Tk 1.138 tn expansionary budget unveiled
Friday, 12 June 2009
FE Report
Finance minister Abul Maal Abdul Muhith rolled out Thursday a Tk 1.138 trillion (Tk 1,13,819 crore) national budget for the fiscal 2009-10, with a resolve to mitigate effectively the global recession impacts, maintain macroeconomic stability and develop infrastructures relying more on the public private partnership concept.
"The budget for FY 2009-10 has been formulated bearing in mind the need to maintain macroeconomic stability in the context of current global economic meltdown, achieve the desired economic growth to fulfill our election pledge and thereby contribute to poverty reduction," the finance minister said in his speech while placing the country's 38th budget in parliament Thursday.
The finance minister projected the gross domestic product (GDP) to grow at 5.5 per cent in the next fiscal, lower from the current fiscal year's revised estimate of 5.8 per cent. Inflation in the coming fiscal is expected to ease at around 6.5 in 2009-10 from 7.0 per cent in the current fiscal.
Despite a negative impact of the ongoing global recession on export earning and inflow of remittance, the finance minister expects the domestic revenue generation to increase following the expansion of tax and non-tax revenue net.
Prime minister Sheikh Hasina was present at the budget session. Opposition leader Khaleda Zia remained absent as Bangladesh Nationalist Party (BNP) and its ally Jamaat-e-Islami have been boycotting the budget session following dispute over seating arrangement.
In the proposed budget for FY 2009-10, the total revenue earning has been estimated at Tk 794.61 billion (Tk.79, 461 crore) (11.6 per cent of GDP), with a growth of about 15 per cent over the revised revenue target of Tk 69,180 for the outgoing fiscal. Of this, the share of National Board of Revenue (NBR) revenues will be Tk 610 billion (Tk. 61,000 crore) or 8.9 per cent of GDP, Non-tax and Non-NBR revenues will be Tk 155.06 billion (Tk. 15,506 crore) and Tk 29.55 billion (Tk. 2,955 crore) respectively (2.7 percent of GDP).
On the expenditure side, the size of Annual Development Programme (ADP) for the FY 2009-10 will be Tk 305 billion
(4.4 per cent of GDP), up Tk 75 billion (Tk 7500 crore) or about 32.61 per cent from the revised ADP of Tk 230 billion.
He also said a provision for a fresh stimulus package involving a total Tk 50 billion has been made in the budget for the next fiscal to salvage the export sectors hard-hit by the global recession.
In his budget speech the finance minister said overall budget deficit, excluding grants, has been estimated at Tk 343.58 billion or 5.0 per cent of GDP of which Tk 86.73 billion (Tk 8,673 crore) or 2.0 per cent will be financed from external sources and the remaining 3.0 per cent will be financed from domestic sources, including borrowings from the banking system, non-bank borrowing and national savings certificates.
Muhith admitted that the budget might look ' slightly expansionary' but defended the same by saying that compared with most countries the fiscal deficit here was minimal in the context of the current global crisis.
He also defended the large ADP, saying that the ADP has been proposed keeping in mind the "commitment in our election manifesto to regional parity, improved infrastructure and the quality of expenditure."
In the proposed allocations in the ADP, 7.8 per cent has been allocated to the agriculture sector (agriculture, fisheries and livestock, rural development and water resources), 22.1 per cent for local government, 14 per cent for power and energy, 15.7 percent for communication (roads, railway, bridges, waterways, airways and telecommunication), 23.5 per cent for human development (health, education and science & technology).
Interest payments on account of both external and domestic borrowings have been estimated at Tk 158.08 billion -- Tk 13.37 billion on external loans and Tk 144.71 billion on domestic debt.
The finance minister said the government would implement the recommendations of the Pay Commission from July 2009 in phases. "Considering the resource position of the government we are analysing those recommendations and we intend to implement them in phases," he added.
The finance minister proposed allocation of Tk 21 billion for the much-touted Public Private Partnership (PPP) programme.
The finance minister in his budget speech stressed on the measures to attract private investment in the country through such partnership.
The proposed budget sets aside another Tk 3.0 billion in Viability Gap Funding as subsidy or 'seed money' to attract private sector spending for power plants, hospitals, schools, roads and highways which are non-profitable but essential for public services.
Another Tk 21 billion has been allocated to accelerate the process of investment through PPP by setting up an Infrastructure Investment Fund.
The government would use the fund to provide equity or loan to the private investors to ensure government's participation.
In the budget speech, Mr. Muhith said the national budget is prepared centrally, which does not capture the hopes and aspirations of the people at the grass roots level. "At the same time, transparency and accountability cannot be ensured, as none can say how much resources have been utilised in a particular district," he said.
As an initial step, he proposed preparation of a district budget for one district in each division through partial modification and improvement in the classification structure and a few changes in the development project proforma. If it is possible, then the central budget will also be able to illustrate a district wise budgetary break up, which will ensure transparency of public expenditure and accountability in the implementation of programmes.
The finance minister said he has a plan to present a district level budget in the budget for FY 2010-11 before the parliament.
"In fulfillment of the strategy for attaining prosperity the government has attached priority to massive employment generation, enhancement of social safety net, creation of self-employment, reduction of regional disparity, increasing emphasis on agricultural development, achieving the target of power generation, acceleration of industrialisation and building necessary infrastructure for 'Digital Bangladesh'," he added.
In the context of the reality of the global situation where it is forecast that the overall global output growth and the growth of the developed economies will be negative, the expected growth registered by Bangladesh demonstrates the resilience of our economy, the finance minister said.
However, in the context aftermath of deepening of the crisis and its lingering prospect until the later half of 2010, the upcoming budget year will be a real challenge for the economy.
"In particular, the first half of the fiscal year will be very critical," Mr. Muhith added.
He said it may not be possible to disinvest any state-owned enterprise (SoE) next fiscal considering the uncertain environment, adding no SoE would be closed without making alternative arrangements for the likely displaced workers.
Finance minister Abul Maal Abdul Muhith rolled out Thursday a Tk 1.138 trillion (Tk 1,13,819 crore) national budget for the fiscal 2009-10, with a resolve to mitigate effectively the global recession impacts, maintain macroeconomic stability and develop infrastructures relying more on the public private partnership concept.
"The budget for FY 2009-10 has been formulated bearing in mind the need to maintain macroeconomic stability in the context of current global economic meltdown, achieve the desired economic growth to fulfill our election pledge and thereby contribute to poverty reduction," the finance minister said in his speech while placing the country's 38th budget in parliament Thursday.
The finance minister projected the gross domestic product (GDP) to grow at 5.5 per cent in the next fiscal, lower from the current fiscal year's revised estimate of 5.8 per cent. Inflation in the coming fiscal is expected to ease at around 6.5 in 2009-10 from 7.0 per cent in the current fiscal.
Despite a negative impact of the ongoing global recession on export earning and inflow of remittance, the finance minister expects the domestic revenue generation to increase following the expansion of tax and non-tax revenue net.
Prime minister Sheikh Hasina was present at the budget session. Opposition leader Khaleda Zia remained absent as Bangladesh Nationalist Party (BNP) and its ally Jamaat-e-Islami have been boycotting the budget session following dispute over seating arrangement.
In the proposed budget for FY 2009-10, the total revenue earning has been estimated at Tk 794.61 billion (Tk.79, 461 crore) (11.6 per cent of GDP), with a growth of about 15 per cent over the revised revenue target of Tk 69,180 for the outgoing fiscal. Of this, the share of National Board of Revenue (NBR) revenues will be Tk 610 billion (Tk. 61,000 crore) or 8.9 per cent of GDP, Non-tax and Non-NBR revenues will be Tk 155.06 billion (Tk. 15,506 crore) and Tk 29.55 billion (Tk. 2,955 crore) respectively (2.7 percent of GDP).
On the expenditure side, the size of Annual Development Programme (ADP) for the FY 2009-10 will be Tk 305 billion
(4.4 per cent of GDP), up Tk 75 billion (Tk 7500 crore) or about 32.61 per cent from the revised ADP of Tk 230 billion.
He also said a provision for a fresh stimulus package involving a total Tk 50 billion has been made in the budget for the next fiscal to salvage the export sectors hard-hit by the global recession.
In his budget speech the finance minister said overall budget deficit, excluding grants, has been estimated at Tk 343.58 billion or 5.0 per cent of GDP of which Tk 86.73 billion (Tk 8,673 crore) or 2.0 per cent will be financed from external sources and the remaining 3.0 per cent will be financed from domestic sources, including borrowings from the banking system, non-bank borrowing and national savings certificates.
Muhith admitted that the budget might look ' slightly expansionary' but defended the same by saying that compared with most countries the fiscal deficit here was minimal in the context of the current global crisis.
He also defended the large ADP, saying that the ADP has been proposed keeping in mind the "commitment in our election manifesto to regional parity, improved infrastructure and the quality of expenditure."
In the proposed allocations in the ADP, 7.8 per cent has been allocated to the agriculture sector (agriculture, fisheries and livestock, rural development and water resources), 22.1 per cent for local government, 14 per cent for power and energy, 15.7 percent for communication (roads, railway, bridges, waterways, airways and telecommunication), 23.5 per cent for human development (health, education and science & technology).
Interest payments on account of both external and domestic borrowings have been estimated at Tk 158.08 billion -- Tk 13.37 billion on external loans and Tk 144.71 billion on domestic debt.
The finance minister said the government would implement the recommendations of the Pay Commission from July 2009 in phases. "Considering the resource position of the government we are analysing those recommendations and we intend to implement them in phases," he added.
The finance minister proposed allocation of Tk 21 billion for the much-touted Public Private Partnership (PPP) programme.
The finance minister in his budget speech stressed on the measures to attract private investment in the country through such partnership.
The proposed budget sets aside another Tk 3.0 billion in Viability Gap Funding as subsidy or 'seed money' to attract private sector spending for power plants, hospitals, schools, roads and highways which are non-profitable but essential for public services.
Another Tk 21 billion has been allocated to accelerate the process of investment through PPP by setting up an Infrastructure Investment Fund.
The government would use the fund to provide equity or loan to the private investors to ensure government's participation.
In the budget speech, Mr. Muhith said the national budget is prepared centrally, which does not capture the hopes and aspirations of the people at the grass roots level. "At the same time, transparency and accountability cannot be ensured, as none can say how much resources have been utilised in a particular district," he said.
As an initial step, he proposed preparation of a district budget for one district in each division through partial modification and improvement in the classification structure and a few changes in the development project proforma. If it is possible, then the central budget will also be able to illustrate a district wise budgetary break up, which will ensure transparency of public expenditure and accountability in the implementation of programmes.
The finance minister said he has a plan to present a district level budget in the budget for FY 2010-11 before the parliament.
"In fulfillment of the strategy for attaining prosperity the government has attached priority to massive employment generation, enhancement of social safety net, creation of self-employment, reduction of regional disparity, increasing emphasis on agricultural development, achieving the target of power generation, acceleration of industrialisation and building necessary infrastructure for 'Digital Bangladesh'," he added.
In the context of the reality of the global situation where it is forecast that the overall global output growth and the growth of the developed economies will be negative, the expected growth registered by Bangladesh demonstrates the resilience of our economy, the finance minister said.
However, in the context aftermath of deepening of the crisis and its lingering prospect until the later half of 2010, the upcoming budget year will be a real challenge for the economy.
"In particular, the first half of the fiscal year will be very critical," Mr. Muhith added.
He said it may not be possible to disinvest any state-owned enterprise (SoE) next fiscal considering the uncertain environment, adding no SoE would be closed without making alternative arrangements for the likely displaced workers.