ANNUAL BUDGET 2014-15

Group 06 Department of Finance and Banking University of Barisal

Nishadul Islam

ID NO:13 FIN 065

• Budget is an estimate of income and Budget is an estimate of income and expenditure for a set period of time. expenditure for a set period of time.

• From the perspective of Bangladesh the From the perspective of Bangladesh the most important issues that are going to most important issues that are going to impact middle and poor class people need impact middle and poor class people need to be discussed.to be discussed.

Budget Summar y (FY-14-15)

Sources of Financing

Huge borrowing from bank may hinder private investment and can put pressure in inflation

Rabeya Nasrin Papri

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Key futures of Budget 2014-15

The size of the 2014-15 Budget, that at Tk 2.5 trillion, is 12 percent higher than the Tk 2.22 trillion for 2013-14 FY.

The GDP growth target in the new budget is 7.3 percent. In the last budget this target was 7.2 percent, but later it was revised down to 6.5 percent.

The new budget plans to keep the average inflation within 6 percent. In the last budget this target was 7 percent.

Tk 675.52 billion deficit that is one-fourth of the total budgetary outlay and five percent of the current GDP.

The proposed budget’s revenue target has been set at Tk 1.82 trillion, almost 73 percent of the budgetary outlay.

The FY 2013-14 budget proposed extension of the scope for whitening undisclosed income for investment in the real estate

Tk 810 billion for the Padma bridge project in the 2014-15 budget, the single biggest allocation for an infrastructure project so far.

Revenue target of Tk 1.82 trillion, bridging the difference between it and expenditure seems to be the major challenge for the government.

High-earners with annual income above Tk 4.42 million to be taxed at 30 percent instead of the current 15 percent and those sending children to English-medium schools will have to pay more.

Gold will be dearer, stationary cheaper and cancer drugs will cost less.

The latest in Bangladesh’s budget exercise is district-wise budget.Presented budgets forSylhet, Khulna, Chittagong, Tangail, Barisal, Rajshahi and Rangpur.

Abul Munsur Roni

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Sectoral Measure

Agriculture

Average share of AAS in total budget was 10.8% during FY10-FY14, but reduced

to 7.6% in FY15 Average share of AAS in total GDP was 1.64% during FY10-FY14,

but reduced to 1.43% in FY15 Allocation for the Ministry of Water Resources increased by 30.6%.

This is mainly due to rise in development budget by 40%. Agricultural subsidy remains constant at Tk. 9,000 crore. It was 4.2

% of total budget in FY14 which with decline to 3.6% in FY15.

Industry

Curiously, proposed budget allocation for the Industrial sector in FY15 is lower than that that of RADP14 (less than 21% and share of total public expenditure to fall by 0.6% point) .

43 projects related to industry sector are currently under implementation: a total of 24 projects are supposed to be completed by FY15 as per project timeline.

A number of those projects remain far behind the targeted timeline: Shahjalal fertiliser (87%), API Park (70%), BSCIC industrial estates in Sirajgonj (38%), and Borguna (54.9%), Comilla industrial estate (1.7%), strengthening of BSTI (88%), establishment of four textile vocational institute (18%); BMRE of existing cloth processing centre at Narshingdi (17%): overrun of time and cost is likely to reduce the expected return from these projects

RMG and Textile: Reduction of tax at source from 0.8% to 0.3% (till June, 2015) along with other financial support have given relief to entrepreneurs and help undertaking necessary retrofitting measures to make the factories compliant: Enforcement of minimum wage should be contingent

Special Economic Zones: Four SEZs will be set up under Bangladesh Economic Zones Development Fund at a cost of Tk.81.95 crore with 97% financial support from IDA, WB’s soft-lending facility: Should be set up immediately

Capital market

• Capital market has remained stable during FY14: DSEX index has increased by 11.7%; total trade value by 9.4% and market capitalisation by 16.3%

• Proposal for tax exemption facilities for demutualised stock exchanges for over 5 years in graduated rate would help to build confidence on the bourses to potential international institutional strategic partners

• Retail investors will get some relief because of rise in tax exempted dividend income fromTk.10,000 fromTk.15,000

Alipto Kumer Biswas

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Infrastructure

Transport ,Communication and the power sector are more capital centric. The proposed allocation in these two sectors in the budget for FY 2014-15 is Tk. 23,136 crore and Tk. 11,540 crore respectively.

These are higher than the allocation in the budget of FY 2013-14 by Tk. 14,226 crore and Tk. 9,902 crore respectively.

Rooppur nuclear power plant (1st Phase) is a fast track project: 50% of the project cost has been allocated for FY15 (completion due in FY17)

Energy & mineral: Allocation will be increased by16% but reduced in share of total expenditure (-0.25% point)

Defense

Defense Budget as % of Total Budget

Explicit allocation for Defense services is 6.6% of total expenditure (7.0% in RBFY14)

Social Sector

Allocations for the Ministry of Education (MoE) & the Ministry of Primary and Mass Education (MoPME) have increased by 16.4%.

Allocation for the Ministry of Health and Family Welfare (MoHFW) in FY15 has been increased by 17.7%.

However, the allocation as percentage of total budget is 4.5% which is lower than the average allocation of 5.7% during FY10-FY14.

Figure: Share of MoE & MoPME inTotal Budget Figure: Share of MoHFW in Total Budget

Tax free income for women has been raised fromTk. 2.5 lacs in FY 2014 to Tk. 2.75 lacs in FY 2015.

The proposed allocation for the social safety-net and welfare sector is estimated at Tk. 139.74 billion, which represents only 13 percent increase over the amount in the previous budget

FY15 budget has proposed to introduce 1% ‘Environment Protection Surcharge’ or ‘Green Tax’ on ad-valorem basis on all kinds of products manufactured in Bangladesh by industries which pollute the environment.

Dipto Kumar Roy

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The objectives of the budget

The objectives of the budget for FY15 appear to be:• Attaining fiscal consolidation backed up by high growth of revenue• Revitalizing economic growth momentum• Reverting the downturn of private investment• Further control of inflation It also seems that the Budget for FY15:• Has finally abandoned the Sixth Five Year Plan targets• The Seventh Five Year Plan has not been picked up• Has little reference to new and specific commitments of the recent

election manifesto

Some feature to make Budget effictive

Set up an Independent Statistical Commission to validate the Macroeconomic correlates Set up Agriculture Price Commission Set up Local Government Financing Commission Constitute Public Expenditure Review Commission Food adulteration is a huge problem in Bangladesh. The Pure Food

Act,2013 has been enacted but its implementation has not started yet. Pure Food Authority needs to be established urgently

Formulation of the National Shrimp Policy 2014 would help Shrimp farming.

Omar Faruk

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Vision for future

Eight Tasks as part of the road map ahead include:1) Current Account Deficit: CAD will be inevitable for some more years which can be financed only by foriegn investment. Hence, there is no room for any aversion to foreign investment.

2) Price Stability and Growth: In a developing economy, a high growth target entails a moderate level of inflation. BB must strike a balance between price stability and growth while formulating the monetary policy.

3) Financial Sector reforms to be completed as laid down by Financial Sector Legislative Reforms Commission.

Vision for future

4) Massive investment in infrastructure: to be mobilized through the Public Private Partnership.

5) Garments sector to be the base of Bangladesh’s development: All taxes that go into an exported product should be waived or rebated. There should be a minimum tariff protection to incentivize domestic manufacturing.

6) Subsidies, which are absolutely necessary should be chosen and targeted only to the absolutely deserving.

7) Urbanization to be managed to make cities governable and livable.

8) Skill development must be given priority at par with secondary and university education, sanitation and universal health care.