12.22%)
Non-development 2,34,013
expenditure
Non development revenue 2,07,138
expenditure
Non development capital 26,875
Expenditure 1,59,013
Development expenditure
Financial development 249
program 3512
Project excluding ADP
Annual development 1,53,331
expense 1921
Food for working program 361
Food account 6879 4,00,266 4,85,647
Loan and advance (Net) (21.33%)

TOTAL
Budget deficit (1,06,772) (1,56,282)
(46.37%)
Financing
Foreign loan-net 46,420 68,425
Foreign loan 55,313 80,803
Foreign loan payment (88,93) (12,378)
Domestic loan 60,352 87,857
Bank loan net 28,203 36,594
Non-bank loan 32,149 51,263

Total 1,06,772 1,56,282

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4.1: Expenditure of Demo Budget

Amount(cr.) Percentage Amount(cr. Percentage

Sector 2017-2018 2017-2018 ) 2018-2019
Fiscal year Fiscal year 2018-2019 Fiscal year
Fiscal year
Education and technology 65,643 16.4 87,902 18.10
Public administration 54,436 13.6 63,134 13.00
Transportation and 50,033 12.5 60,705 12.50
communication
 Payment on interest 41,627 10.4 50,992 10.50
Local government and rural 27,618 6.9 30,110 6.20
development
Defense 25,617 6.4 31,567 6.50
Agriculture 24,416 6.1 34,966 7.20
Social security and welfare 24,015 6.0 29,624 6.10
Public order and safety 22,815 5.7 26,710 5.50
Fuel and electricity 21,214 5.3 24,282 5.00
Health 20,813 5.2 30,110 6.20
Miscellaneous 10,807 2.7 1706 0.35
Industry and economic service 4002 1.0 5827 1.20
Housing 3605 0.9 5584 1.15
Recreation, culture and religion 3605 0.9 2428 0.50
Total 4,00,266 100.00 4,85,647 100.00

1. Education and Technology: All development and non-development activities include

here. School, college, university, their establishment, infrastructure development,
scholarship, free educational staff etc. are under such sectors. This sector is very important
for the development of a nation. The literacy rate of our country is increasing day by day.
Government takes major initiative to develop this sector. The allotment of this sector is
increases from 16.4% (65,643 crore) to 18.10% of total budget (87,902 crore) in proposed
budget 2018-2019.

2. Public Administration: This sector includes government services, services of different

ministry, salary of ministry personnel, and their other facilities. The allotment of this sector
is 13.00% total budget (63,134 crore).

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3. Transportation and communication: Transportation sector includes water transportation,
road transportation and air transportation like Marine, BRTC and Bangladesh railway and Air
lines. The maintenance of other transport-roads and highways-bridges-flyovers etc.
Communication sector includes Bangladesh Betar, Bangladesh television, satellite, mobile
network etc. The allotment of this sector is 12.50% of total budget (60705 crore)

4. Payment on interest: Our budget is deficit budget to fulfill our expenditure; we take loan
from Bangladesh Bank. We also take overseas loan. For these we have to pay interest.
Interest of this sector includes interest on loan of local bank, IMF, JICA and World Bank. So
the allotment of this sector is 50% of total budget (50,992 crore).
5. Local government and rural development: It exists to promote the establishment and
development of a vibrant and well-resourced decentralized system of local government for
the people to ensure good governance and balanced rural based development. The
allotment of this sector is 6.20% of total budget (31,567 crore).

6. Defense: This sector includes the materials, maintenance and facilities of our three
defense sectors. They are arm force, naval force and air force. The allotment of this sector
is 6.50% of total budget (31567 crore).

7. Agriculture: Agriculture is the main sector of our country. 80% of our country is still
depending on agriculture. It needs more allotment because it is the largest employment
sector of our country. Most of the people of our country are farmer. The allotment of this
sector is 7.20% of the total budget (34,966 crore).

8. Social security and welfare: The government should allocate huge amount of money
every year for the social security and welfare. The main elements of this sector are poverty
reduction, insolvent widow, martyr allowance, old age pension, orphan rural society, health,
rehabilitation, treatment etc. The allotment of this sector is 6.10% of total budget (29,624
crore).

9. Public order and safety: This sector ensures regular safety. It includes Ansar, Police, BGB
(Border Guard Bangladesh). The allotment of this sector is 5.50% of total budget (26710
crore) for their training, safety procedure, purchasing material, expenditure of mission etc.

10. Fuel and electricity: This sector ensures the entire energy and power development and
maintenance of it. The element if this sector is establishment of electricity, gas mining and
communication, salaries of their staff, their maintenance cost etc. The allotment of this
sector is 5.00% of total budget (24,282 crore) Government should allot more in this sector
for ensuring development of our country.

15
11. Health: This sector includes establishment of public hospital, salary of doctors, nurse,
other stuff, medicine, infrastructural development etc. As it is basic need for human,
government always try to allot more in this sector. The allotment of this sector increases
from 5.20% to 6.20% of total budget in 2018-2019 (30,110 crore).

12. Miscellaneous: The elements of this sector are given below:-

 Pension
 Interest
 Subsidies
 Incentives etc.
The allotment of this sector is 0.35% of total budget (1706 crore).

13. Industry and economic service: This sector involves investment in industrial sector. This
sector also includes infrastructural development for industrial and economic services. The
allotment of this sector increases from 1.10% to 1.20% of total budget (5827 crore)

14. Housing: Housing sector is the important part of the Bangladesh budget. Real estate is
one of its elements. The allotment of this sector is 1.15% of total budget (5584 crore).

15. Recreation, culture and religion: There are many religion in our country. All are treated
equally. Religious holidays, their securities, particular festivals, charities, donations all are
done under this budget. Culture sectors like budget for Pahela Boishak, Pahela Falgun etc.
These costs are adjusted through this sector. The allotment of this sector is 0.50% of total
budget.

On the basis of these sectors mentioned above the whole budget is divided.

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4.2: Areas of Money Inflow

Amount (cr.) Percentage Amount (cr.) Percentage

Sectors 2017-2018 2017-2018 2018-2019 2018-2019
Fiscal year Fiscal year Fiscal year Fiscal year
NBR Earnings 2,48,190 62.00 2,85,583 58.81
Non NBR Tax 8622 2.15 9312 1.92
Non Tax revenue 31,179 7.79 28,962 5.96
Foreign donation 5504 1.40 5508 1.13
Foreign loan 46,420 11.60 68,425 14.09
Bank loan (Domestic) 28,203 7.03 36,594 7.54
 Non-bank loan 32149 8.03 51,263 10.55
Total 4,00,266 100.00 4,85,647 100.00

The areas of money inflow are the probable sources from where the government can collect
money for the proposed budget. Revenues are collected from various sources. They are NBR
earnings, Non- NBR earnings, Non-tax revenue, Foreign Donation. Tax-revenues are
collected from both NBR sectors and non NBR sectors.

1. NBR Earnings: National Board of revenue is the main sources of funding of Bangladesh
Government .In this proposed budget the estimated amount of NBR Taxes are 285583 crore
and it is 58.81% of total financing. NBR Taxes are collected from-
 Value Added Tax
 Import Duty
 Supplementary Duty
 Income Tax &
 Others revenue

2. Non- NBR Tax: In this proposed budget the estimation of collecting tax from Non-NBR
sectors are 9312 crore and it is 1.92% of the total funding.

3. Non tax revenue: Non Tax revenue are estimated in this proposed budget are 28962
crore and it is 5.96& of total financing.

4. Foreign donation: In the demo budget of fiscal year 2018-2019, foreign donations are
estimated 5508 crore which is 1.13% of total funding.

17
4.3: Deficit

The amount by which expenditures or liabilities exceeds income or assets. For the Fiscal
year 2018-2019 we estimated the amount of deficit as 156282 crore.
These shortages are met up through both foreign loan and Domestic Loan.

1. Foreign loan: Bangladesh government collects loan from various international sources
like-
 World Bank
 IMF
 Asian Development Bank
 JICA: The Japan International Corporation Agency etc.
In 2018-19 Fiscal year the estimated Net Foreign Loans are 68,425 crore Tk. and it is 14.09%
of total financing.

2. Domestic Loan: Bangladesh Government finances domestic loan from two major sources.
These sources are:
 Net Bank Loan
 Non- Bank Loan

I) Bank Loan: In this proposed budget the estimated amount of bank loans are 36,594 crore
which are 7.54% of total financing. These loan are also two types:-

 Long term loan and

 Short term loan

II) Non-Bank Loan: The amount of Non-Bank loan in this demo budget are 51,263 crore and
this are 10.55% of total financing. The elements of Non-Bank Loans are-
 National Savings Certificates
 Treasury bills
 Government Securities etc.

18
05. Recommendation and Conclusion

5.1: Recommendation
After considering the whole budget, we thought that if some portions of the budget allocate
in some profitable sectors, it may better for our economy. We also thought there are some
shortcomings in our economy. We offer some recommendation for the betterment of our
budget and economy.

 The agricultural sector has less investment. It should be increased more because it is
one of the most profitable sectors.
  There should be opened a different sector for research. In our country there is no
specific sector for research.
 Health is more important for leading a standard life. But there is less investment in
health sector.
 Our economy is mostly dependent on international aid and loan. This is alarming.
Every fiscal there is huge amount has to allocate for payment interest. We should
less dependent on international loan.
 Government may impose higher tax on tobacco, cigarette, alcohol, wine etc.

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5.2: Conclusion
Budget means the financial representation of future planning. Every year Bangladesh
government makes its budget. Most of the time it’s a deficit budget. To develop a country,
deficit budget is expected. This report is based on the analysis of the current budget fiscal
year: 2017-18 and a demo budget fiscal year: 2018-19. Demo budget 2018-2019 is based on
the analysis of current budget and tries to increase the allocation amount of some profitable
and important sectors. This demo budget is also deficit. Government may take some
initiatives to make the budget reliable. Government may also implements some policies for
the betterment of the economy through budget.
 20
Reference
 An Analysis of the National Budget for FY 2017-18 by CPD.
 Bangladesh National Budget Fiscal Year: 2017-2018
 Current Affaires July 2017
 http://al-ihsannewsagency24.com/এক-নজরে-বাজেট-২০১৭-১৮/
 https://www.youtube.com/watch?v=KfxKhxhyAy4
 http://cpd.org.bd/wp-content/uploads/2017/06/Presentation-on-An-Analysis-of-
theNational-Budget-for-FY2017-18.
 http://www.thedailystar.net/Bangladesh-Budget-2017-18/frontpage/still-not-
enough-quality-education-1414294

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