Budget analysis 2013-14

Md. Tarek Rahman

Comilla University
ID: 0908048
Cell: +8801947690360
Email: tartulona@yahoo.com


The honourable Finance Minister has just placed the budget for 2013-14 fiscal year before the
parliament. An analysis of the budget can take different routes. One may approach it with a
human rights perspective, one may try to analyze its potential sectoral impacts, one could also
view it from a poverty alleviation angel and so on. However, the budget being a balance-sheet of
the governments income and expenditure accounts, probably the most basic approach is to
analyze it from the perspective of its financial soundness, which is what this article intends to do.
The new budget shows an estimated expenditure of Tk 2,22,450 crore in the next fiscal year.
This is nothing special given the fact that it is about Tk 31,000 crore more than the last years
budget and we have seen similar increases before. At the same time, this increase in expenditure
is not going to impact on budget deficit that much, as indicated by around Tk 2,000 crore
increase in the overall deficit in the new budget. What this means is that we are anticipating a
growth in income (revenue earnings) impressive enough to offset the increase in expenditure
almost fully. The budget shows around 20% growth in income and 16% increase in expenditure.
Again, this figure is nothing special as similar (and even higher) income growth has been
achieved in the recent years. The budget for 2012-13 fiscal year also targeted 18% growth in
income. However, one may ask how and why the government is expecting a trend growth in
income when imports are falling and private investment is stagnating. As a note, revenue
collection from imports still constitutes a significant share in total public income. From the
revenue estimates in the new budget, the government is also not expecting import duties to
contribute in its income growth. Only 0.4% of the additional revenue (compared to the budget
for 2012-13) is expected to come from import duties with a minuscule growth of 0.7%. Then the
question that arise is, are we expecting a structural shift in revenue earnings in the coming year?
If so, in which direction? Whos going to contribute? Indeed, as detailed revenue targets reveal,
the budget expects an extraordinary shift.
Overall Expenditure Structure: Table 10

Now, I would like to give a brief outline of the overall expenditure (development and non-
development) structure of the proposed budget.
We have classified different ministries/divisions into three groups based on their functions

1. Social infrastructure.
2. Physical infrastructure.
3. General Service sectors.

In the proposed budget, 23.17 percent has been allocated to social infrastructure sector, of which
19.6 percent has been proposed for human resource (education, health, and other related sectors),
30.18 percent of total allocation has been proposed for physical infrastructure sector, of which
14.50 percent has been proposed for overall agriculture and rural development, 8.66 percent for
overall communication sector and 5.1 percent for power and energy sector. 22.45 percent of total
allocation has been proposed for general services sector.
3.29 percent of total allocation has been proposed for Public Private Partnership (PPP), financial
assistance for different industries, subsidy, and equity investment in nationalized banks and
financial institutions. 12.47 percent has been proposed as interest payments. Remaining 8.44
percent will be spent for net lending and other expenditures. Hopefully, the budget framework
proposed in view of the domestic and global perspectives will support growth, contain inflation
and reflect aspirations of the mass people.

Overall Income of Bangladesh Budget:

Of the revenue, Tk 1, 36,090 Crore is predictable from National Board of Revenue (NBR) tax
revenue, Tk 5,129 Crore from non-NBR tax revenue and Tk 26,240cr from non-tax revenue. The
govt. looks ahead to Tk 6,670cr in foreign funding.
Copmparison in Expenditure of 2012-13 and between 2013-2014
1. Public Administration
2. Education and Information Technology:
3. Transport and Communication:
4. Agriculture:
5. Local Administration and Rural Development

Public Administration:
During the Fiscal Year 2011-12 the budget allocation for the public administration sector was
Tk. 23,980 which was 14.6% of total budget allocation of this year. But for the Fiscal Year 2012-
13 the budget allocation for this sector is 24.111 which is 12.6% of the total budget allocation.
Year
Type
2011-12 2012-13 2013-
14
Graph
Development 2,335 2,934

Non-Development 21,625 21,177
Total 23,980 24,111
Percent of total
budget
14.6% 12.6%
Education and I nformation Technology:
23, 900
23, 950
24, 000
24, 050
24, 100
24, 150
1 2
Ser i es1
Educated and skilled human resource is the main drives of development of an economy. Our
Govt. is attaching highest priority to education as the most strategic tool for education of poverty
and development. Govt. have formulated and education policy, 2010.

Transport and Communication:
During the Fiscal Year 2011-12 the budget allocation in the Transport and Communication
sector was Tk. 11,280 cores and in current Fiscal Year it is 13,317 which is not satisfactory for
the current circumstances
Year
Type
2011-12 2012-
13
2013-
14
Graph
Development 7,744 9,475

Non-
Development
3,536 3,842
10 , 0 0 0
10 , 5 0 0
11, 0 0 0
11, 5 0 0
12 , 0 0 0
12 , 5 0 0
13 , 0 0 0
13 , 5 0 0
1 2
Ser ies1
Year
Type
2011-12 2012-13 2013-
14
Graph
Development 5,872 7,402

Non-Development 14,444 14,743
Total 20,316 22,145
Percent of total
budget
12.4% 11.5%
19, 000
19, 500
20, 000
20, 500
21, 000
21, 500
22, 000
22, 500
1 2
Ser i es1
Total 11,280 13,317
Percent of total
budget
6.9% 7.00%

Agriculture:

Year
Type
2011-
12
2012-
13
2013-
14
Graph
Development 3462 4358

Non-
Development
9054 10,099
Total 12,516 14,457
Percent of
total budget
7.7% 7.5%
Local Administration and Rural Development


Year
2011-
12
2012-
13
2013-
14
Graph
23, 900
23, 950
24, 000
24, 050
24, 100
24, 150
1 2
Ser i es1
Type
Development 3462 4358

Non-
Development
9054 10,099
Total 12,516 14,457
Percent of
total budget
7.7% 7.5%

Income Sector:

taxes on income and profit (income tax):

VAT (on local business and at the import stage:



Comparison in income of 2012-13 and between 2013-2014
The budget is 16 % upper from the current fiscal year.
23, 900
23, 950
24, 000
24, 050
24, 100
24, 150
1 2
Ser i es1
The governments income or revenue earnings come mostly from five heads taxes on income
and profit (income tax), VAT (on local business and at the import stage), import duties,
supplementary duties and non-tax revenue sources (profit from different government services).
As mentioned earlier, import is not going to contribute in the anticipated income growth. So is
not the revenue earned from supplementary duties (only about 3%). Of the remaining three
heads, non-tax revenue is going to contribute in a significant manner. While this head has been
struggling in the recent past to post any growth at all (only 1% growth target was there in 2012-
13 budget), the budget for the next year expects it to grow by about 15%! Therefore, over 12% of
the additional revenue in 2013-14 fiscal year is expected to come from profits emanating from
enhanced efficiency in public service delivery!
As for VAT, which is the single largest (about 30%) income source of the government, this
revenue head is expected in the budget to contribute over 34% in the additional income next
year. Two things about VAT collection are of importance here. Firstly, almost 40% of VAT
comes at the import stage and we noted earlier that import is not expected to grow in the coming
fiscal year. Therefore, it is likely that the growth (of over 23%) in VAT collection has been
anticipated mostly at the local stage. Secondly, increase in VAT has been highly dependent on
bringing untapped business activities within its coverage in the past and ample opportunities to
do so remains. As such, the contribution expected out of VAT will again be dependent on the
governments performance in tapping more businesses.
The last remaining contributor is income tax. It is to be noted that revenues from income tax has
been growing at an impressive pace during the recent years. But the new target of an almost 37%
growth in this head will take it to a new height, contributing almost 47% of the additional income
in 2013-14 fiscal year. At the same time, like VAT, growth in income tax will also be primarily
depending on bringing in more tax-eligible people/companies in the tax net; here too, one needs
to note that plenty of opportunities remain. However, being able to do so will once again hinge
on the performance of the government and its mechanism which is, in this case, the NBR.
Bringing it altogether, to a significant part, 80% to 90% of the expected increase in income in
2013-14 will rely on improved governance efficiency!