The document provides an analysis of Bangladesh's national budget for fiscal year 2017. Some key points: 1) The proposed budget of Tk. 3,406.05 billion is the largest in Bangladesh's history and 28.74% higher than the previous fiscal year. 2) Major allocations include Tk. 500.17 billion for education, Tk. 399.51 billion for interest payments, and Tk. 359.20 billion for transportation. 3) The budget aims to achieve a GDP growth target of 7.2% for FY2017 through expansionary fiscal and monetary policies. However, sluggish private investment and low revenue collection could hamper growth.

1. s
Bangladesh
Budget Analysis
and Major
Economic
Challenges for
FY17

2. Bangladesh Budget Analysis and
Major Economic Challenges for FY17
I. Introduction:
The current macroeconomic issue is the historicallylargest national budget of Bangladesh for the fiscal year
2016-17. The budgethasbeenproposedatthe time when,there isneedforaccelerationineconomicgrowth,
poverty reduction, and creation of higher employment opportunities, to implement the 7th
Five Year Plan;
formulationof actionplantoimplementthe
Sustainable Developments Goals (SDGs) is underway and when need for formulating Least Developed
Countries (LDC) graduation strategy. The main objective of the budget gives the impression to have – high
revenue growthtargetedforunderwritingoverreachingexpenditure;harmonizationof taxesandtariff inline
withthe newVATand SD (Supplementary Duty) Act 2012; higherallocationof resourcesinbuildingphysical
infrastructure to enhance capacities, and enhanced resource allocation for social sector. At this time,
government considers to have a comfortable macroeconomic environment existing due to low inflationary
pressure,declininginterestrates,lowglobal commodityprices,manageable fiscal deficitandresilientgrowth
of exportearnings,favorableBalanceofPayment (BoP) andaugmentedforexreserve,andwithrobust Gross
Domestic Product (GDP) growth.At the same time,the economyisfacingerosionof exportcompetitiveness
due togaininnominalexchangerate;risingnon-foodinflation;delayeddeliveryof policysupporttorice output
and low returns from cultivation and overdue rationalization of oil prices favoring the richer sections. So, in
thissituationgovernmentneedstobe concernedaboutsluggishprivate investment,low rate of jobcreation,
credibilitygapdue topoorfiscal planning,highdomesticborrowing,unachievedtax revenuetarget,weakADP
implementationincludingprojectaidandpersistentweaknessinestablishinggoodgovernance inthe financial
sector.
However, considering all of the above issues of the budget FY17 and present fiscal year performance, the
analysis emphasizes on various macroeconomic issues to predict what will be the next fiscal year’s
performance.

3. II. Budget Highlights:
On 2nd June (2016), the Finance Minister AMA Muhith has proposed the largest national budget in the
Parliament for the fiscal year 2016-17. Based on seventh five years’ plan, the government aims to achieve a
growthof over 7% in the fiscal year 2016-17. Amongthe leastdevelopedcountries,Bangladeshhasachieved
significantprogressinMillenniumDevelopmentGoals(MDGs).Bangladeshhasproventobe successful inmost
socio-economic indicators. Based on the targets of seventh five years’ plan, Bangladesh has significantly
contributedtoreducingpovertyinallitsforms;achievedfoodsecurityandimprovednutrition;withpromotion
of sustainable agriculture,developingeducationsector,achievedgenderequalityandempoweredwomenand
girls;improvedWatermanagementandsanitation,energysector,sustainableeconomicgrowthandsoon.
Generally, the new big-budget proposesto achieve higher economic growth through expansionary monetary and fiscal
policy.
Budget FY17 at a glance
• GDPgrowth targets 7.2%
• Govt. sets 6% inflationtarget
• Budget deficit is Tk.97,853 crore
• Revenue target proposedat Tk.242,752 crore
• Tax-free income ceiling unchanged at Tk.2.5 lakh
• New VAT lawto come intofull effect from July2017
• Duty-free import of safetyequipment for exporters
• Package VAT stays withratesdoubled
• Agriculture Ministrygets Tk.13,675 crore
• Education Ministrygets massive boost (Tk26,847 crore)
• Allocationfor primaryeducationwent upbyover 50%
• Tk.3,738 crore increasedfor defense
• Power allocationdrops (Tk15,036 crore)
• Tk.21,322 crore allocated for local government
• Healthsector allocationupbya third(Tk17,487 crore)
• Ministryof Water Resources gets Tk.3,759 crore
• 28.11% increment for WomenandChildrenAffairs
• 20% corporate tax for RMG
• Budget for Railwaygets significant increase
• Bridges Divisiongets Tk.9,289 crore
• Tk.100 crore allotted for Tourism

4. The largestnational budgetinthe historyhasproposedtobe aboutTk.340,605 crore,whichisTk.760 billionover
than that of the ongoingfiscal year(around29 percentbiggerthanthe
current fiscal year) and the budget
would be 17.4 percent of the gross
domestic product (GDP). In terms of
the GDP share, the planned budget is
almost same as the budget for FY16.
The revenue target in the proposed
budgetis
Tk.2,427.52 billion which is 36.82
percent higher than the current FY’s
revised budget. In comparison, the
present fiscal year’s (FY16) revised
target is 21.55 percent higher than the
target of FY15. However, the expected
budget deficit is BDT 978.53 billion
which is 5 percent of GDP and 28.73
percent of the budget. The deficit will
be met through borrowing from
external sources as well as domestic
sources (bank and non-bank
borrowing).
Over the period, proposed annual budget,
expenditure, development and non-
development expenditure, have been
increasing
significantly. In the proposed budget, allocation
of non-developmentexpendituresis
Tk.1,889.66 billionwhichis55.5 percentof the
budgetanddevelopmentexpenditure is
Tk.1,170.27 billion,34.4 percentof the budget.
Table-1: Budget Overview & Growth
Description
FY'17
(Proposed)
Growth
over FY'16
FY'16 Growth Over
(Revise) FY'15
FY'15
(Actual)
Budget Size 3406.05 28.74 2645.65 29.45 2043.76
Total Revenue 2427.52 36.82 1774.22 21.55 1459.65
Budget Deficit 978.53 12.29 871.43 49.19 584.11
Bank Borrowing 389.38 22.93 316.75 6062.45 5.14
Non Banking Borrowing 226.10 -25.87 305.00 -39.79 506.56
External Borrowing 363.05 45.28 249.90 243.27 72.80
Source:Ministryof Finance
Table-2: Budget at a Glance
Description
FY'17
(Proposed)
FY'16
(Revised)
FY'15
(Actual)
NBR Tax Revenue 2031.52 1500.00 1239.77
Non-NBR Tax Revenue 72.50 54.00 48.21
Non-Tax Revenue 323.50 220.22 171.67
Total Revenue 2427.52 1774.22 1459.65
Non-Development Expenditure 1889.66 1503.79 1189.92
Development Expenditure 1170.27 959.08 636.76
In Which Annual Development Programm 107.00 910.00 603.76
Other Expenditure 346.12 182.78 217.08
Total Expenditure 3406.05 2645.65 2043.76
Budget Deficit 978.53 871.43 584.11
Financing 978.53 871.65 584.11
External Source 363.05 249.90 72.80
Domestic Source 615.48 621.75 511.31
In Which, Banking Source 389.38 316.75 5.14
In Which, Non Banking Source 226.10 305.00 506.56
GDP 19610.17 17295.67 15158.02
Source: Ministry of Finance
1136.191321.70
1635.89
1917.38
2224.91
2505.51
2951.00
3406.05
0
500
1000
1500
2000
2500
3000
3500
4000
Figure 1: Proposed Budget Size (BDT Billion)
BDT (Billion) Expon. (BDT (Billion))
Source: Ministryof Finance

5. Consideringall the sectors,Educationhasgotthe highestallocation(16.1%) followedbyPublicSector(14.4%) and
InterestPayment(12.2%) respectively.
AllocationinAnnual DevelopmentProgramme (ADP) hasbeenincreasingeveryyearinthe nationalbudget.In
FY12, allocation of ADP in human resource sector was Tk.85.77 billion, agriculture and rural development
sector was Tk.123.13 billion, with power and energy sector being Tk.79.27 billion, transport and
communicationsectorwasTk.51.78 billionandothersectorswasTk.37.37 billion,whereas,afterfouryearsin
FY16, the allocationincreasedtobe Tk272.03 billion,Tk.270.94billion,Tk.149.51 billion,Tk.285.58 billionand
Tk.128.98 billionrespectively,innationalbudget.InupcomingFY17,the governmentmaintainsthesame train.
The total proposed ADP size in the Budget is Tk.1107 billion which is 21.6% higher than that of FY16 revised
budgetand94.6% of the total developmentexpenditure.
85.77 123.13 79.27 51.78 37.37
114.20
156.22
101.35
79.15
47.62141.70
165.67
102.29 107.33
53.21
161.91
195.30
58.44
132.91
55.17
195.55 242.01 165.44 190.84 116.16
272.03 270.94
149.51
285.54
128.98
Human Resource Agriculture& Rural
Development
Power and Energy Transportand
Communication
Others
Figure 3:Sectoral Allocation inAnnual DevelopmentProgramme (BillionTaka)
Actual 2011-12 Actual 2012-13 Actual 2013-14 Actual 2014-15 Revised 2015-16 Budget 2016-17
Source:Ministryof Finance

6. Figure 4: Financing Sources & Budget
Revenue FY17
Source: Ministryof Finance
Figure 5:ADP Allocation FY'17
Source: Ministry of Finance
However,inFY17 ADP allocatedinHumanResource sector(Education,health,andothers) is25 percent,Agriculture
& Rural Developmentsectoris24 percent,13 percentto the energysector,26 percenttoTransport and
communicationsectorandthe rest12 percentisallocatedtoothersectors.
The governmenthasscaledupitsrevenue generationtargettoTk.2,427.52 billioninFY17.
Where,60 percentrevenue willbe collectedfromNBRtax;18percentfromdomesticsources;11percentfrom
external sourcesand9percentand2 percentwill be fromnon-taxandnonNBRtax,respectively.The targeted
revenue is12.4 percentof the GDP whichis 2.1 percentgreaterthan the previousfiscal year(10.3 percentof
GDP).The Tax-GDPratio(around9.6 percentinthe FY15 actual budget) ismuchlowerthanourpeercountries
(rangingfrom20
percentto 32 percent).
NBR Tax
Revenue
60%
Non-NBR
Tax
Revenue
2%
Non-Tax
Revenue
9%
External
Source
11%
Domestic
Source
18%
Human
Resource
25%
Agricultur
e & Rural
Developm
ent
24%
Powerand
Energy
13%
Transport
and
Communic
ation
26%
Others
12%

7. The total revisedbudgetdeficitinFY16isTK871.43 billionandthe nextfiscal yearitisestimatedtobe TK978.53
billion,which is 12.29 percent higher than FY16. This
year’s budget deficit is kept unchanged to that of the
previous year’s budget - 5 percent of the GDP.
However,
the budget deficit financing will occur 37 percent
(Tk.363.05 billion) from the external source and 63
percent (Tk.615.48 billion) from the domestic source
where 23 percent(Tk.226.10 billion) fromnon-banking
source and 40 percent(Tk.389.38 billion) frombankingsource inFY17
In FY17, the government estimated, mainly,Tax Base resources to come from income and profit tax, VAT,
import duty and supplementary duty which are Tk.719.40 billion, Tk.727.64 billion, Tk.224.50 billion and
Tk.300.75 billionrespectively.Onthe otherhand,Non-Tax
Base resources will
collect Tk.323.50 billion from
non-tax revenue, Tk.307.89
billionfromforeignborrowing,
Tk.307.89 billion from bank
borrowing and Tk.226.10
billion from non-bank
borrowing. The revenue
expenditure will be used
mainly in education sector
(Tk.500.17 billion), interest
payment (Tk.399.51 billion),
transport sector (Tk.359.20
billion), public service sector
(Tk.245.95 billion), local
government sector (Tk.232.58
Table-3: Budgetary Resources(figuresinBillionTaka)
ResourcesCome From
Tax Base
Taxes on Income &
Profit
VAT
ImportDuty
SupplementaryDuty
OtherTax
719.40
727.64
224.50
300.75
59.23
Non-TaxBase
Non-NBRTax
Non-Tax Revenue
Foreign
Borrowing Bank
Borrowing
Non-Bank
Borrowing
ForeignGrant
72.50
323.50
307.89
307.89
226.10
55.16
ResoucesGoingTo
PublicServices
Defense Services
Local Government
PublicOrder
Education
Health
Social Security
245.95
196.09
232.58
191.00
500.17
158.83
177.45
Fuel andEnergy
Agriculture
Transport
Subsidies
Pension &
Gratutities
Interest
Others
150.14
130.03
359.20
177.29
169.16
399.51
318.65
Source:Ministryof Finance
External
Source
37%
Banking
Source
40%
Non
Banking
Source
23%
Figure 6: Budget Deficit Financing FY17
Source:Ministryof finance

8. billion), for defense services (Tk.196.09 billion), Fuel and Energy sector (TK.150.14 billion), agriculture sector
(Tk.130.03 billion),healthsector(Tk.158.83 billion)andTk.177.29 billionwill be allocatedforsubsidies.
III. Major Economic Challenges:
1. GDP Growth:
The governmenthasfixed7.20percentGDPgrowthtarget forFY17. InFY16, targetgrowthrate was7 percent
whichis0.2 percentlessthanthe FY17 GDP growthtarget.AchievedgrowthinFY16 (provisional) is7.05%,an
appreciable accomplishment considering the sluggish pace of recovery in global economy. However, during
thistime the numberof factorssuchasthe favorable politicalatmosphere,privatesectorcreditgrowth(stood
at 15.2 percentwhichexceededthe targetasof March2016), garmentsexportgrowth(increasedsignificantly)
and private consumption(increasedduetothe salary increase of governmentemployees) will helptoachieve
growthtarget.
In FY17, governmenteffortstodevelopinfrastructurewouldhelpmaintainpositive private sectorinvestment.
ADP,bothitssize andimplementationwouldbe steppedup.Though,ADPimplementationinthe currentfiscal
year islow comparedto last several years.Also,governmentemployeeswill getpaidinthe new scale,which
will help increase consumption expenditure. Expected export, particularly to the US and the EU, to rise and
hope to stable the politicalatmosphere athome andisexpectedtocontinue inthe nextfiscal yearaswell.An
upswing in foreign remittance inflows and gradual decline in inflation will boost individual consumption
spending. Taking all this into consideration,the government is confident to achieve 7.2 percent GDP growth
6.46 6.52
6.01 6.06
6.55
7.05
6.70
7.00
7.20 7.20 7.30
7.00
7.20
5
5.5
6
6.5
7
7.5
FY'11 FY'12 FY'13 FY'14 FY'15 FY'16 (P) FY'17
Figure 7: GDP Growth
Actual Target
Source:Ministryof Finance

9. target in FY17. However, the higher growth rate will not be attainable if private investment stagnates, a
shortfall in revenue collection and low implementation of ADP along with the lack of infrastructural
developments.
The GDP growth rate duringthe lastfive fiscal yearsdid not achieve theirtargets.InFY11 to FY15, the government
targetedratesof growth were 6.70 percent,7.00 percent,7.20 percent,
7.20 percent and 7.30 percent respectively, but the actual growth rate became 6.46 percent, 6.52 percent,
6.01 percent,6.06 percentand6.55 percentrespectivelyduringthisperiod.The GDPinBangladeshexpanded
7.05 percentyear-on-yearinnine monthsof FY16.But,notingthe currentstate of economyanddevelopment,
and the recent trend in growth in GDP, it is doubted that government's recent estimation of 7.05 percent of
the growth in GDP is likely to be achieved at the end of the current fiscal year. GDP Annual Growth Rate in
Bangladeshaveraged5.72percentfrom1994 until 2016, reachinganall-timehighof 7.05 percentin2016 and
a record lowof 4.08 percentin1994.
Considering the current performance of the major indicators of the economy, if the government could not
achieve itsgrowthtargetin the currentfiscal yearas well asnextfiscal year, thenitwill be difficulttoachieve
GDP growthtarget 7.20 percent.
2. Revenue Collection:
The governmenthassetthe total revenue targetat Tk.242,752 crore (tax and non-tax revenue) forthe FY17,
which is around 12.4 percent of the total GDP. Projected deficit is Tk.97, 853 crores. Historically, the
government has never achieved its revenue target and the dispersion is rising in last three budgets. Only in
FY12 the target revenue was achieved. The average deviationof actual revenue from target revenue for the
lastfive fiscal years(FY12-FY16) stands at 8.9 percent.
The National Boardof Revenue (NBR) wasassignedtomobilize Tk.203, 152 crores for the FY17, which is 10.4
percent of the GDP, 83.6 percent of the target revenue and 35.4 percent higher from the revised target of
FY16. In the revised budget of FY16, this target was Tk.1500 billionwhich was 84.5 percent of total revenue.
For FY17, the Non-NBRtax wassetat Tk.7250 crore or3 percentof total revenue andNon-TaxReceiptwasset

10. at Tk.32,350 crore or 13.3 percent of total revenue. But in the FY16, initial budget for Non-Tax Receipt was
Tk.261.99 billionor12.6 percentof total revenue.
Government expectation of this ambitious revenue target will be achievable if there is automation in tax collection,
reductionof tax exemptionfacilities,expansionof the tax base and
The collectionof tax revenuelagsfarbehindthe targetsetinthe budgetFY16.The targetcollectionof revenue
wassetat Tk.208, 443 crores,whereasthe actual amountof revenue collectionhasstoodatTk.119,324 crores
during the first nine monthsof the current fiscal year; representing only 57.25 percent of the target. So, the
actual collectionsof tax revenue (bothNBRand Non-NBR) andNon-tax revenue are not satisfactorylevelsin
comparisonwiththe target.The targetsof tax revenue andnon-tax were set at Tk.182, 244 croresand Tk.26,
199 crore respectively,whilethe targetsof NBRandNon-NBRtax revenue were Tk.176,370 crores and Tk.58,
74 crores respectivelybut the actual collection of NBR appears to be Tk.101, 211 crores and Non-NBR Tk.4,
066 crores up to March FY16 whichis57.38 percentand 69.22 percentrespectively.The actual collectionsof
tax revenue andnon-tax revenue duringthe firstninemonthsof FY16have beenTk.105,277 croresandTk.14,
047 crores representing 57.76 percent and 53.61 percent during the same period of time. However, after
analyzingthe situationof the presentfiscal year,itwillbe quite impossible toachieve highambitiousrevenue
target innextfiscal year.
if significant administrative reform is done.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
50000
100000
150000
200000
250000
300000
Budget FY'17 Revised FY'16 Actual upto March
FY'16
Figure 8: Collection of Revenue
Total TaxRevenue
NBR Tax
Non-NBR Tax
Non TaxReceipt
Total Tax Revenue (% of GDP)
NBR Tax (% of GDP)
Non-NBR Tax (% of GDP)
Non Tax Receipt (% of GDP)
Source: Ministry of Finance

11. 3. GovernmentExpenditure:
Total expenditure hasbeenestimatedtobe Tk.328, 624 crores inthe proposedbudgetfor FY17 which is 16.8
percentof total GDP and27.9 percenthigherthanthe revisedbudgetforFY16.Amongtotal expenditures,the
government has estimated Tk.117, 027 crores for development expenditures which are around 6 percent of
GDP and 22 percent higher than that of revised budget FY16. On the other hand, the size of proposed ADP
allocationisTk.110, 700 crore whichis 5.6 percentof total GDP forFY17 and 14.1 percenthigherthanthat of
revisedbudgetfor
During the first six months of FY16, only 30.7 percent of the total non-development budget has been
implemented whereas,only 41 percent of the total ADP has beenimplementedduring the first nine months
of the current fiscal year. However, the National Economic Council has recently revised the development
budget at Tk.91, 000 crore from Tk.97, 000 crore. The actual amount of non-development expenditure was
Tk.56, 629.8 crores and developmentexpenditure wasTk.17703.8 crore duringthe firsthalf of FY16 whichis
not more than 30.7 percentand 17.3 percentrespectively.Butthe amountof non-developmentexpenditure
and development expenditure target has been decided to be Tk.184552.1 crore and Tk.102559 crore
respectivelyinFY16.

12. The implementation of government expenditure is not satisfactoryat any period. Because of the actual amount of
total governmentexpenditure wasTk.76,798 crore inFY15 whichisonly30.7 percentof target.In addition,the rate
of growthin actual governmentexpenditure forthe firsthalf of currentfiscal yearhas become negative 0.1percent
in comparison with the government expenditure during the corresponding period of the previous fiscal year.
However,duringthefirsthalfof FY15,the actual amountof non-developmentexpenditurewasTk.59,789 croresand
ADP expenditure was Tk.17, 009 crores which are representing only 35.1 percent and 21.2 percent of respective
targets.So, the conclusionis,inthe upcomingfiscal year,thishistorical behavioringovernmentexpenditure willbe
continuing.
Of the amount, Tk.38, 938 crores, 2 percentof GDP, will come from the banking sector which was Tk.31, 680
croresor 36.3 percentof deficitinthe FY16’srevisedbudgetandTk.22,610 crores,1.1 percentof GDP, will be
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Budget FY'17 Revised FY'16 Actual up to March
FY'16
Figure 10: Government expenditure
Total Expenditure
Non-Development Exp
Development Exp
In which, ADP
Other Expenditure
Total Expenditure (% of
GDP)
Non-Development Exp
(% of GDP)
Source: Ministry of Finance
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0
20,000
40,000
60,000
80,000
100,000
120,000
Budget FY'17 Revised FY'16 Actual up to March
FY'16
Figure 11: Budget Deficite
Budget Deficit Budget Deficit(% of GDP)
Source: Ministry of Finance
Budget Deficit and4.
Financing:
The budget deficit for the
be Tk.97FY17 will , 853
crores or 5.0 percent of
GDP which is 12.3 percent
higher than the revised
budget of FY16.
Government plans to meet
the deficit by borrowing
Tk.61, 548 crores from domestic sources, which is 3.1 percent of the GDP.

13. collected from government savings instruments and other non-banking sources which is 25.8 percent lower
than the revisedbudgetof FY16 and23.1 percentof total deficit.
The restof the deficitamount,Tk.36,305crore or1.9 percentof the GDP,willbe financedfromexternalsources
whichwere TK.24,990 crore or 28.66 percentinthe FY16’s revisedthe budget.The growthintargetedforeign
financingis45.27 percentas comparedtoFY16’s revisedbudget.
However, in FY15 the budget deficit was
targeted at Tk.67, 552 crores, which was
assumedtobe financedbyTk.24,275 crores
from external sources, Tk.43, 277 crores
from domestic sources where Tk.31, 221
crores from the banking system and Tk.12,
056 croresfrom non-banksources.
The actual budget deficit has become Tk.
5,944 crore duringthe firstninemonthsof the
current fiscal year, which has been financed
by Tk. 2,359 crores fromexternal sources,Tk.
3,538 crore from domestic sources. It is
conspicuous that because of low
implementation of the budget, the budget
deficit has also remainedlow during the nine
monthsof FY15, the same scenariohappened
inFY16. So itisverylikelythatsimilarscenario
will be seeninnextfiscal year.
-5.0
0.0
5.0
10.0
-100,000
0
100,000
200,000
Budget FY'17 RevisedFY'16 Actual up to March
FY'16
Figure 12: Financingsource
Financing External source
Domestic source In which, Banking source
Source: Ministry of Finance
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Budget
FY'17
Budget
Revised
FY'16
Actual
FY'16 (Up
to April)
Budget
Revised
FY'15
Actual
FY'15
Figure 13: Yearly Foreign Aid (in crore Tk.)
Foreign Aid (Yearly)
Source: Ministryof Finance

14. 5. ForeignGrants / Aid:
The total foreignaiddisbursementsduringJulytoApril,FY16increasedbyUSD0.19 billionor7.82 percentand
stoodat USD2.68 billioncomparedwithUSD2.48billionduringJulytoApril,FY15.
Figure 14: Total Foreign Aid and Growth
The net receipts of foreign aid were also higher and stood at USD1.94 billion during July to April, FY16 compared
withthe same periodof the precedingyear.
However, Bangladesh government has been decided TK.5, 515.53 crores in the proposed budget for FY17,
whichis 9.72 percenthigherthanthe revisedbudgetFY16. In the presentfiscal year,up to April 2016, actual
foreignaidwasTk.3,968.15 crore whichisa little bitlowerthanthe FY15.But inFY15, the gapbetweenactual
and revisedbudgetappearedtobe Tk.1,347.78 crores or 31.15 percent.
In this situation, in FY16, total investment, in terms of GDP, stands at 29.4 percent which is insufficient for
pickingthe pace of GDP growthup to 8 percentinthe mediumterm.The governmentistryingtoraise public
investmenteachyear,butthe executionof annual developmentprogramfallsshortof expectationduetolack
of implementationcapacity.
Particularly,the utilizationrate of foreignaidisfairlylow.Soitwill be a biggerchallenge forthe governmenttoproperly
utilize foreignaidat presentandin nextfiscal year. In thissetting,the governmentisworkingon an implementationof
structural reforms in project design and execution stages namely, formulation of policies and procedures for finalizing
0
100
200
300
400
500
600
700
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Foreign Aid Growth
Total AidFY'15 (InmillionUSD)
Total AidFY'16 (InmillionUSD)
Source: Bangladesh Bank

15. projectpreparatoryworkpriortoprojectapproval.The governmentissettingasideTk.100 crore inthisyear'sbudgetfor
this purpose. Alongside, the government is working on formulating a project implementation manual and extending
training programs for project employees. The government has also decided that each project will have one project
director and one officer who will not be appointed as project director for more than one project. If government fail to
implementall of the above issues,thenitwill be difficulttoachieve the targetof foreignaiddisbursementsinFY17.
6. Remittance:
Remittance receiptsdecreasedby3.05
percentandstoodat USD13.45 billion
duringJulyto May, FY16 comparedwith
the same periodof the previousyear.
Remittance receiptsdecreasedsharplyby
8.79 percent(y-o-y) andstoodatUSD1.21
billioninMay2016 comparedto the same
monthof the previousyear.While
remittance receiptsincreasedby1.22
percent(m-o-m) inMay2016 comparedwiththatof April 2016.
However,governmentassumption,overseasemploymentispostingasignificantincrease inrecentmonthsof
the present fiscal year and it will be continuing next fiscal year due to our diplomatic efforts coupled with
various initiatives on expanding labor markets, developing capacity, and ensuring safe immigration.So the
remittance inflows will gather impetus very soon. But it will be quite difficult for Bangladesh government to
send a significant amount of manpower abroad without proper infrastructure development and private
sector’scontribution.
During the last few years’ manpower, export fell sharply due to the growing global recession, lower price of
foreign currencies, political problem in the Middle East, and fall in oil price. Middle Eastern countries, the
largest manpower market for Bangladesh,are now facing a crisis due to fall in oil price and political turmoil,
whichhasdirectlyorindirectlyaffectedourremittanceinflow.So,itwill be verydifficulttoachieveremittance
target at presentandupcomingfiscal year.
800
900
1000
1100
1200
1300
1400
1500
1600
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Figure 15: Monthly Remittance Trend
FY'15 (US$ million) FY'16 (US$ million)
Source: Bangladesh Bank

16. 7. Export and Import:
The performance of external sectorof the economyduringthe firstten monthsof the current fiscal year has
been unsatisfactory due to sluggish growth in the export which led to the negative trade balance as the
previousyear.So, it is easyto assume from the past data that the performance mightfollow the same trend
as now.Export earningsincreasedby8.95 percentduringJuly-May,2015-16 comparedto the same periodof
the precedingyearandstoodat USD30.67 billion.WhileexportearningsinMay2016 rose by 6.54 percent(y-
o-y) comparedtothatof the previousyear.Exportearningsof May2016 increasedby12.86 percentcompared
withthat of April 2016 and stood at USD3.03 billion.Exportreceiptsexceededthe strategictargetfor Julyto
May 2015-16 by 1.47 percent.
However,importpaymentsduringJulytoApril,FY16increasedby4.80 percentand stoodat USD34.86 billion
againstUSD33.27 billionduringJulytoApril,FY15.Settlementof importLCsduringJulytoApril,FY16increased
by 4.40 percentandstoodat USD33.38 billionagainstUSD31.97 billionduringJulytoApril 2014-15.

17. 8. Industrial term loans:
The disbursementof total industrial termloansduringJanuarytoMarch 2016 increasedby
36.81 percentandstoodat Tk.18, 264.60 crores as comparedto Tk.13,350.62 crore during
Januaryto March 2015. On the otherhand,the recoveryof industrial termloansincreasedby
18.21 percentandstoodatTk.12,436.75 crore duringJanuarytoMarch 2016 againstTk.10,520.96 crore during
the same period of the previous fiscal year. The outstanding amount of industrial term loans at the end of
March 2016 stoodat Tk.142,145.66 crore whichishigherby23.06 percentcomparedtolast year.
However, in next fiscal year, the government has a plan to borrow BDT 389.38 billion or 39.8 percent of the
deficit from banking sector which was BDT 316.8 billion or 36.3 percent of the deficit in the FY'16 revised
budget and is 22.93 percent higher than the present fiscal year. Normally, government expansionary fiscal
policyincreasesspendingtoboost the economicactivity,whichleadsa higherinterestrate.Generallyhigher
interestrate affectsprivate investmentasthe cost of fundsincreasesleadingtocrowdingout effect.Though
at present,there’sampleliquidityinthe bankingsystem, private sectors'creditdemandisyettofullypickup.
So, there is less possibility of a crowding out effect due to the government's borrowing from the banking
system.Butat the same time,the extraamountof 22.93 percent maycreate crowdingouteffect.

18. 9. Inflation:
The rate of inflation has been declining since the beginning of the current fiscal year. The twelve -month
average general inflation moderated to 5.98 percent in May 2016 from 6.04 percent in April 2016 and 6.46
percent for the same period in FY15. The average food inflationfell to 5.07 percent in May 2016 compared
with5.27 percentin April 2016 but at the same periodin FY15, it was recorded6.81 percentor 1.74 percent
higherthanMay 2016.
While the average non-foodinflation rose to 7.36 percent in May 2016 from 7.21 percent in April 2016 and 5.98
percentforthe same periodinFY15.
The pointto pointgeneral inflationwasmarginallylowerby0.16 percentage pointandstood at 5.45 percent
in May FY16 from 5.61 percent in April FY16 and 6.19 percent in May FY15 due to fall in both food and non-
foodinflation.Foodinflationmarginallydecreasedto3.81percentinMayFY16 from3.84 percentof May FY16
and 6.23 percent in May FY15. On the other hand, non-food inflation fell to 7.92 percent in May FY16 from
8.34 percentinApril FY16,butinMayFY15 itwas6.14 percent,whichis1.78percentlowerthanlastyear(May
FY16).
However, in the next fiscal year, the government aims to keep inflation below 6 Percent. Bangladesh
government strongly believes, inflation will go below 6 percent because there is a possibility of a decline in
pricesof commoditiesinthe internationalmarketinnextfiscalyear.Moreover,continuousagricultural growth
and improvement in transportation or distribution system will help to keep food inflation within a tolerable
limit. On the other hand, oil price in the world market has lowered during this fiscal year and Bangladesh
governmenthasalreadycutoil priceswhichwill helpreduce non-foodinflation.

19. Besides, the government would ensure continued coordination of fiscal and monetary policies. However,
considering all of those things, the government has fixed a target to contain inflation at 5.8 percent during
FY17.
Bangladesh government has reduced overall inflation rate significantly due to satisfactory agricultural
production, reduction of commodity prices including fuel, prudent macroeconomic management and the
normal flowof supplyof goodswithpoliticalstability.Butintheupcomingfiscal year,itwill bequiteimpossible
to maintain targeted inflation rate because there are a lot of examples in the world economy that higher
revenue expenditurecreatesmore inflation.Thismaybe naturaldue tohigherdemandforgoodsandservices,
price speculation for businessmen and traders for new pay scales. Thus, higher inflation in the domestic
economy causes currency devaluation, and finally, the government would have to bear extra payments for
external debtservices.

20. A critique of FY 2016-17 Budget
The sloganof the national Budget2016-17 was:'marching towards growth, developmentandequitable
society'.Whenemploymentiscreatedforgeneral peopleandearningincreasesintheirhandswithaleapin
theirlivingstandard,itrepresentsthatthe resultof growthanddevelopmenthas,tosome extent,reached
them.Underthisprocessof development,all people contribute tothe developmentandavail the outcome
of development.
The benefitsof ourgrowthreachedthe masspeople tosome extentoverthe yearsbutnotas much as it
shouldinline withitssteadyrate of increase.Assetshave beengrabbedbythe richthanksto ourfaulty
policies,erraticgovernance culture andcorruption-supportive administration.
As such,equitable societyisafar-away dream.Underthiscircumstance,the sloganinspiresus,butsome
provisionsof the proposedbudgetandfinance bill weakenthe spiritof the slogan.The followingare the
dark side of the budget2016-17 and finance bill 2016, and maycreate bottlenecksformakinganequitable
society:
EXCESSIVE TAX BURDEN FOR LOWER INCOMEGROUP: The budgethasno strategyto enhance revenue
collectionefficiently,butthe contentsof finance bill exposessome brutalityincollectingtax fromlower
income group.These are: (A) Taxable limithasnotbeenincreasedasperfinance bill 2016 and the limitof
investmentallowance hasbeendecreasedto20 from of 30 per centin 2015-2016. The rate of tax rebate has
beenre-fixedfrom15to 10 percentdependingonthe levelof income insteadof flat15 per cent.Asa result
of these provisions,tax increaseof individual assesses,particularlythose inthe lowerincomegroupwill be
affectedsignificantly.Salariedemployeesare payingtaxesfullyastheircompanypayssalaryafterdeducting
tax at source,as required.Theyhave nowayof payingtaxes,orevadingpayment,likeotherprofessional
groupsand businessmen.Inthe latter'scase,we see verylittleeffective effortsorstrategicplanningtobring
themundertax net.(B) Incase of personswithsalaryup to BDT 16,000 from the governmentunderMonthly
PaymentOrder(MPO),whichisnottaxable,there isthe needtohave Tax IdentificationNumber(TIN).Thisis
reallyridiculousandcontradictorytothe sloganto create an equitable society.(C) Payingtax oncar basedon
the capacity of motor wouldbe consideredastax onincome of the assesseesandallowedtoadjustwithtax
payable in2015-16. By insertinganewsection68B inthe proposedfinance bill 2016-2017, thisfacilityhas
beendilutedashavingacar will be treatedasdeemedincomeandtax shall be paidonthisin line withthe

21. capacityof motorstatedin that section.Assuch,asseeseeswill have topayadditional tax onthisdeemed
income.(D) A newsection82c hasbeenincorporatedstatingthatminimumtax will notbe lessthanthe tax
deductedatsource.In otherwords,notax will be refundedorallowedtoadjustinthe nextyear.(E) In Value
AddedTax (VAT),tax collectionatequal rate irrespective of the economicstandingsof the people isa
regressive method.
HIGHER INCOMEGROUP RELAXED: The rate of surcharge forwell off people isnotrational atall.How will
an equitable societybe createdbyimposingsurcharge ontax payable insteadof payingwealth tax
separately?Nowealthownertalksonthisas theywill fall intothe trap.The numberof payersof surcharge is
not more than six thousandwhereasvaluablecarsregisteredwithBangladeshRoadandTransport Authority
(BRTA) may be more than aroundhundredthousand.Havingalotof apartments,housesandplotsshouldbe
treatedas deemedincomeandshouldbe taxedseparately.Itshouldbe taxedonhigherrates. Mostof the
people underthisgroupholdblackmoneyandtheyare allowedtolegalise itunderthe tax law.
WHITENING BLACK MONEY: Howa nationcouldestablishequitable societybyallowingblackmoneyinthe
business?Thisisaprocessof institutionalisingcorruption.Whileeliminationof the practice ismuchtalked
about,howcan the governmentallow ittolegalise the corruptedearningsinsteadof bringingthemunder
legal action?Section19BBBBB of the Income Tax Ordinance 1984 allowedblackmoneyforinvestmentinthe
housingsectorbypayingtax at differentratesbasedonthe locationsof buildings/apartments.Thisshouldbe
stopped.
IRRATIONAL REVENUETARGET FOR 2016-17: Total revenue targetfor2016-17 is BDT 2427.52 billionwhich
is37 percent highercomparedtothe revisedtargetof 2015-16. to try to achieve the bigtarget,there should
be well plannedstrategies.Itissimplyincremental byimposingtaxes,increasingtaxesandbringingmore
productsand servicesunderVAT.Rather,asstatedearlier,appropriatestepshouldbe towidenthe tax net
by briningall taxable personsunderitwithprudentassessmentof taxes.
PLANNING OFINCREMENTAL SPENDING NOT REFORMED ON PRIORITY BASIS: The parameterforincreased
spendingismore tradition-boundandnotbasedonproperassessment.Besides,the majorhardle toexecute
the spendingissnaggedbyinefficiencyof the governmentmachinery.Unlessthe budgetcontainsanyreform
measuresof ensuringefficiencyandeffectivenessof spending,the taxpayersare indarkabout proper

22. utilisationof theirtax money.
The proposedfinance bill maybe furtherexaminedandmodifiedinconsultationwiththe stakeholders.The
same shouldalsobe done as regardsa good numberof contentiousprovisionsinthe proposedbudget.
IV. Conclusions:
The biggerbudgetisabase forcarryingout Bangladeshfromleastdevelopmentstatustodevelopmentstatus.
But it will notbe too easyto implementthe budget.A numberof familiarchallengeshave tobe mitigatedfor
the implementation of budget FY17. This ambitious budget will face different challenges because of the
inabilitytomobilize targeteddomesticresources,low capacityto spendthe earmarkedallocations,failingto
use foreign aid in the pipeline and growing predominance of non-concessional foreign loans, and quality of
public expenditure is still suspected to be fruitful. Structural and institutional weaknesses continue to stand
betweenthe nationanditspotentialachievements.The visionisnotsupportedbyproperimplementationand
innovationinthisregard.
However,bybringingmore transparencyinbudgetformulation,implementationandassessmentprocedures,
the governmenthave toestablishaPublicExpenditure Review Commission;formulate appropriate follow-up
mechanismsformonitoring governmenttax incentives;disclose financialaccountsof state-ownedenterprises
including BPC and contingent liabilities in detail; establish transparency in government’s asset acquisition;
formulate anappropriate foreignaidpolicyinview of the changed global aidarchitecture;more sunshine on
defense economy;introduceseparatebutintegratedbudgetforlocal governmentandintegrateNGOfinancing
inthe publicexpenditure structure.
Finally, to improve budget utilization performance in FY17, government must ensure greater involvement of
parliamentary standing committees in formulating and overseeing implementation of the budget;developa
detailed work plan to implement the budget; provide quarterly reports on budget implementation in
Parliament;establishaneffective result-basedmonitoringsystemtoensure highqualitydelivery;makeclosing
fiscal frameworkfiguresof elapsingfiscal year(FY16) available atthe earliestandrevisebudgetforFY17at an
earlystage.