Term paper

on
Introduction to Macroeconomics (ECO102, Section - 1)

Topic: The analysis on the

national budget for the FY
2009-10

Date of Submission: The 13th

April, 2010.

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Submitted to:
Imrana sharmin
lecturer,
Department of Economics
East West University.

Submitted by:
Md. Imran Mahmud
ID No.: 2009-1-10-155
Kh. Md. Mahbub-A-Khoda
ID No.: 2008-3-10-129

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Contents
Abstract

Definition of Budget

An overview of National Budget for FY 2009-10

Some Important Sectors

Employment Generation

Some Fundamental Issues on Budget

10

Overall Recommendation

13

Conclusion

14

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Abstract
National budget of a country is very crucial for a developing country like
Bangladesh. This term paper is focused on the analysis of National Budget of
FY2009-10 of Bangladesh. In this case, no particular research methodology (like
qualitative, quantitive) has used. Numerous data have used to analyze the budget.
The main goal was to analyze the budget through macroeconomic framework. At
the end of our term paper, we have given some recommendations about the
budget.

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Definition of Budget
A government budget is a legal document which is normally proposed by the
finance ministry, and approved by the parliament. Generally, a national budget is a
combination of Government revenues and expenses. Government revenues come
from different kinds of taxes, foreign borrowings etc.
On the other hand, government consumption is used as the government expenses
in the terms of economics. It consists of infrastructure investment or research
expenditure, unemployment or retirement benefits etc.

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An overview of National Budget for FY 2009-10

In FY 2009-10, the total estimated revenue is Tk.79, 461 crore which is 11.6
percent of GDP. Of this, the share of NBR revenues are Tk. 61,000 crore (8.9
percent of GDP), Non-tax and Non-NBR revenues will be Tk. 15,506 crore and
Tk. 2,955 crore respectively (2.7 percent of GDP). On the expenditure side, the
size of ADP for the FY 2009-10 is Tk. 30,500 crore (4.4 percent of GDP) and the
total expenditure is stand at Tk. 1, 13,819 crore, which is 16.5 percent of GDP. So,
the budget deficit is estimated to be within 5 percent of GDP of which 2 percent
will be financed from external sources and the remaining 3 percent will be
financed from domestic sources. However, efforts will be made to mobilize more
resources from external sources. This budget may appear slightly expansionary,
but compared with most countries our fiscal deficit is minimal in the context of
current global crisis. In the proposed estimates 7.8 percent is allocated for overall
agriculture sector (agriculture, fisheries and livestock, rural development and
water resources), 22.1 percent for local government, 14 percent for power and
energy, 15.7 percent for communication (roads, railway, bridges, waterways,
airways and telecommunication), 23.5 percent for human development (health,
education and science & technology).

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Figure: Revenues & Expenditures (Sector wise)

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Some Important Sectors

Employment Generation
Housing
Civil Aviation and Tourism
Post and Tele-communication
Water Transportation
Communication Sector
Roads and Bridges
Industrialization
Power and Energy
Food Security
Rural Electrification
Rural Development
Water Resources
Fisheries and Livestock
Agriculture and Rural Development
Human Resources Development
Education
Health and Family Welfare
Social Safety and Empowerment
Poverty Reduction

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Employment Generation
Unemployment is a major problem of Bangladesh. On the budget there was huge
opportunity of creating employment in agriculture and rural sectors. There was
also strengthen self-employment opportunities through micro credit Programmes.
Special training programmes will be organized for the workers to be sent abroad.
Greater facilities will be provided for the development of small and medium
industries and integrate them with larger industries. The present government is
pledge-bound to provide employment to at least one member of each family by
2014. According to BBS estimates, the total labor force in our country is 5 crore,
out of which only 20 lakh are employed in the public sector. Every year a similar
number of labors force enters into our labors market.
But, it is true that employment is not in the satisfied level now. The Government
can not employ persons accurately because of corruption, bureaucracy etc.
Besides, in garments sectors, due to some mismanagements and poor working
condition, workers lose their jobs. Government can not employ them again. So
unemployment remains a problem for us.

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Some Fundamental Issues on Budget

Investment:
On the budget, the goal was to obtain equity finance for investment by
strengthening the capital market. At the same time, the government tried to attract
domestic and foreign investment. In this budget the government has taken some
initiative to reduce the cost of doing business in order to attract investment.
But, due to political situation, investors are not interested in investing their capital
in their sector. There are some barriers from both government and the
administration. Total investment has risen but not in the satisfactory rate.

Foreign Investment:
The cost of business through administrative reforms is prime barrier of investment.
So the government is trying reducing the cost of business through administrative
reforms and easier provisioning of utility services. Their goal is to increase foreign
investment which is pre-requisite for a developing country. Another source of
development is the remittance which comes from our workers who live abroad.
The budget is implementing but not in the right way. The barriers are still
hampering so that foreign investment condition is not up to the mark. Foreign
investors are less interested due to the political situation. Recently, Malaysia has
stopped taking Bangladeshi workers so we are loosing a large amount of
remittance.

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Taxes:
Direct Taxes
Income Tax
The revenue from imports is going down significantly for various reasons. So, The
government is increasing revenue from income tax. Reducing the corporate tax
rate for mobile phone operators to 35% is all right. Housing is a fundamental right
of the people. This government considers ensuring housing facility to people as an
important task. People invest their long saved money for buying flats or
construction of own house, which they find it difficult to explain to the income tax
department. To address this housing problem they should not charge any kind of
tax. They should claim the persons who do not give the tax properly. By receiving
all the tax successfully we can make our economy more strong.

Indirect Taxes
Import Duty
Until now import duties constitute nearly 42% of the total tax revenue. Fiscal
2008-09, import duty structure comprised 3% on capital machinery and parts, 7%
on basic industrial raw materials, 12% on intermediate raw materials and 25% on
finished products. In Fiscal 2009-10, government reduce the duty on basic raw
materials from 7% to 5% in order to make our local industries more competitive
both in local and international market. But it was better if they remove the tax
duty.

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Our local industries are seriously hurt due to significant decline in prices in the
international market. So, to offer protection to the local industries producing
footwear, ceramic tiles, tableware, sanitary ware and other ceramic items, they
proposed to raise supplementary duty from existing 20% to 45% and impose 20%
supplementary duty on the imports of particle board, hard board, medium density
fiber (MDF) board, plywood, leather goods, such as bag, suitcase, vanity bag etc.,
mosquito coil, imitation jewelry and corrugated cartons. But foreign countries are
still the market leader. So for the betterment of our local industries, they should
impose more amount of duty.

Value Added Tax

In this budget the government told that they will withdraw VAT from many initial
sectors to protect from foreign competition.
In 2000-01, contribution of VAT in total revenue was 27.11% which became
33.34% in 2007-08. it is good source of government revenue, so they should give
more emphasize of collecting it.

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Overall Recommendation
---- increasing revenue earnings
---- Supporting agriculture
---- supporting rural economy and rural energy
---- preventing corruption on development sectors
---- Encouraging self-employment

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Conclusion
The national budget for 2009-10 was a good budget. We can see that, they gave
priority on the important sectors. But it is not properly implemented. If they can
save our resources and take a long term planning like the developing country then
we are sure that we can survive in this modern competitive world.

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