BACKGROUND OF THE STUDY
Government budget deficit have been common in Bangladesh like other developing countries. When a budget deficit prevails in a given year, it means that government authorities cannot collect enough revenue from taxes and other sources to cover their annual expenditure. To over the deficit, the government must borrow funds, so that it can meet its expenses in the current fiscal year, thereby fulfilling its obligations. When the government borrows funds, it adds to its debt.
The size of the government debt is related to whether it can balance its budget. The only way the Debt can decline is through a budget surplus that allows the government to pay off some of its previous borrowings .The government debt, which was about TK.12 thousand Corers at the end of 1999, has increased by over TK.6 thousand crore in 2000.If budget recur government debt continues to increase. Since 2000 the government has made some progress in reduction in the deficit but in 2004 the deficit was still TK15 thousand crore.
This report investigates both the current and the future impact of budget deficits and increased government debt. This report analyzes the causes of budget deficit and well investigates their effects on interest rates, future tax rate, and private production.
OBJECTIVES OF THE STUDY
The main objective of this report is to show the reasons behind the budget deficit and how the government finances it. In Bangladesh we see over the year the government has been facing a problem to finance the budget deficit. For sustainable growth in any country macro economic stability is very important. So sound and balanced budget can give us economic stability. More specifically the objectives may be stated as follows
1. Identify the various sectors in the economy that can finance the budget deficit. 2. Analyze the government revenue income and expenditure. 3. Analyze the internal and external sources of finance to deficit budget.
A statistical Hypothesis is some statement or assertion about a population about the probability distribution characterizing a population, which we went to verify on information available from a sample. We have set some hypothesis to evaluate our study and help us to make the decision. Here, we consider 1) Government budget deficit increasing over the year.
2) Internal and external sources of finance play an important role to reduce the budget deficit. 3) Proportion of internal financing is increasing in financing the budget deficit.
The study is conducted based upon the secondary sources of information. Information is collected from different books, budget speeches, Bangladesh bank publication, publication of different organization and different web sites. Here, the time series dates have been taken from FY 1991/92-2003/04.
SIGNIFICANCE OF THE STUDY
Foreign loan and grants have reduce to 14% of the 4500 crore in 2003-2003 which was about 70 percent in 1994-1995.The internal financing has been increasing since 1991-1992 due to government expansionary fiscal and monetary policies. i.e. increase the area of taxation and introduce the VAT.
For the sound budgetary system and making the revenue activities stronger some issues has been identified. And how the government can finance its deficit budget is also another part of the study. They are, 1) Accruing the internal sources and uncertain about the growth of the revenue earning. 2) Allocation of resources and unproductive expenditure.
3) Balancing position of the budget and increasing of the financial deficit. 4) Financing the budget deficit and increasing the govt. debt. 5) Creating the broad money with higher growth rate.
6) Minimum foreign reserve.
LIMITATION OF THE STUDY
All the research study has their limitation and this is not with the exemption of such limitations. This study is mainly based on secondary data...