Bangladesh News

The government yesterday proposed a “slightly expansionary” budget of Tk 1,13,819 crore for the fiscal year 2009-10. The proposed budget is 21 percent bigger than the revised budget of the previous fiscal year with big outlays on social safety nets, additional pay hike, PPP initiative and world economic recession.

In his budget speech Finance Minister AMA Muhith said, “This budget may appear slightly expansionary, but compared with most countries our fiscal deficit is minimal in the context of current global crisis. I consider that our budgetary stance is appropriate in the context of the present domestic and global economic scenario.”

In the proposed budget, Tk 2,500 crore has been earmarked for Public Private Partnership (PPP) fund, Tk 5,000 crore for coping with financial recession, and Tk 3,388 crore for implementation of a new pay scale.

Although implementation of development budget is a big challenge, its size has been made bigger than the non-development budget.

The Annual Development Programme (ADP) for the next fiscal year has been increased by 33 percent compared to the revised budget of the current fiscal year.

In revenue budget, development expenditure has been increased by 197 percent while the non-development expenditure rose by 17 percent.

To pay for big spending, the government has squeezed the revenue target to Tk 79,461 crore, which is 15 percent higher than the target in the revised budget of FY2008-09.

Because of the mismatch in income and expenditure, a large deficit of Tk 34,358 crore–5 percent of the GDP–is still expected for which the government will borrow Tk 16,755 crore from the banking system, which is a 57 percent jump from the current fiscal year’s revised bank borrowing.

However, although the foreign assistance target had to be cut drastically, the government expects to receive 48 percent more aid in FY09-10 than the revised estimate of the current fiscal year.

In the next fiscal year, the government’s projected receipt of net foreign loan will be Tk 8,673 crore. In the current fiscal year, the original projection of Tk 7,236 crore has been cut down to Tk 5,833 crore.

Foreign grant has been drastically cut by 22 percent in the current fiscal year and it stands at Tk 4,929 crore in the revised estimate. In the next fiscal year, it will increase only 4 percent over the revised estimate and stand at Tk 5,130 crore.

Muhith said, “The budget for FY2009-10 has been formulated bearing in mind the need to maintain macroeconomic stability in the context of current global economic meltdown, achieving desired economic growth to fulfil our election pledge and thereby contribute to poverty reduction. In fulfilment of our strategy for attaining prosperity we have attached priority to massive employment generation, enhancement of social safety net, creation of self employment, reduction of regional disparity, increasing emphasis on agricultural development, achieving the target of power generation, acceleration of industrialisation and building necessary infrastructure for ‘Digital Bangladesh’.

“The major challenge that we shall confront is implementation of Annual Development Programme. ADP implementation has always been deficient. We are particularly concerned about the possible implementation snags because of the ambitious size of ADP for the next fiscal year. We should, therefore, pay due attention to monitoring and evaluation of ADP execution from the first day,” he added.

THE NEW BUDGET

The non-development expenditure in the budget for FY09-10 is around Tk 83,319 crore more than the revised budget of Tk 71,140 crore for FY08-09.

A break-up of the non-development expenditure reveals that 19.5 percent will be spent on pay and allowances, 18.4 percent for paying non-government teachers (grants in aid), and 19.2 percent on interest payments.

It will also include Tk 15,989 crore in salaries for government employees, which is Tk 15,106 crore in the FY09 revised budget.

The government also kept additional Tk 3,388 crore for partial implementation of the new pay scale. Another Tk 15,808 crore has been allocated for interest payment on debts, going up by 19 percent from FY09.

In the revenue budget, Tk 1,420 crore has been kept for development expenditure, which is 197 percent more than the revised budget (Tk 478 crore) of the current fiscal year.

For development expenditure in FY10, the government has allocated Tk 30,500 crore against Tk 23,000 crore of FY09.

The government has also raised its revenue generation target to Tk 61,000 crore, a 15 percent rise from Tk 53,000 crore of the FY09 revised budget.

Value Added Tax (VAT) income in FY10 budget is expected to grow by 23 percent from the FY09 revised budget, with another 22 percent rise expected in income tax, 9 percent growth in import duty collection and 15 percent increase in supplementary tax collection.

However, non-tax revenue will rise by 14 percent to Tk 15,506 crore, which is Tk 13,654 crore in the revised budget of the current fiscal year.

To mitigate the large deficit, the government also plans on increasing non-bank borrowing to Tk 3,800 crore in addition to the high bank borrowing plans for FY10.

REVISED BUDGET

In the current fiscal year, the size of the revised budget has been cut down by Tk 5,822 crore to Tk 94,140 crore because of fall in the prices of petroleum products on the international market and food subsidy.

The original target in the current fiscal year was Tk 99,962 crore.

The revised budget for non-development expenditure for FY09 is Tk 71,140 crore against the original Tk 74,362 crore.

Development expenditure for FY09 has been revised to Tk 23,000 crore from the original Tk 25,600 crore.

The total revenue earning has been slightly revised down by Tk 202 crore to Tk 69,180 crore.

Revenue earning has been cut by Tk 1,500 crore to Tk 53,000 crore.