Before going to the elaboration and giving recommendation regarding the Budget 2016-2017 of

Bangladesh, it is important to know the definition of budget.

Budget
It is an estimate of future income and expenditure for a set period of time. In Bangladesh budget
speech is given in June July which is implemented throughout the year. A budget is compiled
and re-evaluated on a periodic basis. A surplus budget means profits are earned which says that
revenues are greater than expenditure. On the other hand balanced budget means that revenues
are equal to the sum of expenditure. And finally, the deficit budget means that revenues are less
than the expenditure. Developing country like Bangladesh generally pursue a deficit budget rather
than balanced or surplus budget.
Now the job is to summarize the fiscal budget 2016-2017 by comparing it to the fiscal budget
2015-2016 and give proper suggestion regarding the situation.
Both budget speech of 2016-2017 and 2015-2016 were given by Abul Maal Abdul Muhith. The
key statement of 2016-2017 and 2015-2016 budget are given below.
2016-2017 Fiscal Year (2 June 2016) 2015-2016 Fiscal Year (4 June 2015)
Marching towards Growth, Development and Bangladesh Marches towards Prosperity
Equitable Society Paving the Way for Higher Growth.

GDP Growth
According to the Bangladesh Bureau of Statistics (BBS), In FY 2014-2015 GDP growth was 6.55
percent which was set at 7.3%. The estimation for the FY 2016-2017 is 7.2 percent. The provisional
estimation by BBS for current fiscal year is 7.05 percent.

Recommendation regarding GDP Growth

The rate was slightly lower than the estimation in FY 2014-2015. But the estimation in 2016-2017
is quite good as the GDP growth is in the right track. The governments task is to strengthen the
forces which will stimulate GDP growth.

Inflation
In 2015-2016 the inflation rate was 6 percent which was 6.6 percent in the last fiscal year 2014-
2015, the inflation rate was 6.6 percent. Point to point inflation has decreased to 5.6 percent from
6.3 percent in FY 2015-2016. The inflation rate is set at 5.8 percent for the fiscal year 2016-2017.

Recommendation for Inflation Rate

The inflation rate is at a stable rate because of the lower fuel price in the international market,
supportive fiscal and monetary policies, satisfactory agricultural production and improved
distribution system. The inflation rate will be steady and product price will be within the reach of
common people if proper steps will be taken and the development program will be on in order to
support the stability of the inflation rate.

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Money and Credit
In FY 2015-2016, broad money growth stood at 13.6 percent which was slightly lower than the
estimated target of Bangladesh Banks Monetary Policy Statement. Reserve money growth rate
was 15.8 percent which is marginally higher than the target. In the same period, private sector
growth rate was 15.2 percent. Agricultural credit of Tk. 16,400 crore of which 14,128 crore was
disbursed, the equivalent to about 86 percent of the target. In 2014-2015 the target was fulfilled to
79 percent of the target.

Recommendation for Money and Credit

Money and credit depends on the development of the economic condition including private and
agricultural sector. Proper allocation to the respective sector will strengthen the situation. So more
fund should be allocated in this sector will make this field more strong and fit.

Interest Rates
In FY 2015-2016, the interest rate spread decreased to 4.9 percent. Deposit and lending rates have
been reduced to 5.9 and 10.8 percent respectively. In FY 2014-2015, the interest rate spread has
decreased to 4.87 from 5.31 percent in FY 2013-2014.

Recommendation for Interest Rates

The interest rate is in a stable position. But proper monitoring is necessary to make this interest
rate constant. The lending rate should be around 9-9.5 percent then more industrialist will be eager
to borrow from the bank. Thus development program will flourish in a steady way.

Imports and Exports

In current fiscal year, the export earnings have been increased than the last year by 2.3 billion
USD. Import earnings also increased by USD 31.3 billion compared to USD 29.4 billion during
the same period of previous year. Earning from woven garments and knitwear recorded and
increase of 12.7 and 7.3 percent respectively.

Recommendation for Imports and Exports

In some cases, strict rules should be flexible to enhance the rate of exports earnings. Thus we will
be able to earn a handsome amount of foreign currency. And the responsible person in the
government chair who is responsible for maintain import and export should be more constructive
in building relationships with the importing countries thus flawless import can be achieved.

Remittance Income
In the current fiscal year, the remittance income remittance income was USD 12.3 billion which
is slightly lower than the expectation. Still overseas employment is getting increased in recent
months due to proper diplomatic efforts. Various initiatives have been to expand labor markets,
develop capacity, and ensure same immigration.

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Recommendation for Remittance Income
Remittance income is one of the sources of earning foreign currency. In order to make the earning
increase from remittance income, we have to export our labor in a steady rate. The diplomatic
relationship should be more developed. And the emergence of safety can not be ignored. After
ensuring the proper safety of the labor, we can hope for a regular and good amount of remittance
income.

Balance of Payments, Reserve and Exchange Rate

Current account balance is in a surplus of USD 2.9 billion. At the same time, overall account
balance is also a surplus of USD 3.5 billion due to positive capital and fiscal accounts. This is also
contributing to enhance the foreign exchange reserve. As on May 2016, the foreign exchange
reserve was 28.6 billion. Exchange rate of Tk against US dollar has been stable.

Recommendation regarding Balance of Payments, Reserve and Exchange Rate

The three above mentioned items are very important factor for a country which says about the
economic condition, business environment and overall financial system. The balance in surplus is
a positive thing and we have to make thing stable and steady. The foreign reserve amount should
be increased in order to meet the demand of foreign currency. The exchange rate of Tk against Us
dollar should be stable and should take steps to enhance the value of taka.

Estimates of Revenue Receipts

The estimated revenue for FY 2016-2017 is 2,42,752 crore which is 12.4 percent of GDP. NBR
tax revenue is estimated at 2,03,152 crore which is 10.4 percent of GDP. It is also expected that
the VAT collection will be increased. It is also expected that the non-NBR sources has been set at
7,250 crore which is 0.4 of GDP. The non-tax revenue collection is targeted at TK. 32,350 crore
which is 1.6 percent of GDP.

Recommendation regarding Increasing Revenue Receipt

The collection system of collection of revenue should be strictly followed. It is to believe that
proper instructions and guidance can lead to collect the revenue in time. The sources of revenue
should be increased. Health hazard company (company involve in tobacco and alcohol production)
should be strictly maintained and tax and licensing fee of those company should be increased. The
Non-tax revenue should be collected in a proper way

Estimates of Total Expenditure

The total expenditure for FY 2016-2017 has been set at Tk. 3,40,605 crore which is 17.4 percent
of GDP. The allocation for non-development and other expenditure is a total Tk. 2,23,578 crore
which is 11.4 percent of GDP. The Annual Development program cost is estimated at 1,10,700
crore (5.6 percent of GDP) . Projects of autonomous bodies will stand Tk. 12,646 crore. Total
amount of ADP will be around 12,646 crore.

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Recommendation regarding Proper Allocation of Expenditure
The job of the governments task is to collect revenue from many different sources and spend it to
the respective sector. The proper allocation is needed as to ensure the revenue gained from the
sources is given in the proper sector. If proper allocation is possible, the government will be
considered successful. So the strict supervision is necessary in every phase from rural to urban. If
any inconsistency occurs, the involved people in this discrepancy will be under justice and should
be punished.

Allocation in Education Sector

The allocation in the education sector (primary, mass and ministry of education) in the current FY
2016-2017 is 13877 crore which is 12.6 percent of the GDP and in the previous FY the amount
was 9504 crore (10.5 percent of the GDP) which is much higher.

Recommendation regarding Educational Sector

Education is one of the most important part of the human resource. A countrys base is depend on
the educational system of the country. So the amount given should be properly utilized. And many
more program should held on how student will keep their institution calm and free from political
hazard. The worthy people should be in the chair so that the allocated money should be utilized
properly. Moreover, budget in this sector should be increased.

Allocation in Power Division

It is really surprising the allocation in power division is lower than the last fiscal year. The
allocation in the current FY 2016-2017 is 13040 crore ( 11.8 percent of the GDP) which is lower
than the allocation of the last year. The last years allocation was 15,476 crore (17 percent of the
GDP) .

Recommendation regarding Power Division

Power is one of the major crisis of Bangladesh. The governments fame is largely depend on how
they reduce the power crisis. So in the current fiscal year the allocation in this very important
sector is not sufficient and allocation in this sector should be increased. More power plant should
established considering the environment factor. Rampal is one of the most discussed project which
should be destructive to the survival of Sundarban. So this project should be banned. And this
project should take anywhere where there is risk of life and environment.

Budget Deficit
In FY the budget deficit will be Tk. 97,853 crore which is 5 percent of the GDP. The budget deficit
higher than the last year which was 87,165 crore (5 percent of the GDP). The amount of budget
deficit will be financed from external and domestic sources. The amount of external sources is
36,305 crore and the amount of domestic sources will be of TK. 61,548 crore.

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Recommendation regarding Reducing Budget Deficit
Budget deficit is not a positive thing for a country. If a countrys budget is a deficit one, they fill
the deficit from the external sources (ADB, World Bank). For the borrowed money, the country
have to return the money with high interest. This is a burden for the country which is borrowing
money from those sources. So, budget should be planned so as to reach it near to the balanced
budget or to become a surplus budget. In order to reduce the gap between the sources of revenue
and expenditure, the revenue sources should be increased and realized properly.

Budget is an important phenomenon for any country. Like every country, in Bangladesh budget is
published every year. In this budget, it is easily seen that the GDP growth is really good. And
inflation rate, money and credit rate and interest rate also in a stable position. It is recommended
that the money supply in the educational sector should be increased. The revenue should be
received promptly and use it to the respective sector where monetary supply is really necessary.
Deficit budget is a negative thing to any country. So it is suggested that government should try to
reduce the gap between the revenue receipt and expenditure. The sources of revenue should be
increased so that to minimize the budget deficit and publish a close to balanced one. Proper
budgeting is the prerequisite for making a country completed in all sense. So the authority should
think over and over again to estimate a budget and make budget understandable to all class of
people.

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