Bangladesh Economic Review 2019

CHAPTER FOUR
FISCAL POLICY AND FISCAL MANAGEMENT

Fiscal policy is the strategy of revenue earning and expenditure management of a government. A
balanced fiscal policy plays significant role in macroeconomic stability to create investment
friendly environment, poverty reduction and human resource development. The government has
taken various important reform activities to modernise the revenue management earning
activities and expenditure management. The government is conscious to maintain the budget
deficit within 5 percent of GDP. The trend of revenue mobilisation shows that the revenue-GDP
ratio is on the rise, albeit the pace of growth is not at expected level In FY2017-18, the total
revenue mobilisation by NBR stood at Tk.2, 06,407.25 crore which was 91.73 percent of revised
target (Tk.2,25,000 crore). In current FY2018-19 up to January 2019 the collection of revenue is
stood at Tk.1,16,825.75 crore which is 42 percent of revised target and 7 percent higher than
that of previous fiscal year. The government expenditure as percentage of GDP has been on the
increase. The government expenditure increased to 17.45 percent in FY2018-19 from 16.61
percent in FY2017-18. The utilisation of RADP stood at 93 percent in FY2017-18 and 42 percent
of FY2018-19 (up to February 2019).Currently, the larger portion of ADP is financed from
domestic sources. Aid flow witnessed slightly increased in FY2018-19 than previous fiscal year.
A well balanced fiscal policy plays an opportunities, increasing productivity and
important role in meeting spending priorities poverty reduction.
with available resources, creating congenial Government Revenues
environment for achieving faster economic Tax is the principal source of government
growth and maintaining macroeconomic revenue. The rest of the revenue comes from
stability of the country. Currently, the non-tax sources like fees, charges, tolls etc.
government is implementing a wide range of The trend of revenue mobilisation and
reforms to streamline both revenue and revenue-GDP ratio for the period from
expenditure management. These reforms have FY2010-11 to FY2018-19 is presented in
a direct bearing on creation of employment Table 4.1.
Table 4.1: Revenue Receipts
(In Crore Tk.)
Particulars 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Total Revenue 95188 114885 139670 156671 163371 177400 201210 259454 316599
Tax Revenue 79052 94754 116824 130178 140676 155400 178075 232202 289599
Non-tax Revenue 16135 22279 22846 26493 22695 22000 23135 27252 27000
As percent of GDP (Base Year 2005-06)
Total Revenue 10.39 10.89 11.65 11.66 10.78 10.26 10.16 11.60 12.48
Tax Revenue 8.63 8.98 9.74 9.69 9.28 8.98 9.00 10.39 11.42
Non-tax Revenue 1.76 1.91 1.91 1.97 1.50 1.28 1.16 1.29 1.06
Source: Various issues of Budget in Brief, Finance Division. Figures are based on revised budget.

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Figure 4.1: Revenue Receipts

Non-tax Revenue
9% Tax Revenue
91%

Source: Budget in Brief, Finance Division. Figures are based on revised budget.

The tax-GDP ratio is one of the recognised direct tax and indirect tax. Rest of the revenue
criteria for judging the level of development is collected from different non-tax sources.
of a country. In FY2010-11, revenue-GDP Revenue Management
ratio was 10.39 percent, which rose to 11.66 Formulation of tax policy and its
percent in FY2013-14. But there was implementation are performed by the
decreasing trends from FY2014-15 to National Board of Revenue (NBR) under the
FY2016-17. Again increasing trends is shown Internal Resource Division. The major steps
from FY2017-18 and rose to 12.48 percent in taken by the government during FY2018-19
FY2018-19. Table 4.1 and Figure 4.1 shows for enhancing collection of direct and indirect
that the lion share (more than 90 percent) of taxes with a view to achieving the social and
revenue comes from tax revenue which economic goals at a faster pace are shown in
consists of mainly two types of tax such as the Box 4.1, 4.2 and 4.3.
Box 4.1: Measures taken under Tax System for FY2018-19
 Reform in direct tax was taken based on seven policy philosophies for first time in FY2016-17:
(1) Fiscal adequacy, (2) Equity and fairness, (3) Facilitating business and growth, (4) Social responsibility
(5) Increasing tax compliance and combating tax evasion, (6) Adopting international best practices and
(7) Simplification of tax system and increasing the effective use of tax laws.
In light of it, tax policy has been taken in FY2018-19.The policy reforms of FY2018-19 have earned following
significant achievements:
(a) Introduction of the return submission deadline termed as ‘Tax Day’ (30 November). This has been in-
troduced in light of international good practice and has brought a revolutionary change in the return
filing culture. With the introduction of Tax Day, most taxpayers filed their returns within the Tax Day.
(b) Remarkable success has been achieved in taxpayer’s registration. The number of tax registrations has
reached more than 33 lakh by the end of FY2017-18, exceeding the target for FY2017-18.
(c) The achievement in return filing has also exceeded the expectation. The number of filing of return in the
assessment year 2015-16 was 10.92 lakh. It has passed 15.50 lakh in the assessment year 2016-17. In
the assessment year 2017-18, the number of filing return was 19 lakh.
(d) The growth of tax collection was 50 percent higher than the growth in previous year. In the FY2016-17
the growth was 17.71 percent; the growth rate reached to 22.08 percent in FY2017-18.
To consolidate the reforms initiated in the previous year and to achieve the target of collecting more than 50 per-
cent of NBR revenue by means of income tax, in addition to seven policy philosophies adopted in FY2016-17,
five more areas have been covered in the policy reforms of FY2018-19:

(1)Policy consistency and stability, (2) Attaining SDG, Ease of doing business ,(4) Environment and (5) Clarity.

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The changes adopted on the basis of above described policy guidelines for the FY2018-19

 To increase collection of revenue through expansion of tax net there is no change in existing slab of
tax rate for non-company tax payers and existing area based minimum tax rate has been kept un-
changed.

 Equity and Equality:

 Threshold limit for parents or legal guardians or retarded child has been increased from Tk.25,000
to Tk.50,000 in addition to applicable threshold limit for them
 The existing tax rate for publicly traded bank, insurance and financial institution taxpayers has been
reduced to 37.50% from 40%
 The existing tax rate for non-publicly traded bank, insurance and financial institution taxpayers has
been reduced to 40% from 42.50%
 The existing tax rate for other companies has remain unchanged.

 The surcharge of individual tax payers

 The existing tax rate of surcharge has been rearranged for individual tax payers
 Any taxpayer having more than two motorcars registered in his or her name or having house proper-
ty of 8,000 sqft. or more than 8,000 sqft. is brought under the payment of surcharge
 Minimum surcharge rate for individuals has been split into two slabs. If net wealth is below Tk.10
crore minimum surcharge is Tk.3,000 and if more than Tk.10 crore minimum surcharge is Tk.5,000
 Existing law of surcharge has been continued at the rate of 2.5 percent on the income from the
business of producing cigarette, bidi, zarda, gul and other tobacco items.

 Ease of Doing Business and Facilitating in Growth of Business

 To boost up economic growth and create new job the corporate tax rate for Knit Wear and Oven
Garments has been reduced at 12 percent
 Income from taxed dividend is exempted if it is distributed to resident company
 Limit for admissible expenses for perquisite has been increased from Tk.4.75 lakh to Tk.5.50 lakh
 Income from multipurpose container plying in inland route is declared as presumptive income.
 Social Responsibility
 The operating income of any Day Care Home and educational and training institution for retarded
person has been tax exempted
 Extra 5% tax will be imposed to medical service provider if it does not provide facility for retarded
person. It will be implemented from FY2019-20.
 Conservation of nature
 In order to prevent environment pollution and to maintain ecological balance the government has
integrated the issue of environment conservation in the tax policy. In line with that, a reduced tax rate
of 10 percent has been introduced for a readymade garments company, if the factory of such compa-
ny has an internationally recognised green building certification.
 Compliance
 The return of business entities will be brought under audit if withholding tax return, salary statement
and information regarding filing of tax return of the employee share not submitted to tax authority
 Area and scope of penalty for failure to comply sections of tax law has been expanded.

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 Expanding the area of tax net
 Tax deducted at source has been imposed on income from ride sharing service. E-TIN and filing of
return has been made compulsory for the people who earn income providing their motor vehicle to
ride sharing system
 Tax rate of 1 percent will be deducted at the source from distributors and dealers for the time of sale
of products under distributing financing
 Tax deducted at source from non-resident shall be considered as minimum tax.

 Tax Administration Reform

 Necessary amendment has been made in order to bring income from virtual transactions of foreign
institutions into tax net
 To make tax system digitalized measures for service of notice via e-mail is introduced
 Electronic and automatic sharing of financial information of taxpayers from various agencies and
offices have been introduced
 Section for filing appeal has been updated
 The procedure of issuance of certificate for tax exemption or tax at reduced rate by NBR in order to
execute Double Taxation Agreement and to facilitate implementation of necessary law for
international organization has been clarified
 Formation of new tax law is in progress in line with and keeping pace with modern tax system,
globalisation and information technology revolution which will be placed for approval in 2018-19
 To materialise legal reform successfully immense reform works will be done in tax administration.


Box 4.2 Important steps taken for Reform of VAT law and Rules in FY2018-19:
Value Added Tax (VAT) is one of the important sources among the revenue earning sources in
Bangladesh. The revenue earning target from VAT in FY2018-19 is estimated Tk.1,11,000 crore,
which is 32.53 percent higher than that of previous year. To achieve this target VAT Act, 1991, VAT
Rules, 1991 and gazettes and orders issued under these act and rules was updated.
 Reform of VAT Law and Rules:
 The Value Added Tax Act and its rules have been simplified for Automated and Transparent
Environment
 Online VAT registration has been compulsory and software has been prepared to provide online
submissions. It will be possible to create a comfortable trade environment along with transparency
and accountability
 Using Electronic Cash Register/Point of Sale (ECR/POS) software has been compulsory replaced
with Electronic Fiscal Device (EED) in big resorts, hotels and other institutions
 Using of Fiscal Device is compulsory if the turnover is up to Tk.80.00 lakh to Tk.5.00 crore, but
above that introducing of online system is compulsory.

a) VAT exemption facilities extended to the following goods and services:

a) VAT, SD and ATV exemption facility has been granted against the LNG (at the import stage);
b) VAT and SD exemption facility has been granted against Natural gas (in production and trading
stage)
c) Exemption for Locally produced mobile phone (at the import and manufacturing stage);

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d) Exemption for Locally produced motorcycle and motorcycle parts (at the import and manufactur-
ing stage);
e) Exemption on solar panel (at import and manufacturing stage);
f) Exemption on Travel agency (at service stage);
g) MNP Service (at service stage)

b) Restructuring of the Supplementary Duty (SD) rate for some goods:

Tiltle No./H.S. Code Description Existing SD Rate Revised SD Rate
2202.90.00 Energy Drinks 25% 35%
3304.99.00 Beauty or make-up preparations and 0% 10%
preparations for the skin care(other than
medicaments), including sunscreen or sun
tan preparations; manicure or pedicure
preparations.
Similar H.S. Code Ceramic Bathtub and Gikoji, Shower 20% 30%
Shower tray
Similar H.S. Code All kinds of Plastic Bag and other 0% 5%
closures of Plastic

c) Increase of value and duty rate for tobacco products considering the health risk it imposes on people:

(a) Cigarette
past price( for 10 sticks) past total tax incidence present price( for 10 sticks) present total tax
in Tk in Tk incidence
27.00 52% 35.00 55%
45.00 and above 63% 45.00 and above 65%
70.00 and above 65% 75.00 and above 65%

(b) Bidi
Description of Goods Past Tariff Value & present Tariff Value Supplementary Duty
Unite Rate
Tk.6.00 Tk.7.50 35
handmade Bidi without help of
(10 Sticks Per Pack)
machine
Tk.12.00 Tk.15.00 35
(with filter)
(20 Sticks Per Pack)

d) Activities taken for the development and expansion of information technology::

 Exemption on computer and computer parts, computer modem, Software ( in production and trading
stage);
 VAT rate reduced against ‘Internet Service Provider’ from 15% to 5%.

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 Changes brought in some other cases:
a) ATV exemption on Photovoltaic cells at the import stage
b) Information and Technology Development Surcharge increases to 2% from 1% on the value of
imported mobile set
c) VAT exemption facilities for the refrigerator, freezer and air-conditioner manufacturing industries
have been extended up to 30th June 2021
d) VAT exemption facility has been rationalized for 100 percent export oriented product producing
organisations on the expenditure of four item i.e. workers welfare and recreation, transport cost,
information technology based services and laboratory test services.

Box 4.3 Measures under Customs duty Tax System in FY2017-18

 Existing six tiers/slabs of import duty (CD) like 0%, 1%, 5%, 10%, 15% & 25% is unchanged in FY2018-19
 Existing Supplementary Duty (SD) at 11 (eleven) tiers like 10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%,
250%, 350%, 500% is unchanged
 Regulatory Duty (RD) is imposed at the rate of 3% on the items which are considerable for highest CD
(25%)
 Exemption of CD for agricultural inputs (i.e. fertilizer, seeds, pesticides), for essential commodities ( lentils,
edible oil, wheat, onion etc.) and for import of life saving medicine is unchanged
 RD at the rate of 2% and CD at the rate of 25% imposed on paddy, rice to ensure the fair prices for local
farmers
 CD increased on the imported software which can be produced in the country
 H.S. Code has been revised related to CD on Software justification and included into Bangladesh Customs
Tariff
 Concessionary rate of import duty has been allowed on essential parts and components of mobile, laptop,
iPod’s manufacturing and assembling industry
 To facilitate the domestic producers of cellular phones import duty increased from 5% to 10% for import-
ing mobile
 In order to flourish local motorcycle industry exemption benefit on imported equipment and inputs has been
rationalise
 SD has been reduced for fuel efficient and environment friendly Hybrid cars(on both new and reconditioned)
 Minimum value SRO has been updated/ rationalised for several commercially imported items
 SRO has been balanced/ rationalised issued for textile sector
 To facilitate for concession SRO has been issued for importing raw materials used to preparation cancer
protecting medicine
 Concession facilities for raw materials of pharmaceutical industry is updated
 To rationalise the facilities for the pharmaceutical industry medicine for Hepatitis-C i.e. Daclatasvir HCL
and Velpatasvir are included to H.S. Code 2942.00.10
 Concession facilities given to import raw materials for producing Active Pharmaceutical Ingredients
 As the Electronic Seal and Lock Rules,2017 expired Electronic Seal and Lock Rules,2018 issued to
secured the import-export trade, revenue protection in transit and transshipment trade as well as sovereign
security
 To give incentives for the VAT registered local producers on some products new H.S. Code created and
concession rate revised
 Activities are taken to introduce paperless taxation system in import-export trade
 Preparation of Customs Act, 2019 in Bangla language and modern/up to date instead of Customs Act, 1969
is ongoing.

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Revenue Mobilisation Programs single category. However, indirect taxes
The target for the NBR taxes for FY2018-19 including import duty and VAT are
was set at Tk.2,96,201.00 crore. But revised predominant in the overall revenue collection
target is set at Tk.2,80,000.00 crore. historically. But there is a clear directional
According to NBR statistics, against the shift in the last couple of years with increased
targets, revenue collection up to January 2019 contribution of direct taxes. In FY2017-18
stood at Tk.1,16,825.75 crore (42 percent of revenue mobilisation was Tk.2,06,407.25
revised target). Growth of revenue collection crore which was 91.73 percent of the revised
was 7 percent higher during same month of target. Item-wise tax collection from FY2013-
last fiscal year. Analysis of revenue collection 14 to FY2018-19 is presented in Table 4.2
for FY2018-19 by categories shows that and Figure 4.2.
income tax generates most revenues as a
Table 4.2: Item wise Revenue Collection
(In Crore Taka)
Items of Revenue Collection 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19*
Import Duty 13575.87 15349.85 18016.58 21069.19 24502.12 13919.04
VAT (at import level) 15291.31 17690.47 20583.86 25561.09 29367.76 18433.52
Supplementary Duty (import level) 4335.77 5252.42 6560.20 7628.89 7912.23 4355.28
Export Duty 41.98 40.63 32.75 22.70 35.77 34.51
Sub Total: 33244.92 38333.37 45193.39 54281.87 61817.88 36772.35
Excise Duty 822.39 960.38 1582.03 1790.51 2080.34 1573.75
VAT (Local) 29252.11 32290.13 34862.82 38287.76 47171.80 28880.75
Supplementary Duty (Local) 13647.19 15758.31 19630.96 23481.70 29639.15 15567.52
Turn Over Tax 4.72 4.71 4.85 2.45 2.89 1.37
Sub Total: 43726.41 49013.53 56080.66 63562.42 78894.18 46023.39
(A) Total of Indirect Tax 76971.33 87346.90 101274.05 117844.29 140712.06 82795.74
Income Tax 43207.27 47477.40 51328.92 52754.93 64548.26 33361.66
Other taxes and duties 641.25 876.40 1018.37 1057.22 1146.93 668.35
(B) Total of Direct Tax 43848.52 48353.80 52347.30 53812.15 65695.19 34030.01
Grand Total (A+B) 120819.85 135700.70 153621.34 171656.44 206407.25 116825.75
Share of Indirect Tax (%) 63.71 64.37 65.93 68.65 68.17 70.87
Share of Direct Tax (%) 36.29 35.63 34.07 31.35 31.83 29.13
Source: National Board of Revenue (NBR).* Up to January 2019

Figure 4.2: Comparative statement of Item wise revenue collection (%)

2018-19 40 12 17 29 2 VAT
2017-18 37 12 18 31 2 CD
2016-17 37 12 18 31 2 SD
2015-16 36 12 17 33 2 Income Tax
2014-15 37 11 16 35 1 Others
2013-14 37 11 15 36 1
0 20 40 60 80 100 120

Source: National Board of Revenue (NBR).* Up to January 2019.

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From the above table 4.2 and figure 4.2 Public Expenditure
shows that income tax and Value Added Tax Public expenditure management is an integral
(VAT) plays significant role in revenue part of fiscal management. Total public
mobilisation . The share of VAT is in highest expenditure including non-development,
position and 40 percent of revenue collection development and other expenditure in respect
of NBR tax in current fiscal year. In few of expenditure-GDP ratios from FY2013-14
years share of VAT was 36-37 percent. The to FY2018-19 are presented in Figure 4.3 and
share of income tax is the second highest Table 4.3.
position. Revenue earning from income tax
Figure 4.3: Public Expenditure
was 36 percent in FY2013-14, which reduced
39% 1%
to 31 percent in FY2017-18. In the current
FY2018-19 up to January 2019 the percent 60%

stood at 29. Though there is an increasing

trend in amount of income tax collection but
64-70 percent of revenue is coming from Recurrent expenditure Development expenditure

indirect source. Other expenditure

Source: Budget in Brief, Finance Division, M/O Finance.

Note: Based on Revised Budget of FY2018-19.
Table 4.3: Public Expenditure
(In Crore Taka)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
(a) Recurrent expenditure 134907 149399 156592 175849 210578 266926
(b) Development expenditure 65145 80476 81407 88090 153688 173449
(c) Other expenditure 16170 9793 217 5560 7229 2166
Total Public Expenditure (a+b+c) 216622 239668 264564 269499 371495 442541
As percent of GDP
(a) Recurrent expenditure 10.04 9.86 9.46 8.86 9.10 11.12
(b) Development expenditure 4.85 5.31 5.54 4.33 6.87 7.07
(c) Other expenditure 1.20 0.65 0.29 0.18 0.32 0.09
Total Public Expenditure 16.12 15.81 15.30 13.56 16.61 18.30
Source: Budget in Brief, Finance Division, M/O Finance.
Note: Data are based on revised budget. ‘Development Expenditure’ includes ADP, Non-ADP, FFW and Projects and
Development Programe under Revenue Budget,‘Other Expenditure’ includes net outlay for food account operation, loans
and advances.

Annual Development Programe (ADP)

The Annual Development Programe (ADP) Although the ADP’s absolute size has been
is an essential fiscal tool for increasing along with the number of projects,
government as short term development there has been a marked improvement in the
planning. Investment in socio-economic ADP implementation.
development has been gradually increasing.

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In FY2018-19 the total size of the Revised projects are financed by autonomous bodies
ADP (RADP) (including self-financed and corporation. Table 4.4 shows that
projects of autonomous bodies), is excluding the self-financed projects of
Tk.1,76,619.71 crore (GoB Tk.1,24,959.71 autonomous bodies, there were 1,551
crore and project aid Tk.51,660 crore). projects in FY2017-18 and the number stood
A total of 1,916 projects are included in the at 1,785 in FY2018-19. The implementation
Revised ADP, where 1,629 are investment status of ADP/RADP from FY2013-14 to
projects, 154 are Technical Assistance FY2018-19 is presented in Table 4.4.
Projects, 2 are funded by JDCF and 131

Table 4.4: ADP Allocation, RADP Allocation and Expenditure

(In Crore Tk)
Fiscal ADP Allocation RADP Allocation Expenditure
Year (as % of RADP)
No. of Total Taka PA No. of Total Taka PA Total Taka PA
Project Project
2018-19* 1511 173000 113000 60000 1785 167000 116000 51000 70772 42979 24225
(42%) (37%) (48%)
2017-18 1308 164085 96331 57000 1551 148381 96331 52050 141492 89155 52337
(95%) (93%) (100.55%)
2016-17 1123 110700 70700 40000 1415 110700 77700 33000 100840 72410 28430
(91%) (93) (86%)
2015-16 999 97000 62500 34500 1315 91000 61840 29160 83581 58357 25224
(92%) (94%) (86%)
2014-15 1034 80315 52615 27770 1204 75000 50100 24900 68524 46080 22444
(91%) (92%) (90%)
2013-14 1046 65870 41307 24563 1254 60000 38800 21200 56747 38051 18696
(95%) (98%) (88%)
Source: Programming Division, Planning Commission; IMED, Ministry of Planning.
Note: Excluding own funded projects. *Up to February 2019

Table 4.4 shows that in FY2013-14, RADP government. The analysis of the sectorial
allocation was Tk.60,000 crore which composition of the ADP of FY2018-19 shows
increased three-folds to Tk.1,67,000 crore in that the policy to create favourable
FY2018-19. The utilisation rate of the RADP environment to increase in the investments
allocation was 95 percent in FY2017-18. for creating infrastructures needed for gross
RADP implementation in FY2018-19, up to production has been upheld. Similarly the
February 2019 is 42 percent. increasing trend in allocations and utilisation
rate for the socio economic infrastructure
Composition of Annual Development
sectors in the ADP indicate relevance to the
Programe (ADP) by Major Sectors
government’s sectorial policies and strategies.
The increasing trend of allocation to physical Table 4.5 and Figure 4.4 shows the revised
infrastructure and socio-economic allocations for the 17 sectors in the RADP
infrastructure sectors through ADP is from FY2013-14 to FY2018-19.
consistent with the policy and strategy of the

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Table 4.5: Sector Wise Allocation of ADP
(In crore Taka)
FY 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Sector Allocation % Allocation % Allocation % Allocation % Allocation % Allocation %
1. Agriculture 3511.76 5.85 4147.23 5.33 4410.05 4.85 5741.60 5.19 5283.52 3.56 6918.24 4.14
2. RD and RI 6977.15 11.63 7840.09 10.07 9046.13 9.84 10761.43 9.72 16722.00 11.27 15154.25 9.07
3. Water 1889.38 3.15 2035.92 2.62 2609.49 2.87 3342.11 3.02 4147.31 2.80 5000.87 2.99
Resources
4. Industry 2727.14 4.55 1863.00 2.39 1711.35 1.88 974.12 0.88 1563.55 1.05 2046.27 1.23
5. Power 8066.11 13..44 8223.71 10.56 15478.21 17.01 13447.57 12.15 22340.32 15.6 23225.36 13.91
6. Gas, Oil and 1912.66 3.19 2209.33 1.38 1068.17 1.17 1067.87 0.96 1346.48 0.91 2209.12 1.32
Natural
Resource.
7. Transport 10295.13 17.16 17361.9 22.30 19512.13 21.11 27360.23 24.72 37513.22 25.28 38099.58 22.8
8.Communi- 786.67 1.31 1003.58 1.29 1434.82 1.58 1915.79 1.73 937.44 0.63 2021.01 1.21
cation
9. Physical 5383.35 8.97 7194.27 9.24 11092.38 12.19 14391.17 13.00 15146.83 10.21 20371.84 12.2
Planning
and Housing
10. Education 7994.74 13.32 9026.65 11.6 10101.74 11.10 12845.97 11.60 14186.56 9.56 15468.65 9.26
and Religion
11. Sports 265.92 0.44 166.92 0.21 261.00 0.29 214.19 0.28 318.61 0.21 653.66 0.39
and Culture
12. Health and 4219.79 7.03 5041.61 6.48 5556.47 6.11 5655.33 5.11 9607.51 6.47 10902.07 6.53
Population
13.Mass Com. 111.90 0.19 109.95 0.13 117.98 0.13 176.00 0.16 219.65 0.15 250.39 0.15
14. Social Wel- 451.31 0.75 409.04 0.53 424.48 0.47 347.19 0.31 431.86 0.29 649.71 0.39
fare, Women
Affairs and
Youth Dev.
15. Public 1371.27 2.29 1703.35 2.19 2327.43 2.56 2361.38 2.12 2118.91 1.43 4964.30 2.97
Administration
16. SICT 1559.03 2.60 4628.82 5.95 1808.38 1.99 5472.04 4.94 12593.18 8.49 13353.63 8.00
17.Labour and 354.40 0.59 511.10 0.66 421.29 0.46 450.77 0.41 356.25 0.24 464.30 0.28
Employment
Block/Others 2122.29 3.54 2650.43 3.40 3918.50 4.31 4092.07 3.70 3547.80 2.39 5246.75 3.14
Grand Total 60000 100 75000 100 91000 100 110700 100 148381 100 167000 100
Source: Programming Division, Planning Commission.
Note: Data according to RADP.
Figure 4.4: Sector wise allocation of ADP
50000 Agriculture

RD & RI
40000
Sci. & ICT
Crore Taka

30000
Edu.& Relg.
20000
Physical Pl.
W.S.,Housing
10000 Power

0 Transport
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Source: Programming Division, Planning Commission.
Note: Data according to RADP.

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Bangladesh Economic Review 2019
ADP allocations in Table 4.5 shows that allocation made Tk.23,225.36 crore which is
maximum importance has been given to 13.91 percent of RADP. ‘Ruppur Nuclear
transport, energy, physical infrastructure, Power Plant (another mega project)’ is
water supply and housing, rural development implementing under Ministry of Science and
education and religion, science and Technology which is the highest allocated
information technology (SICT), health, project in RADP i.e. Tk.11, 313.38 crore. So
nutrition and family planning and agriculture the SICT sector gets 8.00 percent of total
sectors. During the last five fiscal years, the ADP. The Physical infrastructure, water
highest allocation has been given to the supply and housing sector got 12.20 percent
transport sector. As the construction of allocation of ADP in FY2018-19.
Padma Multipurpose bridge is a national
Education and Religion sector allocated 9.61
priority, the increased allocation for the
percent of ADP which is highest in last five
Padma Multipurpose Bridge project, Padma
years. To emerging the rural economy and to
Bridge Rail Connectivity project and third
create more employment, Rural development
important project ‘Dhaka Mass Rapid Transit
and Rural Institutions sector allocated 9.07
Development’ project allocated Tk.2,656.00,
percent of RADP in FY2018-19.
crore, Tk.3,290.00 crore and Tk.2,488.83
crore respectively. These allocations made the Domestic Resources for ADP
transport sector the highest (Tk. 38,099.58 The contribution of domestic resources
crore) recipient of ADP allocation in towards financing of ADP shows an ups and
FY2018-19 as well, which is 22.81 percent of downs trend during FY2013-14 to FY2018-
the total outlay. 19. The average contribution of domestic
Power sector also continues the trend of resources towards ADP stood at around 65
increasing allocation for the significant percent. Table 4.6 shows the financing of
project ‘Matarbari Ultra Super Critical Coal revised ADP from domestic sources during
Fired Power’ project which allocated the period from FY2013-14 to FY2018-19.
Tk.2,827.00 crore and a total sectorial
Table 4.6: Domestic Resources in Financing ADP
(In crore Taka)
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
ADP 60000 75000 91000 110700 148381 167000
Total Domestic Resource 38800 50100 61840 77700 96331 116000
Domestic Resource as % of ADP 64.67 66.80 67.95 55.86 64.92 69.46
Source: Programming Division, Planning Commission. Data according to RADP.

The contribution of domestic resources to decreased to 55.76 percent. Again the

ADP was 64.67 percent in FY2013-14. Next percentage of domestic resources started to
to years it increased but in FY2016-17 increase from FY2017-18. In FY2018-19 the
contribution of domestic resources to ADP share is 69.46 percent.

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Bangladesh Economic Review 2019

Steps Taken to Accelerate ADP MoU with 46 banks to receive tender security
Implementation and performance security including
Central Procurement Technical Unit (CPTU) registration fee, renewal fee and tender
under Implementation Monitoring and document fee related to e-GP system and
Evaluation Division (IMED) was established 4,117 branches of this banks linked with the
in April 2002 with a view to expediting the system. A total 25,385 officers from different
implementation of Annual Development procuring entities including banks have
Program and ensuring transperency, received training on e-tendering.
accountability as well as efficiency in public
procurement. At the initial stage of the To ensure more transparency, speediness in
establishment, Public Procurement government procurement and to bring CPTU
Regulation 2003 was enacted for performing under a legal framework the government has
procurement activities. Then Public approved the policy to reorganize the CPTU
Procurement Act (PPA) 2006 was enacted to ‘Bangladesh Public Procurement Authority
and Public Procurement Rules 2008 was (BPA)’ in March 2018. At that respect,
formulated to ensure more transparency, Bangladesh Public Procurement Authority
accountability and fair competition in public Act, 2019 and Public Procurement
procurement. Standard Tender Document (Amendment) Act, 2019 is under process for
(STD) was prepared under Public approval. To ensure value for money on the
Procurement Rules 2008 for executing basis of whole life of product, work and
procurement. service Sustainable Public Procurement is
Again, for ensuring value for money as well included to the revised proposal of PPA,
as equal treatment in public procurement, 2006. Besides this, to achieve the target of
National e-GP web portal was introduced as a SDG Disposal Policy, Reverse Auction,
centralised online procurement system in Quality Based Selection for intelligent
Bangladesh in June 2011. This system is Service procurement is also included to the
pioneers e-tendering system in Bangladesh. revised proposal.
For the expansion of e-GP system, high speed Budget Balance and Financing
new data centre has been set in CPTU. CPTU
There is a clear guideline in ‘Public Money
also provides 24/7 help desk support service
and Budget Management Act 2009’ to keep
to tenderer and procuring entity as well. In
the budget deficit to a sustainable level.
the meantime, Up to January 2019, 1,291
Therefore, government is conscious to keep
organisations out of 1,333 organisations are
the budget deficit within 5 percent of GDP.
registered in the system. At the same time,
Table 4.7 and Figure 4.5 shows the data of
55,221 procuring entities/ procuring
overall budget balance and financing of last
institutions registered in e-GP system.
few years:
2,48,007 tender invited and 1,43,144 work
order done through e-GP. CPTU has signed

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Bangladesh Economic Review 2019
Table 4.7: Overall Budget Balance and Financing*
(As Percent of GDP)
Budget Balance/ financing 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Overall budget balance (excluding -4.40 -5.00 -5.00 -5.00 -5.00 -4.80
foreign grants)
Overall budget balance (including -4.00 -4.50 -4.70 -4.80 4.80 -5.00
foreign grants)
Net domestic financing 3.05 3.61 3.59 3.53 2.96 3.10
Net foreign financing (excluding 0.94 1.05 1.56 1.22 1.85 1.70
grants)
Net foreign financing(including grants) 1.38 1.42 1.85 1.46 2.05 1.80
Source: Finance Division, M/O Finance and BBS. (Various issues of the Budget in Brief). Base year of GDP 2005-06.
* According to the iBAS++, according to actual outturn, from FY2013-14 to FY2017-18 the overall budget deficit excluding grants
stood at 3.54, 3.81, 3.77 ,3.39 and 5.4 percent of GDP respectively.

Figure 4.5: Overall Budget Balance and Financing

5 Overall budget balance

(excluding foreign grants)
4
3 Overall budget balance
(including foreign grants)
2
Percentage of

1
GDP

Net domestic financing

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-1
Net foreign financing
-2 (excluding grants)

-3
Net foreign
-4 financing(including grants)

-5

Public Debt Management Tk.47,490.70 crore from non-bank sources at

The government borrows both from domestic same fiscal year. Therefore, the total
and external sources to meet the budget government borrowing (net) from the
deficit caused by the social welfare domestic sources stood at Tk.44,624.30 crore
expenditure, unexpected expenditure in in FY2017-18 which was 2.00 percent of the
emergencies, development planning GDP. Sector-wise government borrowing
expenditure and increased investment. In from domestic sources during FY2013-14 to
FY2017-18 the government borrowed FY2018-19 are presented in Table 4.8 and in
Tk.2,866.40 crore from banking system. Figure 4.6.
Besides, the government borrowed
Chapter 4-Fiscal Policy and Fiscal Management ‫׀‬55‫׀‬
Bangladesh Economic Review 2019
Table 4.8: Government Borrowing (net) from Domestic Sources
(Taka in crore)
Fiscal Net government borrowing from the banking system Government Total Percent
Year Bangladesh Scheduled Total from borrowing from government of GDP
Bank banks banking System other than banks borrowing

2013-14 -17497.7 24704.8 7207.2 15344.3 22551.5 1.7

2014-15 -1821.9 -6839.4 -8661.4 34680.3 26019.0 1.7
2015-16 12548.7 -9733.9 2814.8 34206.0 37020.8 2.0
2016-17 -520.2 -17884.8 -18405.0 53689.2 35284.2 1.8
2017-18 9619.3 -12485.7 -2866.4 47490.7 44624.3 2.0
2018-19* -9116.9 7382.7 -1734.2 37759.7 36025.5 -
Sources: National Savings Directorate (NSD) and Bangladesh Bank (BB),* up to February 2019.

Figure 4.6: Government Borrowing (net) from Domestic Sources

60000 Borrowing from

Bangladesh Bank
50000
Borrowing from
40000 Scheduled Bank

30000
Crore Taka

Total Borrowing from

Banking system
20000
10000 Borrowing from other
than banks
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19* Total Gov. Domestic
-10000 borrowing

-20000

Sources: National Savings Directorate (NSD) and Bangladesh Bank (BB),* up to February 2019.

Government Borrowing from External higher than previous fiscal year. External
Sources resource supply jumped almost double in
To achieve the target to become Bangladesh a FY2017-18 due to Russian disbursement for
middle income country within 2021, the Ruppur Nuclear Power Plant project starting
budget of recent years shows a trend of steady that year which should be continued. The
decline of dependence on external assistance. payment of foreign aid was US$ 1,409
But the amount of external resource is million which was US$ 21 million less than
increasing. The principal and interest the budget allocated for payment of foreign
repayment for received loans by Bangladesh aid. Table 4.9 and Figure 4.7 show the
is also gradually increasing. The amount of government borrowing from external sources
disbursement for external assistance was US$ and its repayment during FY2013-14 to
6,370 million in FY2017-18. The received FY2018-19.
amount of foreign assistant was 73 percent
Chapter 4-Fiscal Policy and Fiscal Management ‫׀‬56‫׀‬
Bangladesh Economic Review 2019

Table 4.9: Flow of External Resources

(In million US$)
Fiscal Year External Aid Principal and Interest Payment Net Foreign Aid Flow
Grant Loan Total Interest Principal Sub-Total After Principal After Principal and
Payment Interest Payment
1 2 3 4=2+3 5 6 7=5+6 8=4-6 9=4-7
2013-14 680 2404 3084 206 1088 1294 1996 1790
2014-15 571 2472 3043 188 909 1097 2134 1946
2015-16 531 3033 3564 202 849 1051 2715 2513
2016-17 459 3218 3677 229 894 1123 2783 2554
2017-18 383 5987 6370 299 1110 1409 5260 4961
2018-19* 173 3906 4079 241 749 990 3330 3089
Source: ERD, Ministry of Finance *provisional

February 2019, net supply of foreign aid may

Considering the amount of received external
be increase at the end of this fiscal year.
resources in current FY2018-19 up to

Figure: 4.7: Flow of External Resources

7000 6370
6000
5000 4079
3564 3677
4000
Million US$

3084 3043
3000
2000
1000
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19*

Grant Loan Total

Source: ERD, Ministry of Finance *provisional.

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Bangladesh Economic Review 2019
Table 4.10: Budget at a Glance
(In Crore Taka)

Description Revised Budget Budget Actual

2018-19 2018-19 2017-18
Revenue Receipts:
Revenues 3,16,599 3,39,280 2,16,557
Tax Revenue 2,89,599 3,05,928 1,94,327
NBR-Tax Revenue 2,80,000 2,96,201 1,87,103
Non-NBR Tax Revenue 9,600 9,727 7,224
Non-Tax Revenue 27,000 33,352 22,231
Foreign Grants 3,787 4,051 868
Total Receipts: 3,20,386 3,43,331 2,17,425
Expenditure:
Non-Development Expenditure 2,66,926 2,82,415 1,91,473
Non-Development Revenue Expenditure 2,47,945 2,51,668 1,78,879
Domestic Interest 45,278 48,377 38,160
Foreign Interest 3,467 2,963 3,605
Non-Development Capital Expenditure 18,981 30,747 12,593
Food Account Operation 282 365 6,994
Loans and Advances (Net) 1,884 2,124 1,430
Development Expenditure 1,73,449 1,79,669 1,22,154
Development Programmes financed from Non-Development 299 327 141
Budget
Non-ADP Projects 4,143 4,365 1,495
Annual Development Programe (ADP) 1,67,000 1,73,000 1,19,538
Non-ADP FFW and Transfer 2,008 1,978 980
Total Expenditure: 4,42,541 4,64,573 3,22,051
Deficit:
Overall Deficit (including Grants ) -1,22,155 -1,21,242 -1,04,626
Deficit in Percent of GDP -4.8 -4.7 -5.3
Overall Deficit (Excluding Grants ) -1,25,942 -1,25,293 -1,05,494
Deficit in Percent of GDP 5.0 -4.9 -5.4
Financing:
Foreign Borrowing-Net 43,397 50,016 25,621
Foreign Borrowing 53,883 60,585 33,132
Amortization -10,486 -10,569 -7,512
Domestic Borrowing 78,758 71,226 79,076
Borrowing from Banking System (Net) 30,908 42,029 -11,731
Long-Term Debt (Net) 21,130 23,965 -6,171
Short-Term Debt (Net) 9,778 18,064 -5,560
Non-Bank Borrowing (Net) 47,850 29,197 67,346
National Saving Schemes (Net) 45,000 26,197 46,289
Others 2,850 3,000 20,984
Total Financing: 1,22,155 1,21,242 1,04,624
Memorandum Item: GDP 25,36,177 25,37,849 22,36,498
Source: iBAS++ data, Finance Division, (Base year 2005-06).

Chapter 4-Fiscal Policy and Fiscal Management ‫׀‬58‫׀‬