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Assignment on Public budget- A critical analysis

Course Title: Public Finance and Taxation
Course Code: ACC-308

Submitted To:
Professor Dr. Bidhan Chandra Mazumder

Department of Accounting

University of Chittagong

Submitted By:
Team: A.I.B.O

Session: 2017-18

Department of Accounting

University of Chittagong

Date of Submission: 21th August 2021.

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TEAM: A.I.B.O
Member name ID Session
Md Yousuf 18301006 17 -18
Fayez Abdul Mabud 18301012 17 -18
MD. Arif Sharear Reasvy 18301013 17 -18
Galib Al- Shahriar 18301016 17 -18
Nujhat Jahan Nabila 18301024 17 -18
Nazmun Nahar Tania (Leader) 18301051 17 -18
Anika Ibnat 18301066 17 -18
Samia Sarmin Ritu 18301065 17 -18
Sharmin Akter 18301071 17 -18
Prantika Nath Vabna 18301085 17 -18
Siful Islam Fahad (Co-Leader) 18301087 17 -18
Khalid Bin Nasir 18301088 17 -18
Mirza Hameem Khaled 18301089 17 -18
Maria Sultana 18301093 17 -18
Tanveer Ahmed 18301097 17 -18
Niloy Dutta 18301101 17 -18
Alhadat Hossain 18301104 17 -18
Jeshia Mehjabin 18301113 17 -18
Al- Amin 18301117 17 -18
Md. Rifat Hossain 17301072 16-17
Abdur Rahim 17301104 16-17
Abdullah Al Maruf 17301115 16-17
MD. Saiful Islam 18301026 17-18
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Introduction:
The National Budget is the annual financial statement of Bangladesh; an estimate of income
and expenditure of the government on a periodical basis. Under Article 87. (1) of the
Constitution of Bangladesh, it is a compulsory task of the government. Tajuddin Ahmed
presented the first budget as the finance minister of the post-independence Bangabandhu
government in 1972.

This budget for FY22 will be the 3rd consecutive budget of incumbent Finance Minister AHM
Mustafa Kamal. This budget for FY22 will be the 3rd consecutive budget of incumbent Finance
Minister AHM Mustafa Kamal.

Objective:
To find out the authenticity of the proposed budget.

Nature of public budget:

Public budget is a policy statement of the government with its financial implications.
Traditionally, budgets served as a more rigid tool to implement policy in a retrospective setting.
A budget enables the government to decide about each individual item of revenue and
expenditure. It outlines the estimated government expenditure and expected government
receipts or revenues for the forthcoming fiscal year.
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Public budget is effective during a financial year starting from July 1 and ending on June 30,
next year. It is done on a cash basis. Both receipts and expenditures are shown in cash terms.
Budget is prepared on incremental basis, on the basis of upward adjustment of expenditure as
against performance budgeting
The public budget in the country has two parts: Revenue and development. The former is
concerned with current revenues and expenditures i.e., maintenance of normal priority and
essential services, while the latter is prepared for development activities. Formulation of the
two budgets follows different procedures. Their financing pattern and the delegated authorities
of incurring expenditure in different tiers in them are also different. Revenue budget is
prepared by the finance division and the agency to prepare the development budget is the
planning commission.

Types of Public Budget:

There are many types of public budget. But in our country, we follow deficit budget.
A budget deficit occurs when expenses exceed revenue and indicate the financial health of a
country. The government generally uses the term budget deficit when referring to spending
rather than businesses or individuals. Accrued deficits form national debt. In deficit budget at
first expenses are determined then it comes to revenue. In cases where a budget deficit is
identified, current expenses exceed the amount of income received through standard
operations. A nation wishing to correct its budget deficit may need to cut back on certain
expenditures, increase revenue-generating activities, or employ a combination of the two.
From the beginning it wasn’t deficit. The given data on internet shows that there has been a
budget deficit every year since 1980.

Revenue
Tk 389,000 crore has been set as the NBR sources and non-NBR sources. The FY2022 Budget
targets a tax revenue amount of Taka 3460 billion as against an estimated actual tax collection
of Taka 2428 billion in FY2021, implying a target tax revenue growth of 42.5%. There is a
probability that this tax revenue target will not be met. While the FY2022 Budget contains some
tax measures, this is a mix of tax reduction in some cases and increases in some. The reforms
that could have made a significant difference in increasing tax revenues have not been adopted.
These include the implementation of the VAT Law of 2012 in its original form, substantial effort
with tax automation, and the reform of personal income taxes (simplification of tax forms,
online filing and payments, productive and selective audits, and speedy resolution of tax cases).
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We project that the tax revenue in FY2022 will at best amount to Taka 2792 billion, which is
healthy growth by 15% over the estimated actual tax revenue of Taka 2428 billion in FY2021.
Major changes in Corporate Income Tax structure > CIT decreased for publicly traded
companies (22.5% from 25%), non-publicly traded companies (30% from 32.5%), one person
companies (25 % from 32.5%), association of persons (30% from 32.5%). measure will provide
relief to corporate entities with expectations that this will encourage more tax compliance.
However, to ensure uniformity, tax rate for one-person companies should remain at 30% in line
with the non-publicly traded companies' rates
1. Rates for banks, insurance, cigarette companies (45% +2% surcharge), mobile phone
companies (40 % -45%) remained unchanged
2. CIT for MFS institutions have been raised to 40% from 32.5%. However, no MFS
institution has reported earning profits in recent period. Fair competition for lowering
the cash-out rate may be hampered. The burden is likely to be passed on to end-users
who tend to be mostly marginalized people.
3. CIT imposed on private universities and private medical colleges at 15%. Minimum
amount of tax may be raised, if there any! Non-profit entities and educational institutes
should not be taxed mostly.
4. Minimum turnover tax for personal businesses have been reduced to 0.25% from 0.5%.
welcome move
5. Fish farmers will pay income tax at a higher rate for an annual income of over 20 lakh at
15% rate.

Personal Income Tax (PIT) structure remains generally unchanged

1. Tax-free limit for transgender raised to Tk. 3.5 lakh will promote social inclusion
2. n Some changes were introduced in FY21. CPD argued that reducing the highest tax rate
(from 30% to 25%) was against the cause of promoting tax justice. The highest tax rate
should be reinstated at 30% for top earners.
3. The second slab for PIT which is 5% for additional Tk. 1 lakh should be increased to Tk.3
lakh to provide cushion to low-income earners
4. Wealth Surcharge free limit remains unchanged at Tk. 3 crore. Payees with net personal
wealth worth over Tk. 50 crore will have to pay at a higher rate of 35%. - a potential
source of revenue generation from wealthy citizen. Right step in view of promoting
equity.

About 22% of TDS income was sourced from suppliers' payments in FY18 while TDS
accounts for more than 60% of total earnings from income tax. This. would be a major
source of the government to generate additional revenue TDS is exempted for workers
without taxable income participating at Workers Profit Participation Fund (WPPF) only up to
Tk. 25,000.- this should be exempted for all workers without taxable income irrespective of
the amount o funds received.
Tax holiday expanded for a wide range of sectors > On top of existing 22 IT enabler services
enjoying tax exemptions, the provision has been expanded to six more services i.e. cloud
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services, system integration, e learning platform, e-book publications, mobile apps

development service and IT freelancing until 2024. - timely move to encourage more young
IT entrepreneurs
 Mega industry (e.g., three and four wheelers producers who invest at least Tk. 100
Crores for ten years) or home appliance producers which promote Made in Bangladesh
 Establishment of vocational and technical institutions which impart training to develop
skilled human resource Entrepreneurs of Light Engineering and IT Hardware
 Investment for establishing hospitals in cities other than Dhaka, Narayanganj, Gazipur,
Chittagong
 Women Entrepreneurs in SME sectors to receive tax exemption up to Tk. 70 lakh
All these initiatives have long-term revenue implications. Use of these provisions will
need to be carefully monitored.

Non-tax revenue projections are normally conservative because these are not strategy based. In
the past, much of the non-tax revenues have come from profit transfers from the Bangladesh
Bank based on the issuance of currency (seigniorage), the licensing fee collected by the BTRC
from mobile operators, and profit transfers from the Chittagong Port Authority. In recent years,
the BPC is also contributing to the Treasury by making money from its oil operations as the
domestic average oil prices exceed international oil prices.
Indirect Tax Measures Changes in VAT and SD Act, 2012
 VAT-free annual turnover threshold stands at Tk. 50 lakh;
 turnover tax ceiling has not changed either (up to Tk. 3 crore);
 4% turnover tax also remained unchanged
 CPD called for an upward revision for VAT-free annual turnover threshold to Tk. 1 crore
in its Budget Analysis for FY21
 Provision of fine and rate of interest to be halved on arrear VAT in the VAT and SD Act,
2012: Fine (From twice the amount of revenue to equal), Monthly rate of

interest (From 2% to 1%), Yearly interest (From 24% to 12%) - will leave more space for VAT
evasion, failure and anomaly. Defaulters should be penalised accordingly.
Changes in duties at import stage Existing (six) slabs of Customs Duty (0%, 1%, 5%, 10 %, 15%,
and 25%) will remain unchanged 12 slabs (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%,
300%, 350%, and 500%) of SD to also continue.

Expenditure
Education Sector
Education remains ignored in the budget as the government has proposed Tk66,401crore,
which is 11.7 percent of the total outlay. The allocation is just 2.09 percent of the GDP, which is
much less than that in any other South Asian countries. Experts anticipate that the country's
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quality of education will continue to produce certificate holders who cannot cope with the job
market. Analysts have been demanding special allocation to curb the number of dropouts and
increase the allocation in this sector to at least 15 percent of the total budget outlay to ensure
quality education. The budgetary allocation for the development of the education sector has
increased slightly, but it is not enough to recover the impacts of the pandemic. Over the last 18
months, around 42 million children were affected by COVID-19, due to school closures. This
forced students to start remote learning but not all students had access to the required
technology such as the unavailability and high cost of internet connections, smartphones and
televisions that will enable them to attend virtual classes. Almost 22 million students are from
rural areas and they come from underprivileged circumstances, and therefore, are unable to
access remote learning opportunities. It is also estimated by UNICEF that 63% of the students
do not have internet access. It is also disclosed that 69.5% of Primary and Secondary School
students did not participate in remote learning classes, which were conducted via television,
radio, and the internet. Education will be a critical determinant of sustainable economic
development something that Bangladesh strives to attain.

Health Sector
The current year's Health sector designation just contains 0.95% of the absolute Gross Domestic
Product (GDP) when contrasted with 0.84% in 2020. The overall assumption was a bigger
spending portion for the health sector. The reasoning behind this is the approaching trepidation
of the continuous COVID-19 emergency deteriorating with the new invasion of the Delta
variation into Bangladesh. The spending record didn't uncover any new project to fight the
repercussions of the pandemic. Even during such a pandemic time, the allocation in the health
ministry was lowered whereas the allocation was needed to be increased to protect the public
health and human lives during the severe time of Covid-19.
Total budget allocation for health has increased only by 12 per cent from Tk 29,247 crore in
FY21 to Tk32,731 core in FY22, which was lower than the 14 per cent average annual increase
in total budget allocation for health between FY11 and FY22. "Increase in total budget
allocation for health in FY22 followed a linear trend line, indicating that the rise was business-
as-usual and nothing out of the ordinary, even though the healthcare sector is reeling from the
shocks of COVID-19," according to a study by the CPD. The share of the health sector in ADP
FY22 (7.7 per cent) has increased from 6.4 per cent in ADP FY21. However, given the pandemic
situation, the increase remains below what is needed. It includes only two continuing projects
related to Covid-19 titled "COVID-19 emergency response and pandemic preparedness" and
"COVID-19 response emergency assistance" co-financed by World Bank and Asian Development
Bank. No new project has been proposed to particularly address Covid-19, said the study of the
private think tank. Also, no Covid-related project was found in the list of Unapproved projects
without allocation.
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In any case, as an endeavor to make COVID-19 testing more doable, the exemption of Value
Added Tax (VAT) on the COVID-19 test packs, Personal Protective Equipment (PPE), Vaccination,
and Medication administrations will be proceeded with this year too. Sub-areas, for example,
Women's Health are getting help as VAT has been taken out from the creation of sterile
napkins, at the local assembling stage, to expand the inventory of appropriate and reasonable
clean napkins. What's more, a development of the current concessional facilities has been
proposed, especially for the import of raw materials needed to produce clinical products. This
will decrease the expense of making meds and make medications more available for the lower-
pay gatherings. A general expansion in the allotment is misdirecting as the increment in the
allotment for health services is negligible, and it was basic that fundamental leakages were
addressed to guarantee the cash was spent effectively.

Public Administration Sector

The government has proposed the highest allocation for public administration sector. In the
operating and development budget of fiscal year 2021-22, government has allocated 3829 crore
tk which was 4048 crore taka in fiscal year 2020-21.
The percentage is 18.70% of total ADP. In the fiscal year 2020-21, it was 19.90%. Government
decreases 1.20% of total allocation for this sector. GDP share from this sector is 5.47% which
was 3.51% in fiscal year 2020-21.
Among this allocation, Govt. allocated 3047 crore taka for operating activities and 782 crore
taka is for the sectoral development. The recurrent expenditure of this sector is 2864 crore taka
which was 2608 crore taka in fiscal year 2020-21. In the fiscal year 2019-20, it was only 2339
crore taka.
In the budget speech, it is mentioned that public administration has given priority while
allocating resources for ADP. However, actual allocation does not reflect this. As we can see the
allocation for public administration has been significantly decreased by 1.2% from the revised
fiscal year.
Even though, government increase the allocation for its development which was essential from
the past four fiscal year. Apart from this, they manage to recruit 25% female employee in
various training. Which was 15% in last year.

Power and Energy Sector

Bangladesh’s power and energy sector are set to receive an allocation of Tk27,484 crore
through the proposed budget of the 2021-22 fiscal year— Tk726 crore or a little over 2.71%
increase from the outgoing year’s amount. The Power Division will get Tk25,398 crore, while
the rest (Tk2,086 crore) will go to the Energy and Mineral Resources Division. The power and
energy sector will get 12.1% from the allocation for the annual development program or ADP of
Tk 2,25,324 crore in the next fiscal year. The total power generation capacity (including captive
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and renewable energy) now stands at 25,227 MW as of May 2021, with 99% of the country
already brought under electricity coverage, he said. “To meet the growing demand for power in
Bangladesh, 38 power plants with a capacity of 14,115 MW are under construction, and
contracts have been signed for the construction of another 20 power plants with a capacity of
2,961 MW,” the minister said. Besides, six power plants, he said, with a capacity of 650 MW are
in the process of tender, and construction of 33 power plants with a capacity of 15,019 MW has
been approved. Due to the strict measures taken by the government, the system loss in
electricity has reduced from 14.33% to 8.73%. Mentioning the efforts to lay all distribution lines
and substations underground in the metropolitan area to modernize the power system, Kamal
said: “There is a plan to increase the number of transmission lines to 28,000 km and the
number of distribution lines to 6.60 lakh km by 2030. “We expect that through the
implementation of these projects, it will be possible to meet the growing demand for
transmission and distribution of electricity throughout the country,” he added.

Transportation and Communication Sector:

Transport and Communication in the total public expenditure increased to 11.90 per cent in the
FY22 from 11.20 per cent in FY21.This year the combined operating and development budget
proposed for the transport and communication sector is Tk 71,966 crore. It was Tk 64,587 crore
in the 2020–21 budget. The transportation sub-index of the CPI basket in Bangladesh increased
to 297.31 points in June of 2021 from 294.86 points in May of 2021.
In Bangladesh, revamping the bus-based public transport is an order of the day to reduce the
plight of the daily commuters. The budget did not give any guideline in this direction. Compared
to before the pandemic, only 25% of buses are operating on long routes and 50% in Dhaka but
in lockdown that also come to a complete halt, train and launch services suspended. The
authorities approved a 60% price hike. The country's transport sector is losing around Tk.500
crore daily due to halt in mass transit. There are 4 lakh vehicles in the country like buses, trucks,
covered vans, pickup van with around 50 lakh workers involved in the sector. The national
lockdown has led to widespread unemployment and frustration among transport workers. But
we haven't seen any significant allocation to solve this issue in the budget.

Public Order and Safety Sector

The allocation for Public Order and Safety for FY22 is Tk. 29,124 crore. It is 8.08% higher than
FY21. The allocation is legislative and parliament affairs division 40 core. Anti-corruption
commission 150 core. Ministry of Home and affairs 26518 core. Supreme Court 223 core law
and justice division 1739 core.

 Overall, share of this sector in total budget has been declining (from 6.2% in FY17 to
4.8% in FY22)
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 The share of operating expenditure within the budget for the sector has always been
higher-both in terms of allocation and actual expenditure. Which means allocation are
spend well in this sector.

❑ Following the usual trend, Ministry of Home Affairs has taken the lion’s share of the
total allocation for the sector in FY22.

 From 91.5% in FY17 to 92.3% in FY22

 Budget of Ministry of Home Affairs is largely dominated by operating expenditure.

Social Security and Welfare Sector

Allocation for social security and welfare has been increased from BDT 81,865 crore in revised
budget for FY2019-20 to BDT 95,574 crore in budget for FY2020-21. This represents an increase
of only 17% which is lower than the average rate of increase of 18% between FY10 and FY21.
Allocation for pension of government officials has decreased in FY21 by BDT 10 crore. This is
only the second time in the last 13 years that the allocation for pension of government officials
has decreased in the budget. Overall social safety net budget has increased as a percentage of
budget and as a percentage of GDP. Social security and welfare budget excluding pension has
also increased, both as percentage of budget and as percentage of GDP. Most of this increase
has been allocated to COVID-19 related programs, loans, interest payments and subsidies.
Houses for the homeless 10%,Distributing cash among the target-based communities
2%,Agricultural Subsidy 9%,Employment Generation Programme through Palli Sanchay Bank,
Karmasangs than Bank, Probashi Kalyan Bank and PKSF 10%,Refinance scheme for the low-
income professionals, farmers and marginalized businesses 14%,Interest subsidy for loans to
CMSME sector 14%,Interest subsidy to commercial banks 10%,Interest payment on national
savings certificates 31%.Distribution of new additions to safety net budget, always present, but
never shown under social security and welfare budget interest subsidies on two liquidity
support packages announced previously. Loans bearing interest, conditional on stringent
regulations. The budget speech for FY20, just like the budget speech for FY19, had mentioned
the intention of the government to introduce a Universal Pension Scheme. Unfortunately, no
budget allocation was made for such a scheme in the budget for FY21, although it was
mentioned that the target is to provide universal health coverage by 2030.According to CPD’s
preliminary cost estimation, the cost of providing unemployment support, equal to 100 per
cent of the national poverty line for 100 days per year for 1 person at working age per
vulnerable household would be 2.14% of GDP providing USD 2 at PPP per day for 100 days per
year for one person at working age per vulnerable household would cost only 1.27% of GDP.

Industrial and Economic Service Sector

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The amount allocated as a percentage of the total budget to the industrial & economic service
has not increased or decreased while doing cross comparison with FY2020-2021 & 2021-
2022.And here the percentage is 0.70.
In this budget, to response COVID-19 situation, Tax reformation has been introduced. Tax
breaks and tax reductions have been introduced also as an attempt to promote aggregate
demand.
In response to the first COVID-19 surge starting in March 2020, the government took a series of
measures to reduce the spread of the infection and in April 2020 adopted several stimulus
packages, estimated at Taka 1196.4 billion (4.3% of GDP), to help the needy and stem the
downward spiral of economic activities.
First, the policy packages were implemented unevenly, with most progress in the
implementation of measures aimed at containing the damage to the medium and large
manufacturing, especially the RMG. Progress is slow with implementing support for the micro
and small enterprises (MSEs), which provide 35% of total employment in the country and is the
largest source of non-agricultural employment. The MSE credit programs in the stimulus
package benefited only those enterprises that currently have access to bank credit, which is a
very small percentage of total MSEs.
In this environment, exports growth will resume the path of around 6% growth as in the
FY2015-FY2019 pre-COVID periods. Similarly, the recovery of private investment and attraction
of FDI will require major reforms in improving the investment climate. The FY2022 Budget has
lowered the corporate income tax rate and offered incentives to boost private investment. Yet,
the overall investment climate requires broad-based actions to reduce the high cost of doing
business in Bangladesh. Lower corporate tax rate is a positive step, but by itself it is not
adequate to restore the private investment including FDI path to the levels projected in the
PP2041 and 8FYP macroeconomic framework, which is essential for achieving an 8% plus GDP
growth path. Overall, the most likely outcome would be a 6% GDP growth in FY2022.
Given the improving global economy, especially the recovery in the USA, the export outlook for
FY2022 is good. However, domestic policy constraints will likely slowdown export growth. The
sharp appreciation of the real effective exchange rate (REER) continues unabated. Similarly
trade protection continues to impart heavy anti-export bias. These policy constraints are not
addressed in the FY2022 Budget.
However, it can be concluded that the FY22 Budget needs to sharpen its focus for
implementation of the stimulus package for the cottage, micro and small enterprise (grouping
all small enterprises along with medium enterprise paves the way for the later to grab the lions'
share of the facilities). An institutionalization for bank facility to nurture the CMS enterprises
will help create 60.0 per cent plus jobs. This will increase income of the poor, reduce poverty
and reduce disparity.
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Agriculture Sector
Health, agriculture and employment generation have been given priority while allocating
resources for the ADP of FY 2021 - 2022. 21.7 percent for the overall agriculture sector
(agriculture, rural development and rural institutions, water resources and related others) has
allocated from the ADP of FY2021-2022. The amount allocated for Agriculture in FY 2021-22 is
BDT 319.12 billion which is 7.4% higher than the amount allocated in FY 2020-21. Some
welcome moves of this budget are:
A.VAT exemption at the manufacturing and trending stage of weeder and winnower it will help
to promote agro related investment
B. Continuation of zero tariff on major agricultural input imports, zero tariff on essential food
items and rationalization of duties on imports of other daily commodities is a good move.
C. increase tariff on Mushroom and carrot imports and fixation of minimum value of carrots,
mushrooms, green chillies Tomatoes oranges will protect domestic farmers.
D. Increase tariff rate on import of industrial salt at par with edible salt meat imports to protect
salt farmers domestic meat processing industry and cattle farmers.
However, the disbursement of stimulus package for the agriculture sector (Tk. 239.2billion) was
not up to the mark. Disbursement of agriculture refinancing scheme (Tk. 50.0 billion) was to the
tune of only 45 percent, the corresponding figures for refinancing scheme for low-income
farmers and small traders (Tk 30.0 billion) was only 22 per cent. Procurement of Boro
paddy/rice in FY20 (additional 0.2 million m tonnes) was rather poor, and the amount of
agriculture subsidies (Tk 95.0 billion) that was disbursed was only 76 per cent. The remaining
amount of fund needs to be disbursed in the coming months. Considering the loss of crop
(approximately 1 lakh ton) due to heat shock, the government has allocated Tk 420 million for
the affected farmers the amount is very low (Tk.4.2 per kg of paddy) considering the market
price of paddy Tk.32-34 per kg). The support will thus not be adequate to make up for the loss
of crops. Given the poor performance of procurement of Boro in FY21 (0.9 million tonnes as
against the target of 1.9 million tonnes), necessary funds need to be allocated to incentives
procurement price and stimulate procurement (through hats & Bazars) in order to encourage
farmers to sell to the government. With a view to reducing the production cost of crop, non-
crop, fisheries and livestock sub-sectors, import of the different raw materials should be waived
from advance income tax (AIT). These include different agro processing sectors such as
production of poultry feed, fish feed, dairy, and dairy products. The allocation for agriculture
declined in terms of percentage, it did fall in amount. The amount of agriculture loans was Tk
14,000 crore to Tk 15,000 crore in the past, which has increased at some Tk 22,000 crore in the
upcoming fiscal year during the corona period. And the interest rate of the loans was lowered
from 9 percent to 8 percent.

Defense Sector
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Bangladesh government has allocated 4.09 billion dollars for its military and defense
expenditure in 2021. Bangladesh allocated 34841 corer taka in the year 2021 while it was 32974
corer in 2020. In terms of BDT, the 2021 military budget of Bangladesh is 5% higher than 2020
while in USD it’s just a 0.7% increase. Taka 1672.47 or 196.25 million USD was allocated for
development purposes. Taka 16817 corer or $ 1.97 billion was allocated for the Bangladesh
army, 6330 corers or $ 742.78 million USD for Bangladesh Navy and 4743 million USD corers or
556.56 for Bangladesh Airforce in the 2021 military budget of Bangladesh.
Unofficial estimates place the total amount of military spending for the Bangladesh Armed
Forces higher than the official allocated figures, however, the approximate calculation differs.
As of 2021, Bangladesh military maintains a thriving military industrial complex and other
business interests.
Beside massively expanding industrial complex, the Bangladesh Armed Forces receives a
undisclosed budget for its ongoing modernization program Forces Goal 2030. The allocation is
used primarily for procurement of weapons and technologies, establishment of new military
bases and R&D. According to Ministry of Finance report, the government allocated
approximately 40000-crores taka or $5.2 billion between the 2012-2017 period.[3]
According to reports published in 2007, Bangladesh Armed Forces also receives approximately
$300 million funding from United Nations annually

Public private and partnership Sector

The Government has allocated TK 34,648 crore for public-private partnership, financial
assistance to different industries, subsidies, equity investment in state owned, commercial and
financial institution, which is 5.74% of the total allocation. Bangladesh is facing a resource gap
equivalent to $928.48 billion to achieve the Sustainable Development Goals by 2030, while
around 5.6 percent of the gap would be filled through the PPP financing, according to a study of
the general economic division of the planning commission. Despite having no significant success
in implementation of PPP projects but Mayor Hanif Flyover alone, the government continued
allocation over Tk2,000 crore each fiscal year. However, the government has an intention to
implement about 30 percent of the infrastructure projects under the PPP mechanism.
Chief executive officer of the PPP office stated that PPP arrangement would help government to
find alternative sources of funding during Covid-19 crisis. In order to motivate people in
investing in PPP, corporate Income tax has been reduced by 2.5%.
Reduction in corporate tax is one of the factors that influence investment. Other paramount
factors include – state of business confidence, ease of doing business in the economy, and
overall aggregate demand in the economy. But in the current scenario, this tax cut would rather
raise inequality as this tax break is most likely to benefit the rich, making them richer.
Therefore, a corporate tax reduction may further fuel income inequality and poverty – crises
that have already been exacerbated by COVID-19.
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Telecommunication and IT sector

Amid the Covid-19 pandemic, the telecommunication sector has been declared an emergency
sector and continues to contribute significally in terms of connecting people to run business as
well as keeping the economy running. About TK 69,474 crore is allocated to overall
communication. The tax rate remains unchanged for this sector. It is already heavily taxed and
in dire need of tax reduction in some areas, including minimum tax, corporate tax, SIM tax and
duty on direct operator billing. It needs a rational tax structure for the interest of other sectors
or sub-sectors that depend on the telecom sectors. The country's telecom companies barring
the GP are not being able to make a profit due to the high taxes. This is killing the goose that
lays golden eggs. The corporate tax rate for the telecom companies needs to be reduced every
fiscal year between 2.0-2.5 per cent for the next 5/7 years. This will help expedite Bangladesh’s
digital transformation.
Tax holidays have been extended for companies operating in the Information and Technology
(IT) sector. The existing twenty-two IT enabler services will be subscribed to another year of
enjoying tax exemptions and this provision has been expanded to six more services, i.e., cloud
services, system integration, e-learning platform, e-book publications, mobile apps
development service, and IT freelancing until 2024. This will create employment opportunities
for new start-ups, and fresh IT and STEM graduates.

Budget Deficit and Financing

The finance minister proposed the national budget for 2021–22 financial year with a total
outlay of Tk 6,03,681 crore, a 12.0 per cent year-on-year growth. The budget depends, as the
minister said, on expected revenue with foreign grants collection of Tk 3,89,000 crore, 64.40
per cent of the total expenditure, and borrowing of Tk 2,14,681 crore excluding foreign grant,
35.60 per cent of the total expenditure, from internal and external sources. The gross domestic
product growth target has been set at a stunning 7.2 per cent in this Covid outbreak and the
inflation target is set at 5.3 per cent. Deficit for the 2021–22 financial year is more than 14.35
per cent, higher than that in the revised budget for 2020–21.
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Share of domestic financing

52.8% in FY21 (61.4% in RBFY21)

 Tk 76,452 crore (35.6% of total) will come from the bank borrowing – lower than
RBFY21
 Tk. 32,000 crore from net sale of NSD certificates
 Entire incremental budget deficit will be financed through foreign aid
 Gross foreign aid requirement will be around USD 13.8 bln (USD 10.1 bln in RBFY21)

Deficit Financing
As A Growing Economy, Deficit Budget Is Expected and Usual In Bangladesh. The Deficit Will Be
Financed by Tk 1,13,453 Crore from Domestic Sources Where Tk 76,452 Crore Will Come from
Bank Borrowing and Tk 37,001 Crore from Non-Bank Borrowing. Finally, Tk 101,228 Crore Will
Be Managed from External Sources to Bridge the Budget Gap. Domestic Sources Borrowing, As
Is Projected, Will Decrease By 1.39 Per Cent Compared with The Revised Budget For 2020–21
And Bank Borrowing Will Decrease By 4.13 Per Cent And, Non-Bank Borrowing Will Increase By
4.81 Per Cent This Financial Year. On The Other Hand, External Borrowing Will Increase By
39.82 Per Cent This Financial year.

Deficit Budgeting
Projected net financing from the domestic sector has been reduced by 1.39 per cent, whereas
external borrowing has been increased by 39.82 per cent compared to the revised budget for
2020–21 financial year. Domestic borrowing consists of bank borrowing and non-bank
borrowing. Net long-term bank borrowing is projected to be Tk 51,600 crore in 2021–22. The
government will issue Tk 87,100 crore long-term against the maturity of Tk 35,500 crore. Here,
 16

it is clearly visible that the government will issue another Tk 10,000 crore sukuk bond and Tk
22,000 crore two-years treasury bond will be issued. Net non-bank borrowing will increase by
4.81 per cent this financial year. Tk 28,224.53 crore three-year savings certificates will be
issued. On the contrary, Tk 25,410.00 crore family savings certificates will be matured and no
new issuance will be done. It is also visible that the government emphasizes post office deposit
collection through savings and term deposit product. Tk 22,965.22 crore net borrowing through
post office savings, bank-term deposit has been targeted. Net financing from external
borrowing in 2021–22 to make up for the budget deficit is estimated at Tk 101,228 crore which
is 39.82 per cent higher than the amount in the 2020–21 revised budget.

Impact On Money Market Liquidity

Currently, excess money market liquidity is created by reducing cash reserve ratio in 2020–21
financial year, refinance taken from the Bangladesh Bank against stimulus packages and US
dollar buying by the central bank from inter-bank market. As of March 2021, the excess cash
reserve ratio or un-invested cash was Tk 44,152.07 crore which was Tk 19,443.92 crore and Tk
25,935.89 crore in June 2019 and in June 2020 respectively. At the end of March 2021, excess
liquidity was Tk 198,115.64 crore. Here, the current excess liquidity is 2.59 times larger than the
projected deficit financing from the banking sector. In extreme cases, scheduled banks will
liquidate or not go for fresh investment to face the liquidity crisis. In such a situation, it appears
that the money market is going to enjoy another lethargic financial year.

Impact on debt market

It is clear that the government is trying to increase a mix in financing the deficit budget by
providing more focus on external borrowing and post office deposits. Because of a lower
private sector growth and a lack of investment instruments rates, scheduled banks have no
option to invest in government securities. Few counter-parties/corporate houses try to capture
the liquidity advantages by issuing long-term investment instrument such as the preferred
share and corporate bond, which are ultimately used to settle the loan early. Hence, the
government treasury’s yield might face another downtrend in 2021–22. The asset liability
management desk should take care of the maturity mismatch and re-investment risk of
respective banks.
In an emergency situation, expansionary fiscal policy is always expected. Business confidence is
the key to the budget. If we cannot fully neutralize the covid crisis, we may not be able to play
in full swing. Also, an expansionary monetary policy is required to make the budget successful.
Finally, the revised budget might lower the borrowing from the banking sector. Banks should
put in utmost efforts to invest in long-term securities to protect the wealth of equity holders.

Impact of unexpected condition

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The government had to undertake a large number of expenditures due to the unexpected
condition which was unforeseen and unplanned. The unexpected condition can affect budget in
many ways-
1. Tax collection could be lower due to tax exemption to a few sectors. due to that revenue
collection target remains challenging.
2. As opposed to the constrained fiscal policy the government could not spend whatever was
allocated. Some sectors could also be downsized.
3. The government might announce a number of stimulus package to mitigate the immediate
obstacle.
4. The government might borrow from banking sector and also from external source to alleviate
liquidity pressure. The government also might consider whitening black Money.
In this recent covid pandemic the government announce a number of stimulus package
equivalent to 4.4% country's GDP. Some of government sector like public expenditure was
lower compared to the pre pandemic period. The health budget slightly increased (0.92%) while
ADP has been downsized. Realistic, stronger fiscal framework should be implemented to utilize
the outstanding revenue. The government should not focus too much on growth but helping
the economic sector and livelihoods of people.

Conclusion
The revenue growth assumptions are highly unrealistic. It makes the expenditure targets
unreliable and lowers the transparency of the budget. Health should be the most priority given
sector. Even this pandemic couldn't make this happen where the medical sector is going
through a critical situation. In this pandemic situation, everything is trying to be done through
online. So, Telecommunication and IT sector should be given more priority than as it was and
education sector also. On the other hand, as educational institutions are closed due to this
pandemic, education sectors must have some mentionable allocation and initiatives to make all
the stakeholders comfortable with technology. And there should have some changes and
reshuffling of budget among transportation, public administration, social security and welfare
sectors also.Government should make the necessary allocation for timely implementation of
two irrigation projects based on solar power (project completion years: 2022 and 2023).
Ministry of Agriculture should seek funds for taking more projects to popularize solar power-
based irrigation facilities across the country.The stimulus package of agriculture 826 BD core
still remain un utilized . if the allocation of carry over projects such as livestock development
poly culture crop production is is not adequate there will be adverse impact on production and
employment.