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bangladesh budget for FY2011-12

bangladesh budget for FY2011-12

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  • 1. To our presentation
  • 2. 1.1 Objectives of the Study: The objectives of the study are to develop a theoretical framework to analyze the budget of FY 2011-12. Therefore the paper focuses on the overall budget of FY 2011-12. It also shows the allocation of money to develop different sector of the economy of Bangladesh such as Industry, Finance, Banking, Investment, Environment change, Export, Import, Remittance, Power, Energy and Agriculture etc. It also focuses on many government policies to implement the budget policy. This paper also focuses on the budgetary deficit of the budget.
  • 3. The scope of the study is budget speech,internet & many journals such as TheFinancial Express, The Daily Star, TheIndependent etc. The speech is collected informal way with the help of many weekendjournals, the opinion of many localeconomists and also CPD and general people.In Excusitives times and the Brand Forumthere are also many information which wasalso the scope of study.
  • 4. By studying this budget there have been seen a lot ofpositives and negative phenomenon of oureconomy. We understand that the government hasgiven a lot of subsides in the development budget.As a result this help to general people moreopportunities lead normal life. But it is importantnotification that government has given very lowallocation of monetary in development budget. As aresult, Our infrastructures cannot be build in properway. Besides it also effects to increaseunemployment in our country. So the governmentshould give more allocation of money ofdevelopment budget for increasing employment inour country. This is rationality of this budget.
  • 5. Unavailability of accurate and quality data onbudget and some other budgetary indicators andrelated graph. The unavailability to collectinformation in may sourced and lack of technicalsupport in our institution, the computer labfacilities are insufficient and shortage ofcomputers and also internet availability. Thiscauses many general problems for making thisbudget analysis. The data of this report might bemore standardized if we would have all kinds ofopportunities.
  • 6. 2.1 IntroductionOn June 9, 2011, the Finance minister AMA Muhitpresented his third budget for the Awami Leagueled Grand Allience government. The budget ForFY2011- 12 is the largest in Bangladeshs historywhich is TK1,63,589. This budget has beenannoounced at the midpoint of the presentgovernments five years tenure. It is anexpansionary, ambitious budget,
  • 7. which may be growth enhancing and is definitelypro-poor. There is a rise of expenditure by anadded 26% of last year. The success of budgetdoes not depends on its shape, this dependsentirely on how the budget is to be financed.However, the offshoot of borrowing too muchwill be huge budget deficits in the future. Thetiming is favorable since inflation is already atdouble digits. The total revenue is TK1, 18,385.
  • 8. In the FY2011-12 our government revenue comes from those sources, which are as follow: 56.2% revenue of government revenue comes from Tax revenue(NBR)which is 918.70 billion. In this sources there are also include some other items: Vat 37.3% Import duty 13.7% Income tax 30.0%
  • 9.  Supply duty 17.7% There are also a small part of tax revenue which is non NBR is 2.4% Non tax revenue 13.8 % Domestic financing 16.6% Foreign loan 8.0% Foreign grants 3.0% From those sources government revenue come for the FY 2011-12
  • 10.  The uses of government resources is large. In various sectors government use money or investment. Those sources are as follow : Education & Information technology 11.8 % Interest 11.0% Transport & communication 6.6% Local government & Rural development 7.4% Energy & power 5.1% Health 5.1% Agriculture 4.7%
  • 11.  Defense 6.5% Public Administration 10.2% Social security & welfare 6.2% Public order & security 4.6% Housing 0.9% Recreation, culture & religious affairs 1.0% Industrial & Economic services 0.9% Pension 3.0% Subsidies 5.7% Miscellaneous expenditure 9.3 % In the FY 2011-12 government Is going to use in those resources.
  • 12. In the budget 2011-12 the Development budget is472.76 billion. Of them the main expenditures areEducation & Information Technology is 12.4%which is not much enough in this country. Energy& power 17.5%.Health 7.5% but in our countryhealth service are not enough, but many countrieshas been accelerated their health expenditure.
  • 13. In Large amount of expenditure in nondevelopment budget 1,163,13 billion. In hereInterest 15.5%,Subsidies 8.o%,Pension 4.3%.
  • 14. Revised 2010- Budget 2010- Actual Description Budget 2011-12 11 11 2009-10Revenue and Foreign Grants Revenues 1,18,385 95,187 92,847 75,905 Tax Revenue 95,785 79,052 76,042 62,465 NBR Tax Revenue 91,870 75,600 72,590 59,742 Non-NBR Tax Revenue 3,915 3,452 3,452 2,743 Non-Tax Revenue 22,600 16,135 16,805 13,420 Foreign Grants/1 4,938 4,224 4,809 3,218 Total1,23,323 99,411 97,656 79,123ExpenditureNon-Development Expenditure 1,02,903 83,177 85,786 79,123 Non-Development Revenue Expenditure 87,851 77,103 75,230 67,013 of which Domestic Interest 16,519 13,156 13,271 13,497 Foreign Interest 1,478 1,422 1,438 1,371 Non-Development Capital Expenditure/2 15,052 6,074 10,556 6,155 Net outlay for Food Account Operation 631 351 241 -849 Loans and Advances (Net)/3 9,413 6,718 3,223 930 Structural Adjustment Expenditure 0 150 150 244
  • 15. Development Expenditure 50,642 39,615 42,770 28,115 Development Programmes Financed from Revenue 1,331 1,011 1,498 803 Budget/4 Non-ADP Project 2,035 1,430 1,578 831 Annual Development Programme 46,000 35,800 38,500 25,553 Non-ADP FFW and Transfer/5 1,276 1,294 1,194 928 Total Expenditure1,63,589 1,30,011 1,32170 1,01,608 Overall Deficit (Including Grants)-40,266 -30,600 -34,323 -22,485 (In Percent of GDP)-4.4 -3.8 -4.4 -3.3 Overall Deficit (Excluding Grants)-45,204 -34,824 -39,323 -25,703 (In percent of GDP)-5.0 -4.4 -5.0 -3.7FinancingForeign Borrowing-Net 13,058 5,783 10,834 6,036 Foreign Borrowing 18,685 10,920 15,968 11,004 Amortization -5,627 -5,137 -5,134 -4,968Domestic Borrowing 27,208 24,817 23,680 15,820 Borrowing from Banking System 18,957 18,379 15,680 -2,092 Long-Term Debt (Net) 17,878 16,062 12,570 5,769 Short-Term Debt (Net) 1,079 2,317 3,110 -7,861 Non-Bank Borrowing (Net) 8,251 6,438 8,000 17,912 Others/6 2,251 519 523 6,213 Total Financing:40,266 30,600 34,514 21,856 Memorandum Item: GDP 8,99,670 7,87,495 7,80,290 6,90,57
  • 16.  3.1 / whether the 7 percent growth target for 2011 financial year is “ambitious” or not? Ans: The government has targeted GDP growth worth tk 8,99,670 core or $123 billion in the upcoming 2011-12 fiscal year along with 7 per cent growth, but before the knowing of growth is ambitious or not and why is it ambitious or not, we have to know what is growth and GDP Growth means ‘something grown and growing’. It is ‘a process of becoming larger or longer or more numerous or more important.’ The word ‘growth’ has some synonyms, such as, development, growing, increase, increment, etc. Economic growth means the economic development of a country, measurable by any indicator like GDP, prevailed in an economy, and commonly expressed in statistical and mathematical numbers
  • 17.  There are two common and popular measures for the estimate of economic growth rate, as Gross Domestic Product (GDP) and Gross National Product (GNP). ‘The growth of Gross Domestic Product is usually a good indication of economic growth’. GDP is the abbreviation of the economic term ‘Gross Domestic Product
  • 18.  ‘GDP is defined as the total value of all goods and services produced within that territory during a specified period (most commonly, per year).’ Another definition is that ‘the GDP is the market value of all the goods and services produced by labor and property located in the region, usually a country.’ GDP can be estimated by two following ways--- GDP= consumption + investment + government expenditures + exports - imports GDP=GNP—‘The net inflow of labor and property incomes from abroad.’
  • 19.  Now we discuss about on budget, the proposed Bangladesh budget for 2011-12 fiscal year is highly ambitious one but implementable provided the prerequisites are fulfilled. “Seven percent growth is possible. In this case, industrialization and uninterrupted electricity sup ply have to be ensured.” The newly approved power plants have to start production soon,
  • 20.  He doubted whether the target of foreign investment could be achieved. “If it is not achieved, the government will have to depend on bank loan to face budget deficit. Consequently, the bank will face liquidity crisis, which will lead to endangering local entrepreneurs’ investment, The target of revenue collection through NBR is highly ambitious. The year will be a successful one for Bangladesh if the target is achieved. But, if not, it will cast the negative impact over the whole budget.”
  • 21.  The target of revenue collection through NBR is highly ambitious. The year will be a successful one for Bangladesh if the target is achieved. But, if not, it will cast the negative impact over the whole budget.” The 6.7 percent growth projected in the budget of 2011 fiscal year would be a challenging target and hard to attain to achieve for the government but a growth rate target between 6 and 6.5 percent could have been more realistic.
  • 22. Ans:Deficit means when your spending exceeds your income.For example: you earn 10,000 Taka in a month but you spend16,000 Taka in a month. So you have 6,000 taka deficit. When we talk about Bangladesh Government budget deficit, it means the amount of money Bangladesh Government spends in excess of its income in a particular time.For example, Bangladesh Governments income in a day is 100 core taka but its spending is 150 core taka, so budget deficit is 50core taka.
  • 23.  Budget deficit: If in any budget’s revenue is less than the amount of expenditure, is called budget deficit. In our country there is a huge deficit. With this burden no country can not perform well in the economy sight. So my opinion is to reduce the deficit, also reduce the shape of huge budget because ours is a developing country, the average income of our country is so poor. A country can not go ahead with budget deficit. Bangladesh has been facing an increasing budget deficit over the last few years. The emerging new political and economic changes
  • 24.  combined with an increase in the budget deficit prompting greater reliance on higher cost from domestic and external borrowing. The rate of revenue assortment in FY 2010-11 is 0.4 percent higher than that of FY 2009-10. The revenue expenditure in FY 2010-11 was Tk. 129876 core which is 16.49 percent of the GDP. In FY2010-11, the total expenditure for development sector was Tk. 35830 core which is 4.9 percent of total GDP. In FY2010-11, the overall budget deficit was Tk. 38688 core which is 4.4 percent of GDP. The budget deficit in FY2010-11 is 0.1 percent lower than the previous year.
  • 25. Table 3: Comparison between the expenditure on development and non-developmentsector Fiscal Year Expenditure on Expenditure on non- development sector development sector (ADP) 2007-08 22500 64637 2008-09 23000 71170 2009-10 28500 85319 2010-11 35830 97000
  • 26.  The allocation in non-development sector has increased by 29 percent whereas the expenditure in development sector rose only by 2.2 percent from FY2007-08 to FY2008-09. The various expenditure heads such as deficit financing, rising trend of government subsidy are the key factors contributing largely to amplify the expenditure. The fiscal policy of the government continues to endeavor to narrow the gap between expenditure and income in order to offset the budget deficit or to maintain it to a tolerable level. Over the past few years, the overall budget deficit registered an increasing trend which put a serious pressure on the total debt of the countryAn interesting aspect relating to deficit is that actual deficit is lower than the proposals made in the budget. This is due to the fact that the successive governments propose higher budget to increase the aggregate demand assuming that it will lead to higher output and higher rate of Growth. Deficit lessens as the government reduces the size in the revised budget due to implementation failures.
  • 27.  Table 4: Budget deficit and Government borrowing as a percentage of GDP Time period Budget deficit Internal Debt External Debt FY 2008-09 3.9 3.1 0.8 FY 2009-10 4.5 2.5 2.0 FY201011 4.4 4.4 1.3 FY2011-12 5.0 3.0 2.0 (proposed) The emerging new political and economic changes combined within increase in the budget deficit prompting the government to relying domestic and external borrowing. During the period from FY2010 to FY2011, the level of financing to cover the budget deficit increased from 4.5 percent to 5 percent as a share of GDP.
  • 28.  The statistics suggests that the domestic borrowing has increased from 2.5 percent to 32.5 percent as a share of GDP from the FY2009-10 to FY 2010-11 The total interest payment of the government has increased by Tk. 0.6 billion from FY2009-10 to FY2010-11 intended for financing in budget deficit. Another important feature of this debt burden is that continuous borrowing has increased from internal sources than that of external sources. During FY 2010- 11, the total interest payment in domestic borrowing was estimated Tk. 132.7 billion whereas the interest payment in external borrowing was only Tk. 14.4 billion in the same period. Since the greater portion of debt financing has been managed from the domestic sources, it might create severe pressure on inflation and interest rate. The deficit financing will have to be made in a non-inflationary manner. In this context the government will be better off to use non-bank borrowing window of domestic financing.
  • 29.  : In the budgetary framework of FY2011-12, the finance minister has targeted the investment GDP ratio to be 26.27 percent. The expected progress will be achieved through ADP implementation, expediting private sector investment and making external sector competitive through a stable exchange rate. The government has also set target to achieve 8 percent growth by 2013 which requires uplifting investment from 24.99 percent to 32 percent as a share of GDP by 2013.Achieving this targeted rate of investment by the FY13 is a challenging task for the government as the investment hovers around 25 percent. An annual growth of investment has to be 2.55 percent in order to achieve the targeted rate of 32 percent as a share of GDP by 2013. Meanwhile, Bangladesh needs 1.27 percent investment as a share of GDP to meet the targeted rate of 26.27 percent in the upcoming years which seems to be a daunting task for the government as the public investment is declining by 0.26 percent each year and also the private investment is not showing a positive trend to meet the targeted rate
  • 30.  Table 1: Investment as a share of GDP Fiscal Year Total Public Private Investment as Investment as Investment as a share of a share of a share of GDP GDP GDP 2001-02 23.15 6.37 16.78 2002-03 23.41 6.2 17.21 2003-04 24.02 6.19 17.83 2004-05 24.53 6.21 18.32 2005-06 24.65 6 18.65 2006-07 24.46 5.45 19.02 2007-08 24.21 4.95 19.25 2008-09 24.18 4.7 19.67 2009-10 24.41 4.62 19.74 2010-11 24.73 5.28 19.46
  • 31.  In FY2011-12, the government might face difficulties to attain the targeted level of investment if the volatility in exchange rate continues in the upcoming years. An incessant depreciation of Bangladeshi Taka is crafting a serious pressure on interest rate to amplify. Since the sensitivity of investment with respect to interest rate is high in Bangladesh, it might face a vast decline in the level of investment as the interest rate is rising. In order to achieve the targeted level of investment, Bangladesh Bank should immediately intervene in the foreign exchange market in an effort to stabilize the exchange rate.
  • 32. In FY2011-12, the rising trend of interest rate might be a major hurdle for the government to accelerate investment. Despite the rise in lending interest rate, the deposit interest rate remains fixed which caused a severe decrease in savings that leads to a decline in the overall level of investment.
  • 33.  The power crisis which is the most popular problem in our country. Our finance minister stated in his previous budget speech that our government wants to find an acceptable solution to power crisis within its tenure and they apperes a worked out a plan to produce an additional 7,800 MW electricity by 2013.Presently, 29 power plants, with a capacity to produce around 2,547 MW, are under construction in thepublic and private sectors and also 31power plant with the capacity to produce 4166mw is now underway considering the crisis of natural gas, we have taken steps to build coal, diesel and furnace oil,
  • 34. dual fuel and renewable energy based power plants toreduce the power deficit. In spite of they are also stepshave been taken to produce 700-800 MW additionalpower by enhancing the capacity of old power plantsthrough BMRE. We hope that we will be able to add1,769MW electricity by December, 2011 and anadditional 2,157 MW by December, 2012 in addition to1,556 MW which has already been added to t he nationalgrid. Our govt Steps have been taken to replace 28million incandescent bulbs with Compact FluorescentLamp (CFL) bulbs to ensure savings and proper useof power. In FY2010-11, we have been able to savealmost 250 MW by distributing 10.5 million of CompactFluorescent Lamp (CFL) bulbs free of cost. We areencouraging the factories producing incandescent bulbsto switch over to CFL bulbs production gradually.
  • 35. : The money which obtained through illegal ways and taxes are not paid for the money is called black money. Moreover, Black Money which comes from illegal activities and which have no legal documents of income. In addition, black money is not reported to the government for tax purposes. Therefore, black money is called illegal money. A lot of people of Bangladeshi have been becoming rich through black money. Sometimes, Government would give chance to do black money to white (black to white means illegal to legal). Though Government would give such kind of opportunity, govt cannot take any legal actions to remove such kind of money from Bangladesh. The government, for the fiscal year of 2011-2012, has proposed to allow whitening of black money through investment only in infrastructure funds and treasury bonds.
  • 36.  The government would be able to release between Tk.150-Tk. 200 billion with the incentive of a token 10 percent tax on the amount of black money declared by its owners. The condition was that the investments would have to be made in the prescribed 62 sectors belonging to three categories: Industry, share market and purchase of apartments as well as Balancing, Modernization, Rehabilitation and Expansion (BMRE) of the prescribed projects. That opportunity had been created under the Finance Bill 2009. However, in FY 2010-11, the "62-sector whitening" opportunity was withdrawn and the facility of legalising black money was allowed only under the Bangladesh Infrastructure Finance Project (BIFF); covering big infrastructures such as power and energy projects. The condition was again a payment of a nominal tax at a 10 percent flat rate. It was further stated that no question about the source of the money would be raised.
  • 37.  Climate change is one of the topical issues of the present time. Flood, drought, heavy downpour, rising temperatures, rising sea-level due to climate change have created unprecedented threats to the existence of the lives of huge population of Bangladesh. For this reason our government pledged to create a Bangladesh Climate Change Trust Fund (BCCTF) through government financing in my previous budget speech. A total of Tk. 1,400 core has been allocated for this fund over the last two fiscal years. A total of 60 projects at a cost of Tk.719.61 core has been undertaken with the support of this Fund. The major focus of these projects includes a forestation, tree plantation, utilization of solar energy, mitigating health hazards, construction of embankments, sustainable crop management
  • 38.  and building houses in the affected areas. In order to utilize the resources of Climate Change Trust Fund in an effective and suitable manner, the Climate Change Trust Act, 2010 has already been enacted. Another Tk. 700 core will be allocated to this fund for FY 2011-12
  • 39.  OTHER ECONOMISTS REACTION Noted economists are split over the size of the annual development programme in the proposed budget but unanimous in suggesting that the government enhance its implementation capacity. The size of the budget and the ADP is bigger this time. “The ADP of Tk 46,000 crore is comparatively bigger but it is unlikely that the government will be able to spend more than Tk 32,000 crore. I think the priority sectors are alright.
  • 40.  The former adviser to caretaker government said the government would face challenges in achieving the revenue generation target. “Although our performance has been quite good in the last three years, it will be difficult to maintain the same rate.” He said the governments plan to borrow more from internal sources could squeeze the credit flow to the private sector. Islam said the economy is under pressure from different fronts such as falling remittances, depreciation in exchange rate, liquidity crisis in the banking sector and serious decline in trade balance that are affecting reserves.
  • 41.  “But I have not seen effective strategies to help the country get out of these crises.” Finance Adviser “MIRZA AZIZUL ISLAM” The government has rolled out a major investment plan but it has to maintain quality in investment. “The accomplishment of seven percent economic growth will depend on the countrys capacity to implement the budget in terms of money and quality." He said the government is giving incentives such as tax holiday to decentralise industrialisation. “If we can give infrastructure facilities including gas and power supply, the plan can be implemented.”
  • 42.  “These are good as policies, but the result depends on our ability to make good infrastructure available, and solve problems that hold back entrepreneurs to invest outside Dhaka and Chittagong.” “If we can ensure that the incentives will be effective. Otherwise, only tax holiday will not solve any problem and entrepreneurs will not feel encouraged to go and invest there.” Rahman said it would be challenging to realise tax from non-NBR (National Board of Revenue) sources. “Executive Director Of CPD” Mustafizur Rahman
  • 43.  The governments reliance on loan would go up further through the budget. He said“It will impact the poor,” “ Brac Executive Director” Mahabub Hossain The budget deficit may increase by 0.5 percent to one percent compared to that of the outgoing fiscal year. "The income will increase by one percent but the expenditure, more specifically development spending, will also rise. The question is how the government will meet the deficiency," he said. "Our recent experience shows the government takes more and more loans from banks to meet
  • 44.  dficite. This may lead to non-availability of resources for investment from individuals, and interest rate may shoot up.” “ Renowed Economist” Debapriya Bhattacharya The proposed budget would not be sustainable unless the government enhances employment opportunities or sources of income for the people.Special attention should be given to financial and revenue sectors to reduce inflationary pressure, she said. Fahmida said the government would have to take effective measures for quick release of foreign aid to make them available for timely use. “Chief Of The CPD” Fahmida Khatun
  • 45.  Capital market a market in which individuals and institution trade financial securities organization in the public and private sector also often sell securities on the capital market in order to raise funds .This types of market is composed of both the primary and secondary market. A capital market is not a compact unit but a highly decentralized system made up of three major parts : 1)Stock market 2)Bond market 3)Money market. It also works as an exchange for treading existing claims on capital in the form
  • 46.  of share. Our capital market remained buoyant last year. But at the moment , I would like to reflect on the last 2/3 years according to our government and capital market economy. In jan09, the market capitalization stood at 17%of GDP, In jan10 it increase up 28% and In jan11,it raise 44%of GDP.192 percent in market capitalization in two years time span was not desirable. There had been failures on the part of relevant quarters and also interference from outside. Consequently towards the end of January 2011, the market capitalisation plummeted to 40 percent of GDP. This basically brought about market correctionIn order to investigate the whole rage of incidents we formed an
  • 47.  inquiry team and also published the whole report prepared by the team.Our government have taken steps to implement most of the recommendations made in the report. A training Institute on Capital Market named. Bangladesh Institute of Capital Market (BICM) has been established to promote good governance among the investors, intermediaries and companies. To regain investors’ confidence in the capital market, contain continuous price fall, maintain stability and bring about strategic development, a Tk 5000 crore open-end mutual fund known as Bangladesh Fund has been established.They will remain vigilant About the utilization of the fund and future negative impact on fiscal sector.
  • 48.  The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period, classically a year. In budget speech 2011-12 according to Finance Minister ABUL MAAL ABDUL MUHITH’s World growth projection for 2011 is estimated at 4.4 percent which in 2012 will slightly expand to 4.5 percent. Over the same period, emerging and developing economies are likely to grow by 6.5 percent. Developing
  • 49.  Asian economies are leading the growth performance. For each of the next two years these economies are expected to grow by 8.4 percent. The real GDP growth in FY 2009-10 has been finally computed to be 6.1 percent. According to the provisional estimate, in FY2010-11, a real GDP growth of 6.7 percent has been achieved. Considering the prospects and potential risks in the context of global and domestic economic perspectives, our real GDP growth target set out for FY 2011-12 at 7 percent.
  • 50.  Export: During the July-April period of FY 2010- 11, our export stood at US$ 18.2 billion which is 40.9 percent higher over the same period of the last fiscal Efforts are underway to explore new markets and diversify exportable commodities. It is expected that export will exceed US$22.4 billion in the current fiscal and this trend will continue in the next fiscal year as well. Global imports of goods and services have also bounced back from the negative growth in the aftermath of the
  • 51.  recession. Import: In FY 009-10, our import payments posted a growth of 5.5 percent. During the July-April period of the current fiscal, import picked up and grew by 41.4 percent .Around 80 percent of our imports are essential industrial Commodities. On the basis of Letter of Credit settlement, over the July-April period of the current fiscal, imports of capital machinery and industrial raw materials recorded a growth of 43.1 and 49.8 percent respectively. Growth of imports of capital machinery and industrial raw materials reflects the robustness in investment and the momentum created in our economy. Bangladesh set a unique example in terms of remittance inflow amid the global recession. Among the highest remittance
  • 52.  recipients of the world, Bangladesh ranked 12th in 2008, 8th in 2009 and 7th in 2010. During the first ten months of the current fiscal, the remittance flow stood at US$ 10.6 billion which is 5.1 percent higher than that of the corresponding period of the last fiscal. Remittance: The impact of global recession and recent North African and Middle East political crisis is having a negative effect on manpower exports. To overcome this situation, the Government has taken various steps to explore potential labour markets and train its manpower in line with the demand of the host countries. Efforts are continuing to fully resume manpower exports to Africa, East Europe and Latin America along with diplomatic initiatives for increasing manpower export to these countries.Even though the remittance growth in the current fiscal will be only 5.0 percent, it is likely to accelerate and is estimated to reach US$ 12.7 billion in FY 2011-12.
  • 53.  During the July-March period of current fiscal, current account surplus stood at US$ 0.7billion against US$ 2.6 billion over the same period of the last fiscal. Current Account Balance: We have taken up a range of massive initiatives in infrastructure sector including power to improve the investment situation. Consequent upon the import of machinery for new power plants and the oil price hike coupled with the increased import of oil for power plants, current account surplus is declining. However, we assume that this situation will be
  • 54.  short-lived. Because, improved infrastructure and streamlined power sector will be conducive to domestic and foreign investments. This will reduce trade deficit by increasing export. Despite increasing trade deficit and declining remittance inflows, the foreign exchange reserve remains Broadly stable. Foreign Exchange Reserve: The Government continues its efforts to increase foreign direct investment and mobilize soft-term foreign loans. This will further improve the balance of payment situation and as a result our foreign
  • 55. exchange reserve will reach US$ 11.6 billion markat the end of the next fiscal Because of price hikeof commodities in international market andhigher import bills coupled with decline inExchange Rate remittance inflow, the demandfor US dollar increased in the money market. Thishas created a slight pressure on the exchangerate between US$ and Taka. As a result, duringJuly-April period of FY2010-11, the averageexchange rate of Taka against US$ depreciatedby 2.3 percent compared to that over the sameperiod of previous fiscal.
  • 56.  Monetary Sector: Monetary Policy focuses on a level of money and credit supply that is supportive of faster inclusive economic growth while keeping inflation within a tolerable limit. Alongside, giving emphasis on the supply of credit to agriculture and SME (small and medium enterprise) through Monetary Policy, we are engaging large masses of people in the economic activities to foster economic growth. In the backdrop of global economic recession, Bangladesh Bank, in the past, took necessary steps to maintain adequate liquidity by easing the credit flows to the money market. As a result, the supply of money and credit started picking up from the second half of the last
  • 57.  fiscal. In March 2011, monetary growth stood at 23.5 percent on annualized basis. During the same period, private sector credit grew by 29.1 percent. The high private sector credit growth speaks of the increasing improvement in the domestic investment climate. Nevertheless, I would also like to mention that it came to our notice that a portion of the private sector credit, particularly, the industrial term loan and SME loan was diverted to real estate and capital market investment. Bangladesh Bank has already taken necessary steps to prevent diversion of these types of loans. We expect that in future, industrial term and SME loans will be used for the purposes they were meant.
  • 58.  Inflation : At present, commodity price situation is a widely discussed issue across the globe. According to the latest forecast, the rate of inflation, although low in developed economies, may rise to 6.9 percent in 2011 from 6.2 percent in 2010 in emerging and developing economies. The unusual price hike of different goods including primary commodities and oil in the international market has mainly created the inflationary pressures. Towards the middle of 2008, prices of food commodities as well as oil prices reached at their peak and started declining at the beginning of the recession. Declining to the lowest level in the first half of 2009, inflation experienced an upward trend from the second half of the same year as the world economic recovery began. We can say, for
  • 59.  instance, average spot price of crude oil was about US$ 133 per barrel in June 2008, which plummeted to US$ 42 per barrel in February 2009. It started picking up again and reached to US$ 90 per barrel in December 2010 and rose to US$115 per barrel in April 2011. Similar trend has been noticed in the case of other commodities as well.
  • 60. In this national budget 2011-12 A number of factors have triggered the food price inflation. There were production short-falls in many food producing countries due to inclement weather. Rapid economic growth also pushed up the global demand for food. Some of the countries put ban on food export to ensure internal food security. Investment in agriculture sector has declined. Alongside, continued rally in oil price has also increased the cost of production adversely impacting inflation. Oil price may go
  • 61. up further fuelled by the ongoing crisis in the NorthAfrica and the Middle East. We all should beprepared for facing the impact of oil price hike. Wemay have to take some unpopular decisions like:(1) reducing discretionary public spendingincluding subsidy, (2) observing Economic Policiesand Strategies austerity measures if needed, (3)augmenting revenues, (4) reducing money supplyand private sector credit and (5) exchange ratealignment
  • 62.  Our finance minister mentioned three main reasons of power crisis in the previous Budget, that around one-third of our power plants is exceedingly old, supply of natural gas is inadequate, and transmission and distribution system is defective. We have been trying to reduce in phases the existing gap between the demand and supply of power by implementing integrated development programmes in the power and energy sector through close coordination between public and private sectors. I have just mentioned about our successes in this regard. Now, I will place our ongoing programmes and future plans before you. In addition, I am presenting a report titled ‘Roadmap for the Development of Power and Energy Sector:An Update’ before this august House. This report will provide a clear idea
  • 63. energy sector, their up-to-date status, future stepsto be taken and possible challenges. IntegratedDevelopment Program Power. We have,therefore,worked out a plan to produce an additional 7,800MW electricity by 2013. Presently, 29 power plants,with a capacity to produce around 2,547 MW, areunder construction in the public and private sectors.Moreover, the bidding process for installing PowerGeneration Plan.power plants with the capacity toproduce 4,166 MW is now underway. Under the newaction plan, considering the crisis of natural gas, wehave taken steps to build coal, diesel and furnaceoil, dual fuel and renewable energy based powerplants to reduce the power deficit in addition toinstalling gas fired power plants. For increasingpower generation, we have a plan to use LiquefiedNatural Gas (LNG) to resume
  • 64.  about the action plans taken for the improvement of power and the operations of those plants shutdown previously due to lack of gas supply. We have, therefore, taken steps to import LNG and install LNG terminals. A pre-feasibility study has been carried out for installation of coal fired power plants in Bangladesh. Accordingly, we have finalized a plan to install coal fired power plants after 2014. Steps have been taken to produce 700-800 MW additional power by enhancing the capacity of old power plants through BMRE. We hope that we will be able to add 1,769MW electricity by December, 2011 and an additional 2,157 MW by December, 2012 in addition to 1,556 MW which has already been added to the national grid.our finance minister has also mentioned alternative sources of energy, according to the new action plan, will raise the unit cost of power generation. We propose to meet the additional funding through a combination of subsidy and price adjustments. Power Transmission and Distribution Line: Our finance minister discussed previous budget speech about our plans to ensure uninterrupted transmission and distribution system besides enhancing the electricity generation. According to this plan, we have been implementing 10 projects to develop and augment the transmission system and 28 projects to develop andextend the distribution system.
  • 65.  Renewable Energy: We have already prepared the Renewable Energy Policy in order to generate environment-friendly power from renewable energy sources.Various action plans have already been prepared with the target to generate 5 percent and 10 percent of total power production by 2015 and 2020 respectively from renewable energy sources. I also pledged to set up a Sustainable Energy Development Authority (SEDA) in the previous budget. Accordingly, we have been working to finalise the Sustainable Energy Development Authority Act, 2011. Two windpowered power plants with 1 MW capacity each have been built to supply electricity to coastal belts of Kutubdia and Feni. Solar panels have already been installed in various public and private organisations including the Prime Minister’s Office. Steps have been taken to set up 10-15 MW solarenergy based power stations at 4 different places in the country. A 100 MW (offshore) windmill power plant will be installed at Anwara,Chittagong. 40 solar-based irrigation pumps are
  • 66.  going to be set up and more will be installed gradually. Initially, solar bulbs will be installed in28 some of the streets of Dhaka City Corporation area. This program will be rolled out to all the City Corporations subsequently. Steps have been taken to replace 28 million incandescent bulbs with Compact Fluorescent Lamp (CFL) bulbs to ensure savings and proper use of power. In FY2010-11, we have been able to save almost 250 MW by distributing 10.5 million of Compact Fluorescent Lamp (CFL) bulbs free of cost. We are encouraging the factories producing incandescent bulbs to switch over to CFL bulbs production gradually. In addition, we are going to start special programmes (Energy Star Labeling Program) to encourage people to save energy.
  • 67.  Power Savings: We plan to implement different power sector development Programs under a Power Sector Master Plan which is at the final Approval stage and is expected to be approved within the shortest possible time. Energy: Natural gas is one of the primary sources of energy in our country. As natural gas is environment-friendly and less expensive, both its use and demand have been increasing over time creating a vulnerable situation. I have just mentioned that we are paying special attention to the use of Liquefied Natural Gas (LNG), diesel, furnace oil, and coal as the alternative sources of power generation. We have taken steps to import 500 cft of LNG per day from Qatar by December 2012. Besides, steps have been taken for the Use of Alternative Energy Sources installation of a single point mooring to unload imported crude oil and diesel within a very short time and to avoid waste while unloading takes place. Now, we
  • 68.  are producing 2,000 mncft of natural gas from 23 gas fields. In the last budget, I placed an elaborate list of short, medium and long term initiatives we have taken to meet up the gas crisis. Accordingly, in order to strengthen the only state-owned oil and gas exploration company -BAPEX , the present Government has procured modern seismic survey equipment and a deep drilling rig with a capacity to drill 7000 metre. Moreover, a contract has been awarded to procure a work-over rig for the work-over of the existing gas wells.
  • 69.  Our government has always given much importance on Industry & Financial Sectors. The contribution of this sector to GDP will be raised to 40 percent and the level of absorption of labour force will be raised to 25 percent in future. To make our Bangladesh fulfill Industry & financial sectors are inneed. In the budget FY 2011-12 our government has taken some policies to develop this sectors.
  • 70.  The policies of government for Industry & financial sectors are as follow: 1)Formulation of national industrial policy: This new industrial policy aims to modernise, structurally transform and diversify the economic base, achieve rapid economic growth by enhancing productivity and technological progress, enhance income and improve the standard of living by expanding the small and medium enterprise sector and generating employment. 2) Vibrant and Dynamic Private Sector: Vibrant and dynamic private sector will be the driving force for Bangladesh’s industrial sector. Government will pursue a supportive and regulatory role to develop and sustain an efficient and dynamic private sector. Public-private partnership will feature prominently in continued industrial growth. 3) Impact of Stimulus Package: During global economic crisis, the Government provided a wide range of policy incentives for the export sector under the stimulus packages. The present Government’s successful intervention boosted up investment in the industrial
  • 71.  sector. This upward trend in investment in production sector is still continuing. By this time, our export oriented industries have also consolidated their position. Up to 31st March 2011, distribution of industrial term loan posted 30 percent growth. The import of capital machinery and industrial raw materials also recorded significant growth (54 percent of total Import). 4) Environment-friendly Industrialization: The activities relating to installation of the Central Effluent Treatment Plant (CETP), central water supply plant and creating a dumping yard are well underway at the Leather Industrial City being constructed on the bank of Dhaleshwari at Savar – Keranigonj upazila to shift all the tannery factories spread all over the country including Hajaribagh of Dhaka city. Hopefully, the establishment of Leather Industrial City will be completed by June, 2012. All the plots have already been allocated to 154 industrial units/organisations. A Pharmaceuticals Industrial Park is being built at Gazaria, Munshigonj. The project will be completed in the FY 2011-12. 5) Strengthening BSTI: Our government modernised the laboratories of BSTI (Bangladesh Standards and Testing Institution). After Sylhet and Barisal Division, the Government has taken steps to expand the activities of BSTI all over the country. In the first phase, a project has been taken to set up fully equipped offices in 5 districts namely Faridpur, Comilla, Rangpur, Cox’s-Bazar, and Mymensingh.
  • 72.  6) Jute Sector Development: Bangladesh Jute Mills Corporation (BJMC) has adopted an agreed Business Plan to revitalize the jute sector. In this Taking over the BJMC Liabilities connection, the Government has decided to take over the liability of BJMC’s all past debts and obligations of Tk. 2,396 crore. An amount of Tk. 200 crore has been allocated to buy raw jute and Tk. 500 crore for refinancing. It has been decided to turn BJMC into a profitable organisation by turning it into a holding company. An amount of Tk. 105.30 crore has been allocated to put previously closed the Kawmi and the Peoples’ Jute Mills into operation under new names under PPP. Up to June, 2010, for the running and closed mills of BJMC, Government has agreed to pay a total of Tk. 364.83 crore from public exchequer to cover the arrears of bills for jute, wages, financial benefits of retired employees and liabilities of storage, power and gas. 7) Development of Tourism Industry: Tourism Industry can unlock the door of immense potential for the economy of Bangladesh. A law titled Bangladesh Tourism Board Act, 2010 has already been enacted to facilitate overall development, operation and promotion of the tourism industry and services. Our government took the initiative to update the National Tourism Policy of 1992 and have already issued the Bangladesh Tourism Policy, 2010. Besides, we have taken steps to celebrate 2011 as Tourism Year and organise SAARC Tourism Mart in January, 2012 to promote and expand the Tourism industry. In continuation of building new tourist attractions,we have already taken steps to establish a Tourism Centre of international standard on the
  • 73.  premises of Bangabandhu Mausoleum at Tungipara. 8) Improve the Standard of State Owned Industries: we are continuing our activities to raise the standard of the State-owned industries. Under the free market economy, in any sector, new firms will enter the market and the old ones which fail to survive the competition will exit. However, in developing countries like Bangladesh, firms become sick for various reasons out of their control in the face of uneven competition. Bearing this in mind, we have given an allocation of Tk. 2,590 crore to write off loans, repay bank liabilities, exempt interest or as interest subsidy to 1,585 sick industries especially in the frozen foods, RMG and textile sectors. we are now taking steps to build a legal framework to solve the problem of sick industry for ever. 9) Equity and EntrepreneurshipFund Establishment of Economic Zone: Government has taken an initiative to create Special Economic Zones (SEZ) for both export and local market oriented industries. In these zones, in addition to taking steps for the protection of domestic industries, the local entrepreneurs and non-resident Bangladeshis will be encouraged to invest. Meanwhile, Bangladesh Economic Zone Act, 2010 has been enacted. The organizational structure of the Economic Zone Authority has been finalised and framing of relevant rules and
  • 74.  regulations is underway. development of physical infrastructure, communication, power and energy supply have to be ensured in the Economic Zones. The existing EPZ and BSCIC Industrial Estate will continue for the time being. Small and Medium Enterprises: SME sector: the SME sector as one of the main agenda of economic development, for the first time in 2010, we had fixed a target of Tk. 23,995 crore to be disbursed by the banks and financial institutions as SME loan. Under the SME refinancing scheme managed by Bangladesh Bank, an amount of Tk. 1,806 crore has been
  • 75.  refinanced from three funds to various banking and non-banking financial institutions up to 30 April 2011. The number of beneficiaries stands at 19,339. Out of the three funds for refinancing, one fund of Tk. 120 crore is earmarked for women entrepreneurs. Women-friendly SME activities: SME foundation has introduced Credit Wholesaling Programme to disburse loans on easier terms and at low interest rates. A special credit package programme named ‘Gunabati’ has begun at the initiative of the SME Foundation exclusively for the women entrepreneurs. SME foundation provided special assistance to set up a total of 71 Helpline Centres across the country with at least one centre for one district. BSCIC Industrial Estate: Bangladesh Small and Cottage Industries Corporation, BSCIC has so far established 74 industrial estates across the country to provide infrastructural facilities to private entrepreneurs in setting up small and medium industries. Up to now, employment has been generated for 3,93,000 individuals in 3,986 industrial units of the industrial estates established in different parts of the country. Among these industrial units, 774 are export- oriented. TRADE Expansion of Trade Our government has taken some steps attaching special priority to trade which are:
  • 76.  (1) Modernization and automation of land registration process on a pilot basis; (2)Introduction of digital procedures for land survey, record and preservation and registration processes; (3) Settlement of trade related disputes and establishment of dedicated benches in the High Court to dispose of the outstanding cases of defaulting loans of National Board of Revenue; (4) Use of modern technology in every unit of customs department to initiate automated estimation of duties and levies for advance declaration and cargo clearance; (5) Introduction of automation in the judiciary; (6)Establishment of One-stop Service Centre to facilitate the issuance of different clearance certificates from one place for construction activities; (7) Collection of all sorts of government receipts through mobile phones and online system instead of treasury Chalans. Regional Trade: The developing countries under South Asian Free Trade Agreement (SAFTA) have reduced the custom duties down to 0-5 percent for all the goods except those in the sensitive list. SAARC Agreement on Trade in Services (SATIS) has been signed to strengthen the economic cooperation in the SAARC region. Under Asia-Pacific Trade Agreement (APTA), China has reduced 100 percent customs duties for 83 goods for the Least Developing Countries (LDC) including Bangladesh, whereas South Korea has reduced100 percent customs duties for 139 goods. Besides, China, in accordance with the decision of the World
  • 77.  Trade Organization (WTO), has allowed duty free access for 4,721 goods for all the Least Developing Countries (LDC) including Bangladesh. A framework agreement has been signed under Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC) to form BIMSTEC Free Trade Area. Moreover, a Preferential Trade Agreement has been signed under D-8 initiatives to introduce preferential trade arrangements. We are at the final stage of introducing border markets (Shimanto haat) with India. Ensuring Fair Competition: The Competition Act, 2010 with a view to ensuring fair competition in the free market economy and preventing all forms of anticompetition arrangements. A Competition Commission will be formed and its terms of reference will be determined under this Act. Strengthening TCB: ‘The Trading Corporation of Bangladesh Order, 1972’, a draft has been prepared to bring necessary amendments. As part of administrative reform, steps to increase the number of manpower of TCB have been taken and its board of directors has been reorganised. We have planned to build emergency stock of daily essential items worth Tk. 2,500 crore through TCB in the current fiscal year. A total number of 1,909 dealers have been appointed throughout the country to sell 5 categories of daily essential items like sugar, soybean oil, chick-peas, red lentil and onion imported by TCB
  • 78.  : poverty is a dangerous problem for our country. Our government always works hard to solve this problem. To solve it government should take some necessary steps. Those steps are as follow: Social safety net is one of the effective ways to reduce poverty. Social safety net framework for poverty reduction is divided into four major categories. Provision of special allowances so that the hardcore poor can face the incidence of poverty to a certain extent. Employment generation for the hardcore poor through micro credit and different funds/schemes. Ensuring food security for hardcore poor by providing food free of cost or at fair price. Providing support to the hardcore poor in the areas of education, health and training to face the incidence of poverty. Our finance minister has proposed various allowance schemes for FY 2011- 12:
  • 79.  Under the coverage of Old Age Allowance, I propose to provide allowance of Tk.891 crore to 24,75,000 beneficiaries. I propose to allocate Tk.331.20 core to support 9,20,000 women under Widow, Divorced and Distressed Women Allowance Scheme. In order to ensure welfare of the underprivileged disabled section of the society, I propose an allocation of Tk. 102.96 crore for 2,86,000 beneficiaries under the Allowances for the Insolvent Disabled Programme for FY 2011-12. Maternity Allowances: Our government has planned to expand two ongoing programmes aimed at ensuring health, nutrition and safe motherhood for the ultra-poor mothers. Our finance minister proposes to allocate Tk. 42.50crore under the Maternity Allowances for Poor Working Mothers Schemes and widen the beneficiary coverage from 80,000 to 92,000 for the poor mothers of low income group in the rural areas. , I propose to allocate Tk. 32.60 crore and increase the number of beneficiaries from 67,000 to 77,600.
  • 80.  Welfare for the Disables: Our Government is committed to ensure education, employment, rehabilitation and overall welfare of the disabled section of the society. In the ensuing fiscal year, we have therefore, a plan to increase the number of Disabled Service and Assistance Centers from 15 to 25 to provide Medicare and therapy facilities to the disabled. 329 organizations working for the welfare of the disabled people. 2005, all these organizations have come under the umbrella of an organization titled National Alliance of Disabled Peoples’ Organization (NADPO) and they have been delivering services to the intended beneficiaries. Rehabilitation of Acid Burnt Women and Physically Disable: It will require an amount of Tk. 1.50 core for Acid Burnt Women and Rehabilitation of Physically Disabled and Women Selfemployment Fund for FY2010-11. we are planning to increase the amount of grants provided to social voluntary organisations under Social Welfare Council. For this purpose, I propose to allocate Tk. 11.95 crore.
  • 81.  Deprived Street Children and Orphans: In FY2011-12, we would like to enhance the allocation for Programme for the Welfare of Deprived Street Children and Orphans. For this purpose, I propose to allocate Tk. 28.65 crore for the public orphanages and Tk. 63 crore for the private orphanages. Eradication of Begging Profession: Our finance minister has allocate an amount of Tk. 7 crore in the budget for FY2011-12 for this programme. Employments for the Hardcore Poor: Our Government started a special programme titled Employment Generation for the Hardcore Poor. The results from this programme in the last two years are highly encouraging.Our finance minister thereofre, plan to continue this programme and propose to allocate an amount of Tk. 1,000 crore for this programme in FY2011-12. This will create temporary employment opportunities for 15 lakh people in the rural areas.
  • 82.  Maternal and Child Health: Maternal Health Voucher Scheme and National Nutrition Programme have been included in the Health, Population and Nutrition Sector Developemnt Programme to be implemented from the next fiscal year. I propose an allocation of Tk. 271 crore for these development programmes. Socio-economic Empowerment of the Poor: Our finance minister propose to allocate a total of Tk. 4,233 crore for various projects targeted for poverty reduction. These include Tk. 134 crore for Rural Employment and Road Maintencane Program, Tk. 38 crore for Protection of Goverment Assets Project, Tk.115.7 crore for the projects namely, Creating Employemnet for the Hardcore Poor of Monga areas and Economic Empowerment of the Poor . Ghore Fera (Returning Home): Our finance minister to expand the Ghore Fera (Returning Home) programme as part of ensuring social safety and addressing human poverty. We have already rehabilitated 1,245 slum dwellers under this
  • 83.  NGO Foundation: The Government allocated about a total of Tk. 152 core up to FY2009-10 to the Endowment Fund of NGO Foundation. A total number of 51 lakh people from 10 lakh families are being benefited from the activities of the Foundation. 30 lakh of these beneficiaries are women. Palli Karma-Shahayak Foundation (PKSF): a total of Tk. 10,191 core has been disbursed among 80.60 lakh poor beneficiaries by the Palli Karma- Shahayak Foundation (PKSF) under training and micro-credit programmes for raising income level of the poor section of the community, rearing cattle and poultry, ensuring food security and raising income level of the small and marginal farmers, of which 92 percent are womenthe government is implementing a project titled Insurance Sector Development Project for the poor through PKSF is One Union One Associate Organization (Samriddhi). Social Development Foundation: Social Investment Program Project (SIPP) of Social Development Foundation (SDF) is in operation which is under social development foundation. financial assistance has been provided in the form of grants to 15,030 vulnerable families under this programme, which resulted in creating employment opportunities for 23,600 individuals. In the project areas, 2,518 culverts have been constructed, 1,930 tube wells have been sunk and 1,929 kilometer rural roads have been developed.
  • 84.  One House, One Farm: One House, One farm is another successful initiative of our government in reducing poverty. we have planned to expand this program in all villages of 482 upazilas, which will require atotal of Tk. 5,925 crore Employment: We need to create sufficient employment opportunities in order to make the poverty reduction initiatives successful through social empowerment. recruitment for a total of 1,40,000 posts in the public sector which remained vacant for a long time has been completed. Labour Force Survey 2010 released by Bangladesh Bureau of Statistics (BBS), there are 9.45 crore people in the age group of 15 and above in the country, of which 5.62 crore are economically active. At present, 5.37 crore people are employed. In FY2010-11, through various programme interventions, we have created employment opportunities equivalent to 621.56 lakh man months. Under the various programmes of non- development and development budget of FY2011-12, creation of an estimated total of 656.26 lakh man months of employment is targeted
  • 85.  Foreign Policies: Expatriate Welfare Bank: Our government has established ‘Expatriate Welfare Bank’ which has started functioning for the overall welfare of the expatriates by providing loans to those who are interested to go abroad and working out simpler procedures for them to remit their earnings to Bangladesh. Our government has taken steps to reimburse the expatriate workers who returned home from Libya the money they spent as airfare to come back home and an approximate amount of Tk. 50,000 per head for rehabilitation. Potential New Labour Markets: Our government is taking up steps to expand export and labour markets in different countries of the world including the continents of North America and Africa. Furthermore, we have taken steps to establish new labour wings in the missions of 7 countries where the concentration of Bangladeshi workers is high
  • 86.  Coordination in Skill Development: Our government created ‘Immigration and Skill Development Fund’ for skill development of workers. We already have allocated Tk.140 crore to this fund. A number of skill development programmes have already been taken up within the remit of this fund.
  • 87.  Tax Policy: Government’s tax policy aims not only at mobilising maximum revenues, but also plays a vital role in increasing investment, creating employment opportunities through establishment of new industries, uplifting the status of livelihood, and ensuring social security. Policy and Administration: Our Tax-GDP ratio (9.3 percent) still lags behind many developing countries. Our government planned ‘NBR Modernization Plan’ during 2011-16 before this august House. The main objectives of this plan are: (a) Raising Tax-GDP ratio to 13 percent by 2016; (b) Initiating exemplary modern web-based services for eregistration,e-filing, tax-return, declaration submission, tax payment and rebate within 2016; (c) Reducing the number of tax related suits to 80 percent by the year 2016.
  • 88.  Fundamental Principles in Tax Collection: There are some fundamental principles emanate from our government’s political and economic goals and also from our tax reform plans. • Steps have been taken to formulate a tax policy for developing domestic industries, particularly, for small and medium scale industries and for trade expansion in the current international context; • We are trying to deliver tax-services to assume spontaneous and voluntary participation and enthusiasm among the tax payers; Broad Principles of Taxation: • Continuing the current tax exemption process till 2013 and developing a tax- paying-culture in later periods; • Considering issues to ensure maximum revenue collection by adopting appropriate policy and measures, finally to achieve social justice and protection; • Proposing alternative dispute resolution (ADR) to settle disputes amicably and promptly under Income Tax, VAT and Tariff Act with a view to avoiding procrastination in tax related cases and to creating confidence among tax collectors and tax payers. VAT Act and Direct Tax Act: Meanwhile, VAT and Direct Tax Act have already been drafted. a number of significant features of these two draft acts have already been incorporated in the Finance Bill of 2011. Alternative dispute settlement has been incorporated in these three Ac
  • 89.  Social Recognition for Tax Payers: The Government has also taken initiatives to give social recognition and esteem for paying taxes by the general people against their hard-earned income. In addition to the existing system, the highest 10 tax paying persons and companies will be given tax cards. These persons and companies will enjoy various state privileges and behonored as CIPs. Expansion of Tax Administration: Our government able to complete the expansion of tax administration. Extended tax administration will be working in full swing from this year. At the same time, plans of modernizing public management and professional efficiency are there to develop human resources by imparting training to employees working in revenue administration. Income Tax Simplification of Tax Payment: As a direct tax, income tax plays a significant role in ensuring socio-economic development and establishment of a society based on justice. To ensure this, several steps have been proposed for the augmentation of income tax collection from domestic sources, simplification and modernisation of the system for filing of income tax return and payment of tax.
  • 90.  Income Tax Rate: Our finance minister propose to increase threshold of income for individual taxpayers from Tk.1,65,000/- to Tk.1,80,000/-. I also propose to increase threshold for individuals above 65 years and women from Tk. 1,80,000/- to Tk.2,00,000/- and that of retarded people from Tk. 2,00,000/- to Tk.2,50,000/-. Following the proposed system, people having annual income upto Tk. 12 lakh will get enough rebates. Withdrawal of Tax Exemption Privileges: Our finance minister proposed to withdraw this tax exemption on their salary and allowances to ensure equal treatment of law for all. From now on, they have to pay tax themselves on their basic salary or remuneration received from the government. Taxpayer-friendly Steps: Taxpayers will be encouraged to pay taxes voluntarily, if the tax payment system is made simplified and transparent. filing system of income tax return through online was introduced in two taxes zones. CSR and Individual Investment: Restructuring the fields of Corporate Social Responsibility (CSR) has been proposed to encourage CSR compliance. Company taxpayers will be eligible to get 10 percent tax rebate for CSR donation up to Tk. 8 crores subject to a limit of 20 percent of their income. Tax Holiday and EPZ: I propose to extend the tax holiday period up to 30 June, 2013 and also propose tax holiday for certain areas and sectors keeping conformity with the Industrial Policy. To materialise the dream of Digital Bangladesh of the present government
  • 91.  Indirect Tax: We collect four types of indirect taxes such as (1) Import duty, (2) Export duty, (3)Supplementary duty, (4) Value Added Tax Import Duty and Valued Added Tax Rate of Domestic Revenue Collection at Import Stage: Still 35 percent of total domestic revenue is collected at the import stage despite reduction in customs duties over the years. Continuing Zero Duty on Certain Items: In order to keep the price of commodities within the reach of the people, I propose to maintain zero rate of import duty on rice, pulse, wheat, sugar, edible oil, onion, fertilizer, seeds, life saving medicine and cotton.
  • 92.  Supporting Furniture Manufacturing industries: To protect local emerging furniture manufacturing industries and to discourage imports from abroad, I propose to raise supplementary duty from 20 percent to 30 percent on the imported furniture. Application of Copyright and Intellectual Property Rights: The Customs authority is responsible for preventing the illegal entry of goods in violation of copyright and intellectual property rights. Value Added Tax VAT Act: Value Added Tax plays a key role in revenue earning commensurate with the development of the economy. You will be happy to know that a new draft of Value Added Tax named as Value Added Tax Act, 2011 has been completed.
  • 93.  Expansion of SMEs: Our government proposed to increase the supplementary duty on electric fan from 20 percent to 30percent and impose 20 percent supplementary duties on electric multicord, switch & socket. Reduction of VAT: I am proposing VAT exemption for some products to gear up employment generation through the Reduction of VAT development of local industries. * To keep in mind the protection of environment, the supplementary duty on Particle Board is exempted. * Supplementary duty on Paints is reduced by 5 percent * Withdrawal of supplementary duty applied to concrete ready mix, hollow concrete block, plastic goods (for kitchen & household) * Withdrawal of VAT on hand-made Biscuit and Cake valued at Tk.100 (per kg.) at the production stage * At present, Tk. 800 tax is imposed on SIM card under VAT. For a long time, there has been a demand for reducing the tax. In this context, tax on SIM card is reduced to Tk. 600.
  • 94.  Modernization of VAT System: Within a very short time, this system will be expanded across the country. Besides, a project named Modernization of VAT Environment (MOVE) will be lunched shortly to bring more VAT offices under automation. Taxpayers whose yearly VAT payment exceeds Tk. 5 million will be under compulsion to maintain all documents by using relevant software. Awareness building on VAT: Value Added Tax Day’ & ‘Value Added Tax Week’ to create awareness among taxpayers. VAT ordinance was promulgated on 2 June, 1991 and the ordinance turned into the Act on 10 July,1991.
  • 95.  The finance Minster plan to implement in this sector.At the same t5ime he presenting a report titled ‘Progressing Towards Digital Bangladesh’ before this budget.This report will be apprise the nations about our various programmes, their progress and future planes to built Digital Bangladesh. The programmes are_____ 2nd Submarine Cable: The government has made a considerable progress in terms of connecting Bangladesh with the 2nd submarine cable.They are completing to involve private sector with this activity.All Upzilas of the country are, by now. under the coverage of mobile internet.T he number of ISPs across the country has increased to 282. Internet: Through dial-up internet, they have brought 475 out of 482 upazilas under internet facility.The work for installation of 1,450 kilometer of optical fibre is in progress across the country.Bandwidth capacity has increased from 7.5 Gbps to 44.6 Gbps and have plan to increase it to 140 Gbps gradually.
  • 96.  Telecommunication network has grown over the years with the nexus between public and private seactor.PSTN based service providers have now increased to 12, while the number of mobile phone operators is 6. E-Commerce: The finance Minister said that, they will be able to start e- Commerce by 2012.Formulation necessary legal and regulatory framework for introduction of digital e-commerce.
  • 97. Conclusion:The budget 2011-12 is a high ambitious budget. Some targets in the budget are so much far from the reality. To get that target Bangladesh need to solve many problems which is occurred long years ago. To get the ultimate solution of those problems within a fiscal year is impossible. We can hope that bangladesh could fulfill those targets in some years but not in FY 2011- 12. But some targets were really ausume ,if our government make the proper management many targets of budget can make true.
  • 98.  This budget will be effective if there have enough affectation in development sector. Agriculture sector will be improves if sub-sides are increased. In industrial sector if the tax rate is decreased and also give some sort of subsidies for owners to give employee and worker many facilities than industrial sector may be developed.

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