Budget in Bangladesh

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Introduction
Generally An estimate of income and expenditure for a set period of time is called budget. A budget is a financial document used to project future income and expenses. The budgeting process may be carried out by a country, individuals or by companies to estimate whether the country /person/company can continue to operate with its projected income and expenses. The finance minister, AMA Muhith, has proposed national budget for fiscal year 2012-13 on June 7, 2012 with a total outlay of Tk 1,91,738 crore which consists of a deficit of Tk 52,068 crore or five percent of the GDP. The budget fiscal year (FY) 2012-13 was announced by the Honorable Finance Minister on June 7, 2012, against the backdrop of mixed performance in the preceding year in terms of macroeconomic and fiscal management. Global economic outlook and Bangladesh's export prospects have also deteriorated markedly because of further deepening of the Euro-Zone Debt Crisis. The budget would be last full-year budget for the current government before facing elections and it has been unveiled in an environment of intensifying political uncertainty. The budget targets an acceleration of real gross domestic product (GDP) growth to 7.2 per cent and a sharp deceleration of inflation to 7.5 per cent, while consolidating Government's efforts towards improved macroeconomic stability and further alleviation of poverty. 

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Use of Resources

Implication of budget in our banking system

* In the original budget, deficit was estimated at 5.0 percent of GDP. It will now stand at 5.1 percent of GDP with a slight increase from the original budget. Out of this 1.3 percent of GDP will be financed from external sources and the rest 3.8 percent from domestic sources. Again out of this 3.8percent, 3.2 percent will be financed by borrowing from banking system. In order to maintain overall economic stability, we need to take measures to reduce our dependence on banking sector in financing budget deficit. In doing so, we have enhanced the rate of interest on savings instruments and simplified the investment conditionality.

* Investment declines and industrialization slows down with the rise in interest rates. In the current fiscal, interest rates were pushed a bit upward due to monetary policy tightening and increased government borrowing from the banking system. The Government, therefore, has adopted a policy to keep its bank borrowing to a minimum in the next fiscal year. They, however, believe that generally interest rates should be left to be decided by the market forces so that optimum allocation of resources is ensured. Empirical research reveals that investment-interest rate correlation is not very much significant. When an economy is in the take off stage, there are ample opportunities for earning high returns on investments. As a result, high interest rates are not likely to impede investment.

* Government has undertaken a number of reform initiatives to establish an efficient financial sector. By installing LAN and WAN across all the divisions/offices, Bangladesh Bank, in its entirety, has been brought under a web-based internet connectivity. ERP (Enterprise Resource Planning) software has been installed to carry out accounting as well as human resource management activities effectively. A long term plan has been adopted to install Enterprise Data Warehouse and National Switch keeping in sight the wider target of implementing e-Commerce

* In FY2010-11, made a commitment to establish one ‘Probasi Bank’ (Expatriate Welfare Bank) under private ownership. Meanwhile, approval has been accorded to establish three ‘Probasi Banks’ under private ownership. Besides, we have already prepared a draft amendment to the Bank Company Act 1991. A special committee has been formed to scrutinize the draft. The draft is expected to be finalized by next financial year.

* Government made commitment to prevent money-laundering and...
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