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Chapter 1
History of budget
In historical terms, Budget is a relatively new invention. Its origins, however, lie in centuries of
monarchs mismanaging the country's finances.
It was not until the early 18th century that a version of the annual Budget emerged. The origins
of the word Budget lie in the term "bougette" - a wallet in which documents or money could be
kept. While at first referring only to the Chancellor's annual speech on the country's finances, the
word quickly became used for any financial statement or plan.
The beginnings of what we have come to know as the Budget did not immediately act as a
complete safeguard for Britain's finances. The bursting of the South Sea Bubble in 1720, for
example, wrecked the country's balance sheet and led to the imprisonment of the Chancellor in
the Tower of London. Toward the end of the same century, in 1789, Pitt the Younger introduced
income tax.
Budget Day has historically been held during spring because the collection of the Land Tax took
place in April, and much of the country's wealth derived from agriculture.

History of Bangladesh budget

First financial budget of the fiscal year 1972-73 was proposed by Tajuddin Ahmed (first Finance
and planning minister of Bangladesh) on 7 th July 1972. There was no deficit in the budget rather
there was surplus in the first fiscal budget of newly independent Bangladesh. There was no new
taxes in the budget; which was one of the most significant aspects the first budget.
Total amount of expenditures in the budget is 501 crore Bangladeshi taka. Total surplus in the
budget is 66.95 crore Bangladeshi taka. Total amount of taka 317 crore was allocated for the
development projects all over the country. Total amount of foreign aid was taka 375 crore.
Since then eleven finance minister placed 45 budget. Finance minister AMA Muhith announces
the country’s 44th budget, for the financial year 2015-16 in parliament on Thursday.

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Chapter 2
What is budget?
A budget is a quantitative expression of a plan for a defined period of time. It may include
planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities
and cash flows. It expresses strategic plans of business units, organizations, 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

What is government budget?

A government budget is a government document presenting the government's
proposed revenues and spending for a financial year that is often passed by the legislature,
approved by the chief executive or president and presented by the Finance Minister to the nation.
The budget is also known as the Annual Financial Statement of the country. This document
estimates the anticipated government revenues and government expenditures for the ensuing
(current) financial year.[1] 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 are the basis for state revenues, and income tax and corporate tax are the basis
for national revenues.

Types of budget
Different types of Government Budget - Diagram

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Budget

Balanced Unbalanced
Budget Budget

Surplus Deficit
Budget Budget

Balance budget:
A balanced budget is a situation in financial planning or the budgeting process where total
revenues are equal to or greater than total expenses. A budget can be considered balanced in
hindsight, after a full year's worth of revenues and expenses have been incurred and recorded. A
company's operating budget for an upcoming year can also be called balanced based on
predictions or estimates.

Unbalanced Budget
The budget in which income and expenditure are not equal to each other is known as Unbalanced
Budget. Unbalanced Budget is of two types:-

Surplus Budget:
A surplus budget is a situation in which income exceeds expenditures. The term "budget surplus"
is most commonly used to refer to the financial situations of governments; individuals speak of
"savings" rather than a "budget surplus." A surplus is considered a sign that government is being
run efficiently. A budget surplus might be used to pay off debt, save for the future, or to make a
desired purchase that has been delayed. A city government that had a surplus might use the
money to make improvements to a run-down park.

Deficit budget:
A status of financial health in which expenditures exceed revenue. The term "budget deficit" is
most commonly used to refer to government spending rather than business or individual
spending. When referring to accrued federal government deficits, the term "national debt” is
used.

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The opposite of a budget deficit is a budget surplus, and when inflows equal outflows, the budget
is said to be balanced.

Fiscal policy
Fiscal policy is government spending and taxation that influences the economy.
Fiscal policy refers to changes in government expenditures and taxation to achieve
macroeconomic goals such as low unemployment, stable prices and economic growth.
Government spending policies that influence macroeconomic conditions. Through fiscal policy,
regulators attempt to improve unemployment rates, control inflation, stabilize business cycles
and influence interest rates in an effort to control the economy. Fiscal policy is largely based on
the ideas of British economist John Maynard Keynes (1883–1946), who believed governments
could change economic performance by adjusting tax rates and government spending.
Fiscal policy involves the decisions that a government makes regarding collection of revenue,
through taxation and about spending that revenue. It is often contrasted with monetary policy, in
which a central bank (like the Federal Reserve in the United States) sets interest rates and
determines the level of money supply.

Types of fiscal policy:

There are two types of fiscal policy:

Expansionary fiscal policy:

Expansionary fiscal policy is a fiscal policy enacted by the government of increase output the
two major vehicles for expansionary fiscal policy are reducing taxes and increasing government
spending.

Contractionary fiscal policy:

Contractionary fiscal policy is a fiscal policy enacted by the government of decrease output .the
two major vehicles for Contractionary fiscal policy are increasing taxes and decreasing
government spending.

Goals of Fiscal Policy

The three major goals of fiscal policy and signs of a healthy economy include inflation rate, full
employment and economic growth as measured by the gross domestic product (GDP). Let's take
a look at the individual goals.
The inflation rate refers to the rise in costs for goods and services in relation to decreases in
purchasing power. For example, if the rate of inflation is 3%, than your $2.00 morning cup of
coffee will cost you $2.06 in a year. In most countries, central banks try to maintain an inflation
rate of no more than 3%.

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Secondly, a healthy economy will have a low unemployment rate, also described as full
employment. This means, if you need a job, you'll be most likely able to find one.
The third indicator of a healthy economy is economic growth as measured by the gross domestic
product (GDP). The GDP reflects the monetary value of all the goods produced and services
offered in a country during a particular period, and ideally, it's increasing at a steady, stable rate.

Monetary policy:
The central bank of a nation keeps control on the supply of money to attain the objectives of its
monetary policy.
is the process by which the monetary authority of a country controls the supply of money, often
targeting an inflation rate or interest rate to ensure price stability and general trust in the
currency.
Further goals of a monetary policy are usually to contribute to economic growth and stability, to
lower unemployment, and to maintain predictable exchange rates with other currencies.
Monetary economics provides insight into how to craft optimal monetary policy.
Monetary policy is referred to as either being expansionary or contractionary, where an
expansionary policy increases the total supply of money in the economy more rapidly than usual,
and contractionary policy expands the money supply more slowly than usual or even shrinks it.
Expansionary policy is traditionally used to try to combat unemployment in a recession by
lowering interest rates in the hope that easy credit will entice businesses into expanding.
Contractionary policy is intended to slow inflation in order to avoid the resulting distortions and
deterioration of asset values.

Types of Monetary Policy:

There are two types of monetary policy

Expansionary Monetary Policy:

An expansionary policy is a macroeconomic policy that seeks to expand the money supply to
encourage economic growth or combat inflationary price increases. One form of expansionary
policy is fiscal policy, which comes in the form of tax cuts, transfer payments, rebates and
increased government spending. Another form is monetary policy, which is enacted by central
banks and comes about through open market operations, reserve requirements and interest rates.

Contractionary Monetary Policy:

Contractionary policy refers to either a reduction in government spending, particularly deficit
spending, or a reduction in the rate of monetary expansion by a central bank. It is a type of policy
or macroeconomic tool designed to combat rising inflation or other economic distortions created

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by central bank or government interventions. Contractionary policy is the opposite of

expansionary policy

Goals of Monetary Policy:

Rapid economic growth: the monetary policy can influence economic growth by controlling real
interest rate and its resultant impact on the investment.
Price stability: all the economics suffer from inflation and deflation, it’s called price instability.
Thus the monetary policy having an objective of price stability tries to keep the value of money
stable.
Exchange rate stability: exchange rate is the price of a home currency expressed in terms of any
foreign currency .if the exchange rate is frequently ups and down then the international
community might lose confidence in our economy, the monetary policy aims at maintaining the
relative stability in the exchange rate.
Balance payments equilibrium (BOP): the bop has two aspects, the bop surplus and deficit.
Full employment: it refers to absence of involuntary unemployment .in simple word full
employment stands for a situation in which everybody who wants jobs get job.
Equal income distribution: in recent year’s economist have given the opinion that the monetary
policy can help and play a supplementary role in attaining an economic equality.

Government expenditures
Government spending or expenditure includes all government consumption, investment, and
transfer payments. In national income accounting the acquisition by governments of goods and
services for current use, to directly satisfy the individual or collective needs of the community, is
classed as government final consumption expenditure. Government acquisition of goods and
services intended to create future benefits, such as infrastructure investment or research
spending, is classed as government investment (government gross capital formation). These two
types of government spending, on final consumption and on gross capital formation, together
constitute one of the major components of gross domestic product.
Government spending can be financed by government borrowing, seignior age, or taxes.
Changes in government spending are a major component of fiscal policy used to stabilize the
macroeconomic business cycle.

Sources of government expenditures:

 Subsidizing hospital
 Subsidizing education
 Social security system, Medicare and anti-poverty program
 Collection of taxes
 Providing employment opportunities in government in private sector.
 Housing program

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 Infrastructure program
 Provides legal structure to settle disputes
 Environmental regulations
 Safety regulations
 Government fosters macroeconomic stability and growth
 Reducing unemployment and inflation while courage’s growth.

Principles of Public Expenditure:

Public expenditure is related to macroeconomics. Public expenditures have some principles.
Public Expenditure contain following Principles:

Principle of Maximum Social Benefits:

Public expenditure should be made to attain the maximum social advantage from activities
conducted by it.
Attainment of maximum social advantage requires:
 Both public expenditure and taxation should be carried out up to certain limits and no
more,
 Public expenditure should be so utilized among the various uses in an optimal manner:
 The different sources of taxation should so tapped that the aggregate sacrifice entailed is
minimum
Principle of Economy: It means that extravagance and waste of all types should be avoided.
Public expenditure has great potentiality for public good but it may also prove injurious and
wasteful. If the revenue collected from the taxpayer is heedlessly spent, it would be obviously
uneconomical.
To satisfy the canon of economy, it will be necessary to avoid all duplication of expenditure and
overlapping of authorities. Further, public expenditure should not adversely affect saving. In
case government activity damaged the individual’s will or power to save, it would be repugnant
to the canon of economy.
Canon of Sanction: Another important principle of public expenditure is that before it is
actually incurred, it should be sanctioned by a competent authority. Unauthorized spending is
bound to lead to extravagance and over-spending. It also means that the amount must be spent
on the purpose for which it was sanctioned. Allied to the canon of sanction, there is another,
viz., auditing. A postmodern examination is equally important. That is, all the public accounts
at the end of the year should be properly audited to see that the amounts have not been
misappropriated or miss-spent.

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Principle of Balanced Budget: Every government must try to keep its budgets well balanced.
There should be neither ever-recurring surpluses nor deficits in the budgets. Ever recurring
surpluses are not desired because it shows that people are unnecessarily heavily taxed. If
expenditure exceeds revenue every year, then that too is not a healthy sign because this is
considered to be the sign of financial weakness of the country. The government, therefore, must
try to live within its own means.
Canon of Elasticity: Another same principle of public expenditure is that it should be fairly
elastic. It should be possible for public authorities to vary the expenditure according to the
needs. A rigid level of expenditure may prove a source of trouble and embarrassment in bad
times. Alteration in the upward direction is not difficult. But elasticity is needed most in the
downward direction. It is not so easy to cut down expenditure. When the economy axe is
applied, it is a very painful process. Retrenchment of a widespread character creates serious
social discontent. Perfect elasticity is out of question. But a fair degree of elasticity is essential
if financial breakdown is to be avoided at the time of shrinking revenue.
Avoidance of Unhealthy Effects on Production or Distribution: It is also necessary to see that
public expenditure exercises a healthy influence both on production and distribution of wealth in
the community. It should stimulate productive activity so that the volume of production in the
country increases and it may be possible to raise the standard of living.

Government revenue:
Government revenue is money received by a government. It is an important tool of the fiscal
policy of the government and is the opposite factor of government spending. Revenues earned by
the government are received from sources such as taxes levied on the incomes and wealth
accumulation of individuals and corporations and on the goods and services produced, exports
and imports, non-taxable sources such as government-owned corporations' incomes, central bank
revenue and capital receipts in the form of external loans and debts from international financial
institutions.
Governments across the world earn "public revenue" from the following main sources:
 Tax revenue
 Non-tax revenue

Tax
A tax is a compulsory payment levied on the persons or companies to meet the expenditure
incurred on conferring common benefits upon the people of a country.
Two aspects of taxes follow from this definition:
 A tax is a compulsory payment and no one can refuse to-pay it.

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 Proceeds from taxes are used for common benefits or general purposes of the State. In
other words, there is no direct quid pro quo involved in the payment of a tax.
This implies that an individual cannot expect or demand that the Government should render him
a specific service in return for the tax paid by him. However, this does not imply that
Government does nothing for the people from whom it receives taxes.
In fact Government spends the tax money for the general or common benefits of all the people
rather than conferring any special benefit on a particular tax payer. To quote Taussig, “The
essence of a tax, as distinguished from the other charges by Government is the absence of any
direct quid pro quo between the tax payer and the public authority.”
Tax should be carefully distinguished from a fee. Fee is also compulsory payment made by a
person who receives in return a particular benefit or service from the Government. For paying
fee on a television or radio, a person gets the benefits of programmes relayed by the Government
on television or radio. Likewise, students who pay the education fee in schools and colleges,
obtain the benefits of teaching arranged by the Government.
The amount of fee is always less than the cost of service rendered by the Government in return
and therefore covers only a part of the cost of service rendered. Thus, even in case of fee, there is
a general public interest or common benefit of the service rendered by the Government. In this
case, the Government undertakes a service for the common benefits of the citizens and obtains a
fee from those who avail of that service to cover a part of the cost of service rendered.

Classification of Taxes:
The taxes have been variously classified. Taxes can be direct or indirect, they can be progressive,
proportional or regressive, and indirect taxes can be specific or ad-valorem. We spell out below
the meanings of these different types of taxes.
Direct and Indirect Taxes:
A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be
shifted to others. A homeowner pays personal property taxes directly to the government. A
family pays its own federal income taxes.
An indirect tax can be passed on to another person or group. A business may recover the cost of
the taxes it pays by charging higher prices to customers. A tax shift occurs when the business
shifts its taxes to others.
Specific and Ad-Valorem Taxes:
Indirect taxes can be either specific or ad-valorem. A specific tax on a commodity is a tax per
unit of the commodity, whatever its price. Thus the amount of total specific tax will vary in
accordance with the changes in total output or sales of the commodity and not with the total
value of output or sales.

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On the other hand, an ad-valorem type of an indirect tax is levied according to the value of the
commodity. For instance, sales tax in India is an ad-valorem tax as the rate of sales tax in case of
several commodities is 10 per cent of the value of sales of the commodities. Ad-valorem taxes
are progressive in their burden on consumers whereas specific taxes are regressive.

Proportional, Progressive, Regressive and Digressive Taxes

Proportional Taxes:
Taxes in which the rate of tax remains constant, though the tax base changes, are called
proportional taxes.
Here, the tax base may be income, money value of property, wealth, or goods etc. Income is,
however, regarded as the main tax base, because it is the determinant of taxable capacity of a
person.
In a proportional tax system, thus, taxes vary in direct proportion to the change in income. If
income is doubled, the tax amount is also doubled. Thus, a proportional tax extracts a constant
proportion of rising income.
Progressive Taxes:
Taxes in which the rate of tax increases are called progressive taxes. Thus, in a progressive tax,
the amount of tax paid will increase at a higher rate than the increase in tax base or income, for
the taxation amount is the product of multiplying the base by the rate and both these increase in a
progressive tax. Thus, a progressive tax extracts an increasing proportion of rising income. The
progressive rate of taxation is illustrated in following table:
Regressive Taxes:
When the rate of tax decreases as the tax base increases, the taxes are called regressive taxes.
This has been illustrated in the schedule below:
It must be noted that in regressive taxation, though the total amount of tax increases on a higher
income in the absolute sense, in the relative sense, the tax rate declines on a higher income. As
such, relatively a heavier burden (sacrifice involved) falls upon the poor than on the rich.
Generally, taxes on necessaries are regressive as they take away a greater percentage of lower
incomes as compared to higher incomes.
Thus, regressive taxation is unjust and inequitable. It does not comply with the canon of equity.
It tends to accentuate inequalities of income in the community.
Digressive Taxes:
Taxes which are mildly progressive, hence not very steep, so that high income earners do not
make a due sacrifice on the basis of equity, are called digressive. In digressive taxation, a tax
may be progressive up to a certain limit; after that it may be charged at a flat rate. In digressive
taxation, thus, the tax payable increases only at a diminishing rate.

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Sources of tax revenue

Government sources of tax are given below
Income Tax: It is a form of direct tax which is levied on individual’s total earnings. It is the
most effective tax vehicle for attaining equity, particularly if it is progressive tax. Following are
the requirements for an optimal income tax system:
 All incomes should be treated uniformly and all rupees of income should be accorded
equal tax treatment regardless of the source.
 Just as ‘equals’ should be treated ‘equally’, ‘unequal’ should be treated ‘unequally’,
 The tax structure should be sensitive to changes in economic activity in order to dampen
the changes
 The tax structure should be designed in such a fashion as to facilitate compliance and in
enforcement, consistent with the attainment of the other objectives.
Corporate Tax: The following are the primary tax consequences of the existence of the
corporation:
 The corporation’s earnings are accumulated as reserves giving rise to capital gains.
 The division between initial earning of the income and subsequent payment of dividends
encourages government to tax both the corporation and the dividend earners.
 The division between ownership and top management in a large corporation may cause
the reactions to the tax to be different from the personal income tax.
Under perfectly competitive markets the corporate tax shifted to reduce the real income of
stockholders. Under imperfectly competitive markets the firms use mark-up price for shifting the
tax burden on consumers.
Wealth Tax: A wealth tax is a levy upon individuals not corporations, on the basis of their net
wealth. Corporate property is reached via securities outstanding in the hands of the owners and
creditors. The wealth tax can take form of either progressive or proportional tax. Wealth tax is
not a major source of revenue and in most countries they form 1 to 2% of the total tax revenue.
Sales Tax: Sales tax is applied to all or a wide range of commodities and services. It is collected
from vendors rather than individual consumers. The sales tax is finally borne by consumers. The
sales tax is often refer to regressive tax relative to income.
Excise Duty: It is actually imposed on the manufacturers but the consumers have to pay it. It is a
form of indirect tax imposed on widely used commodities often regarded as non-essential such as
cigarettes, liquor, tobacco, etc.
Custom Duty: Custom duties are of two types:
 Specific
 Advolarem

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Specific custom duty is fixed per physical units of goods, e.g., television, CD players, computers,
etc. The advolarem custom duty is according to the value of a good and charged at a certain rate.
As industrial and commercial development continues the increased use of custom duties lessens
the revenue potential.
State Duties: There are several other duties imposed by the government broadly classified as
‘state duty’. These include the tax on the earnings of commercial deposits and on sales and
purchase of properties. These are somewhat different types of tax as:
 The taxes imposed by the federal government and used by itself,
 The taxes imposed by the federal government and distributed among provinces, and
 The taxes imposed by the provincial governments and used by themselves.
Other Sources:
1. Fee: It is also a compulsory payment but made only by those who obtain a definite
service in return from the government. The fee covers the part of the cost of service
provided to the consumer / client. The licence fee, however, is much more than the,cost
of service and there is not much of a positive service in return.
2. Price: A price is the payment of a service of business character, for example, charges for
travelling on railway. The price is different from fee. The fee is for public interest. You
can escape a price by not purchasing the said service / commodity.
3. Special Assessment: According to Professor Seligman, special assessment is a
compulsory contribution, levied in proportion to the special benefit derived, to defray the
cost of a specific improvement to property undertaken in the public interest. Suppose the
government build a road or bridge or provide mass transport system or makes suitable
sewerage and water supply arrangements, all the property will appreciate in value. The
State has the right to levy a special tax on the owners of land or property known as
‘special assessment’.
4. Rates: Rates are levied by the local bodies, municipalities and district boards for local
purposes. They are generally levied on immovable property of the residents, but not
necessarily for any special improvements effected or special benefits conferred.

Sources from non-tax revenue

Government also earn revenue from other sources other than tax. These sources are given below
in brief:
 Aid from another level of government (intergovernmental aid): in the United
States, federal grants may be considered non-tax revenue to the receiving states, and
equalization
 Aid from abroad (foreign aid)

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 Tribute or indemnities paid by a weaker state to a stronger one, often as a condition of

peace after suffering military defeat. The war reparations paid by the defeated
Central after the First World War offer a well-known example.
 Loans, or other borrowing, from monetary funds and/or other governments
 Revenue from state-owned enterprises (for example, revenue from Public Sector Unions)
 Revenue (including interest or profit) from investment funds (collective investment
schemes), sovereign wealth funds, or endowments
 Revenues from sales of state assets
 Rents, concessions, and royalties collected by the state when it contracts out the right to
profit from some good or service to a private corporation. An example are contracts
for resource extraction (for such natural
resources as minerals, timber, petroleum and natural gas, or marine resources) collected
privately under license from state-owned lands
 Fines collected and assets forfeitured as a penalty. Examples include parking fines, court
costs levied on criminal offenders
 Fees for the granting or issuance of permits or licenses. Examples include vehicle
registration plate permits, vehicle registration fees, watercraft registration fees, building
fees, driver's licenses, hunting and fishing licenses, fees for professional licensing, fees
for visas or passports, fees for demolition, rezoning, and land grading(which causes silt),
and sometimes for increasing storm water runoff, destroying native vegetation, and
cutting-down healthy trees.
 User fees collected in exchange for the use of many public services and facilities. Tolls
charged for the use of toll roads are an example
 Donations and voluntary contributions to the state

Debt finance:
A government borrows to ensure it can finance all its planned expenditure (and plug its budget
deficit). If a government is running a budget surplus, it should not in principle need to increase
its debt. A government will normally borrow money by issuing bonds or other securities. Local
governments, specific departments or agencies may issue their own bonds to finance
expenditure. Rather than issuing paper, the government of a developing country with low credit
ratings may need to negotiate loans from foreign governments, institutions such as the World
Bank or overseas bank creditors.

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Chapter 3
Budget analysis
A government budget is a legal document that is often passed by the legislature, & approved by
the chief executive-or president. For example, only certain types of revenue may be imposed &
collected. Property tax is frequently the basis for municipal & county revenues, while sales tax &
income tax are the basis for state revenues, & income tax & corporate tax are the basis for
national revenues. The two basic elements of any budget are the revenues & expenses. In the
case of the government, revenues are derived primarily from taxes. Government expenses
include spending on current goods & services, which economists call government consumption;
government investment expenditures such as infrastructure investment or research expenditure;
& transfer payments like unemployment or retirement benefits.
Budget at a glance
Finance Minister AMA Muhit placed Tk 340, 605 crore budget for fiscal 2016-17 as his 8th and
45th of Bangladesh on June 02, 2016. Foreign investment friendly and business oriented budget

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2016-2017 will help to get this high achievement as the government will take initiatives to
develop physical infrastructure in the power, energy and communication sectors.
Revenue Amount in Taka
 Tax Revenue: 203152 crore taka
 Non-NBR Tax: 7250 crore taka
 Non Tax Revenue: 32350 crore taka
Non Development and Development Budget for Bangladesh 2016-17
 Foreign Grants: 1.6%
 Foreign Loan: 9%
 Domestic Financing 18.1%
 Non-tax Revenue 9.5%
 Tax Revenue: (non nbr) 2.1%
Tax Revenue (NBR)
 Taka 2031.52 Billion (59.7%)
 VAT: 35.8%
 Import Duty6: 11.1%
 Income Tax: 35.4%
 Supplementary Duty: 14.8%
 Others: 2.9%

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Source of buget 2016-17 fiscal year

Foreign loans
Domestic financing 9%
18%
Foreign loans
Tax revenue (NBR)
Foreign grants Tax revenue (Non NBR)
2%
Non-tax revenue
Non-tax revenue Foreign grants
9% Domestic financing

Tax revenue (Non NBR)

2%

Tax revenue (NBR)

60%

The proposed national budget for 2016-17 fiscal year has been placed in Parliament with an
outlay of Tk 3.41 trillion. It’s 15.5 percent larger than the current FY’s initial budget and 29
percent higher than the revised one. The new budget is equivalent to 17.37 percent of
Bangladesh’s GDP, which is Tk 19.61 trillion. The current FY budget represented 17.2 percent
of the GDP.

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Resource allocation of budget 2016-17 in %

Education
Industrial service
Interest 1% Culture
Education
13% 17% Local government
Social security
Public order Housing
Culture
6% 1% Public administration
Misc expenditure Local government Defence
3% 7% Health
Transport and Communication
Agriculture Agriculture
7% Social security
6% Misc expenditure
Housing Public order
1% Interest
Transport and Communication Industrial service
11% Public administration
Health 15%
5% Defence
6%

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Budget FY 2015-16
The National Budget 2015-16 of Bangladesh has been announced in Fiscal Year 2015-2016.
Bangladesh Budget 2015-2016 has been announced at Parliament in Bangladesh. All parliament
members and prime minister were present during the Budget Announce.
This Bangladesh Budget 2015-2016 increase and decrease many products Price in Bangladesh.
Some services and Products Vats are included is fiscal year. Specially, Telecommunication
Charge will be increase as well as Online Products Sell or Buy 4% VAT on Online Trading, No
Exemption For Internet. All Internet Online Trader are not happy for this decision.

Source of budget 2015-16 in %

Foreign loans
Domestic financing 8%
Foreign grants
19% 2%
Foreign loans
Foreign grants
Tax revenue (NBR)
Tax revenue (Non NBR)
Non tax revenue Non tax revenue
9%
Domestic financing
Tax revenue (Non NBR)
2%

Tax revenue (NBR)

60%

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Resource allocation of budget 2015-16 in %

Energy and power
Health 4%
5% Education
16%
Defence
6%

Culture
Social security 1%
6%

Misc expenduture Transport and

3% communication
11%

Agriculture
7%

Local government
7%

Housing
Interest 1%
12%

industrial service Public administration

1% Public order 14%
6%

In between 2013-14 and 2014-15 economic year developmental budget is increased 2.4%, on the
other hand non development budget decreased 2.4% which indicate that government has given
more emphasis on development activity rather than non-development sector. The budget for
FY’16 is BDT 2951.00 billion in size which is 23.1% higher compared to that of the FY’15
revised budget and the largest of its history.
Estimated GDP growth rate for fiscal 2015-16 is 7.3%.If GDP growth in FY15 has to be 7.3%,
private investment (as % of GDP) has to grow from 21% to 25% (4-5% percentage points or
around Tk. 75,000 core additional amount of private investment or USD 9.5 billion) in a single
year. It is an impossible target. GDP growth rate was estimated 6.5% for fiscal year 2013-14.

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Comparison of Budget 2015-16 and 2016-17

16
15
14 14
12 12
11 11
10

7 7 7
6 6 6 6
5 5 5
4 4 4 4
3
1 1 1 1 1 1
n st t er e n y r e
tio re tio
n
en al
th r ce o i t e
si ng r i ce re
a te po
w ltu en a ti ur rd ltu rv itu
uc In icaen
m He
ric
u
De
f
is t
r
se
c
ic
o
Ho
u
Cu
ls
e ed
Ed un r
an
d
al bl ia xp
m ve Ag in c i Pu tr e
m go gy ad
m
So s i sc
c o
ca
l e r du M
nd En l ic In
Lo b
tr a Pu
o
sp
ran
T

2015-16 2016-17

Comparison of budget 2015-16 and budget 2016-17

Impact of 2016-17 Government Budget
Prices up
Finance Minister AMA Muhith suggested to increase tax and duties on a number of products
including imported rice, mosquito killing bat, drawing book for kids, talcum powder, washing
Machine, travel bag, tea, optical cable low-priced cigarettes and mobile SIM card (services)
while placing the budget for the 2016-17 fiscal year. Price of rapeseed cake and soya cake may
be increased too as the duty has been increased to 10% from the existing 5% for production of
these products locally. However, supplementary duty on stabilizer for milk has been reduced at
10% from the existing 20%.
Prices down
Finance Minister AMA Muhith has proposed to cut tax and duties on some products which is
likely to reduce prices of some consumer goods including liquefied petroleum gas cylinders,
petroleum jelly, baby food sago, LED lamp, cement, stone, coal, fire extinguisher machine and
LAN (local area network) card for Wimax and Wi-Fi services. The minister also proposed to cut
duties on import of materials for tires, locally assembled motorcycles, hybrid cars and raw
material for construction sector such as cement. The import duty on entertainment rides has been
reduced in the budget as well.

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Use of mobile phones to cost more

Mobile phone use is set to become more expensive as the government proposed to hike the
supplementary duty on the services that subscribers use via Subscriber Identity Module (SIM)
and Removable User Identity Module (RUIM) cards.
While placing the budget for fiscal year 2016-17 in parliament, Finance Minister AMA Muhith
proposed to hike the supplementary duty to 5% from the existing 3%.
Tax-free income ceiling unchanged at Tk2.5 lakh
The tax-free income ceiling for individual taxpayers will remain unchanged at Tk2.5 lakh in the
fiscal year 2016-17. The limit will remain the same for women and senior citizens at Tk3 lakh,
and for war-wounded gazette freedom fighters at Tk4.25 lakh. The tax exemption threshold for
people who are physically challenged will also remain the same at Tk3.75 lakh. Other than the
tax-free income threshold, the income tax slabs would be at 10% tax on Tk4 lakh income, 15%
for the next Tk5 lakh, 20% for the next Tk6 lakh, 25% for the next Tk30 lakh and 30% for over
that.
New VAT law to come into full effect from July 2017
The government has finally backtracked from full implementation of the new Value Added Tax
and Supplementary Duty Act, 2012, from this fiscal year 2016-17 – mainly due to lack of proper
preparation
Duty-free import of safety equipment for exporters
The government has proposed duty-free import of fire and safety equipment and prefabricated
building materials for all export-oriented industries from the next fiscal year.
Currently, the government allows such benefits only to 100% export-oriented ready-made
garment industries.
Agriculture Ministry gets Tk13, 675cr
The Ministry of Agriculture is getting around Tk13, 675 crore in the proposed national budget of
2016-17 fiscal year. The new allocation is Tk976 crore more than what the ministry received in
the last proposed budget. However, in terms of percentage, the Ministry of Agriculture is getting
0.29% less than last allocation.
Education Ministry gets massive boost
The government has allocated Tk26, 847 crore or 7.88% of the national budget to the Education
Ministry in its sectorial allocation for FY2016-17. This is an increase of 57% over last year. Last
fiscal year's proposed allocation was Tk17, 103 crore for the sector.
Tk3, 738 crore increased for defense
The government has proposed to increase the allocation of 20.34% for defence services while
38.09% for Armed Forces Division in the upcoming fiscal year 2016-17. The allocation for

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defence sections has been increasing every year. In 2012-12 fiscal year, total allocation for
defence was Tk12,985 crore while in 2013-14 fiscal year, the allocation was Tk14,564 crore.
Power allocation drops
The government has allocated Tk15, 036 crore to the power and energy sector for the 2016-17
fiscal, significantly smaller than outgoing fiscal's Tk18, 541 crore
Tk21,322cr allocated for local government
Some Tk21,322 crore has been allocated for local government in the national budget for the
2016-17 fiscal year. The new allocation is Tk2,454 crore more than last year's budget. The
allocation is 6.26% of the total budget, down from 6.39% in the FY2015-16 budget.
Health sector allocation up by a third
The sectorial allocation for the Ministry of Health and Family Welfare is Tk17,487 crore,
equivalent to 5.13% of the total national budget. Some Tk 12,695 crore was earmarked for the
health ministry in the proposed budget for FY2015-16. This year's allocation is a 37.74% rise
over last fiscal year
28.11% increment for Women and Children Affairs
The government has increased the allocation for woman and children affairs by 28.11% in the
upcoming fiscal year 2016-17. This year the government proposed an allocation of Tk2,151
crore for the Ministry of Women and Children Affairs for 2016-17, which had been Tk1,679
crore for 2015-16.
20% corporate tax for RMG
The government has proposed to reduce corporate tax to 20% from the existing 35% for the
country's export-oriented readymade garment industry. The RMG sector is one of the main
sectors of Bangladesh among the export-oriented industry. The sector plays an important role in
employment generation and contributes a lot to the GDP. Considering these aspects, the sector
had given tax rebate in the previous years, and in continuation of that, this year I propose 20%
corporate tax for the country's RMG sector.
Currently, the sector is paying a 35% corporate tax.
Railways gets significant increase
The allocation for the railways in the upcoming budget has increased by significant numbers.
This fiscal year, the railway sector received Tk11,950 crore, which comes to 3.51% of the total
budget.
Bridges Division gets Tk9,289cr
The government has allocated Tk9,289 crore for the Bridges Division in the newly proposed
national budget of 2016-17 fiscal year.

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The new allocation is Tk336 crore more than the allocation in the FY2015-16. However, it is
2.73% of the total budget – 0.3% less than the allocation in the last budget.
Tk100 crore allotted for tourism
Finance Minister AMA Muhith has proposed to allocate Tk100 crore for tourism sector as the
government declared "Tourism Year 2016 "

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Chapter 4
Summary of findings
POSITIVE SIDE:
A very positive feature relates to subsidies given on food, oil, agricultural inputs aimed at both
raising productivity and alleviating poverty. Reduction of existing concessionary rate of duty on
the import of capital machinery and spare parts from 5 percent to 3 percent will reduce the price
of instruments. A farmer-friendly budget providing priorities to overcome the challenges of food
crisis is the need of the hour. This is very important for unlocking the potential to achieve the
target of poverty alleviation. The continuation of tax holidays will be helpful for employment
and income generation. An increase in defense budget form previous 5% to 6% will be needed to
counter the recent terrorist attack. There is also an increase in social security which is need for
the welfare of the elderly people.
DISADVANTAGE: South Asian countries are facing inflationary pressures due to oil price
hike, increase in price of essential commodities including agricultural produce and higher
domestic demand. In the second quarter of the current fiscal year, the inflation rates in India,
Pakistan and Sri Lanka were 6.9 percent, 8.1 percent and 19.3 percent respectively. In this
context, 6.9 percent inflation in Bangladesh is abnormal. Government can’t draw a developed
picture of a country in a single budget. A country like Bangladesh fully depends on the import
business. Unfortunately Bangladesh is really big market for exporting countries (15 Cr people
huh!!) but still we are not capable to start production. We can’t make a big change in one or two
years. Taxes on IT/Computer accessories are inappropriate right at this moment. There should be
some road map say for example 2/3 year’s time to establish or encourage foreign/local
investment to go for production and after then impose the taxes on import items on this sector. A
most recent agenda which is terrorist attacks on foreigner in our country has made negative
impact on our economy. Because of these terrorist attack the opportunity of foreign investment
and the textile industry will suffer greatly.
 

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Chapter 5
Recommendation and conclusion
The budget framework for FY 2016-17 has to be more robust in comparison to that
of the earlier years, particularly by setting the targets based on more realistic
revised budget figures of the elapsing year. Further, for making the budget more
realistic, one has to either forego the ambition of attaining high revenue collection
and public expenditure targets of give due attention to the task of enhancing
administrative capacity and undertake implementation of the reform agendas for
realizing moderately ambitious targets.
Implementation of budget FY 2016-17 will continue to face a number of familiar
challenges:-
Because of:-
 Inability to mobilize the target domestic resources.
 Inability to spend the earmarked allocation.
 Failing to use the foreign aid in the pipeline and opting for non-concessional
foreign loan.
 Quality of public expenditure will continue to remain suspected

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The following steps can be taken to improve budget utilization performance

 Ensure greater involvement of parliamentary standing committee in
formulating and overseeing implementation of the budget
 Develop a detailed work plan to implement the budget
 Establish an effective result based monitoring system to ensure high quality
delivery
 Establish a public expenditure review commission
 Establish transparency in government asset acquisition
 More sunshine in defense economy
 Introduce separate but integrated budget for local government
 Simplification of vat registration
 Focus on power sector
 To gear up foreign aided project
Finally it may be pointed out that notwithstanding the immediate benefit gained
from the fall in fuel price, the evolving global economic environment may not
remain supportive for Bangladesh economy which is being increasingly integrated
with the international supply chain. Thus, the upcoming budget should have some
built in safeguards in its implementation strategy which may be triggered in case of
adverse impact emanating from the global economy.

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Bibliography
Lecture sheet provided by our course teacher
http://archive.dhakatribune.com/bangladesh/2016/jun/02/budget-glance
http://cpd.org.bd/index.php/press-reports-on-analysis-of-the-proposed-national-budget-fy2016-
17/
https://en.wikipedia.org/wiki/History_of_Bangladesh_after_independence
https://en.wikipedia.org/wiki/Government_budget
http://en.prothom-alo.com/bangladesh/news/68465/Chronology-of-budget-since-1972
http://www.tradingeconomics.com/bangladesh/government-budget

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