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Estimated Budget 2010-2011of Bangladesh
Letter of Transmittal
19th May 2012
Dipika Majumder
Lecturer of Macro economic
Department Of Business Administration
World University of Bangladesh
Dhanmondi, Dhaka.
Subject: Submission of the Assignment and Declaration.
Dear Sir, in accordance to your advice I have made my report of Estimated Budget 2010-
11. To serve the purpose, I have followed standard research methodology to extract the
findings and also applied sophisticated data analysis techniques to get consistent. As per the
direction of the course instructor, I have tried my best to highlight my finding through applied
all concepts. I therefore, sincerely hope that, this report will fulfill the requirements suggested
by you under the course Macroeconomic.
I pray and hope that you would be very pleased to accept our assignment and oblige thereby.
Sincerely Yours
Khondoker Amin UzzamanWUB 01/11/33/1757
Sharna Yasmin NipaWUB 01/11/33/1760
Probhas MadhuWUB 01/11/33/1758
MD. Titash BishwasWUB 01/11/33/1759
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INTRODUCTIONThe basic process of planning a budget involves listing the business's fixed and variable costs on
a monthly basis and then deciding on an allocation of funds to reflect the business's goals.
Planning a budget helps a business allocate resources, evaluate performance, and
formulate plans.
Finance Minister of Bangladesh Mr. Abul Maal Abdul Muhith has presented the Budget for
fiscal 2010-11 on June 10. For the 59percent of Bangladesh's population who can't read and
write, this Budget offer much value to them, for the rest it would be a significant day.1.138trillion (Tk 1, 13,819 crore) national budget for the fiscal 2010-11.
Themaingoals of the budget are to effectively fight off the impacts of globalrecession, maintain
macroeconomic stability and develop infrastructuresProjection for the gross domestic product
(GDP) growth is 5.5% in the next fiscal, which is lower from the current fiscal year's revised
estimate of 5.8% .Inflation, is expected to be around 6.5% in 2009-10 from 7.0% in the current
fiscal year. In his budgetary speech, the minister showed optimism about growth in domestic
revenue generation due to expansion of tax and non-tax
revenue despite the negative impact of the ongoing global recession on export earnings and
Inflow of remittance.
The Minister admitted that
thebudget might look slightly expansionary' He opined that, compared
to most other countries the fiscal deficit here was minimal in the context of the current global
crisis, & accordingly, the budget attempts to stimulate local demands, provide appropriate
protection to domestic industries and deliver a wider range of social safety measures aimed at
ameliorating the economic condition of the country.
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Bangladesh Budget (The essential ambition)
The finance minister has argued that such a big budget is a necessity given the size of the
population. Chart 2 thus looks at the per capita budget expenditure and compares them with
other budgets in the Asian region. In terms of per capita budget expenditure, Bangladesh is way
behind India, Indonesia, and Pakistan, and suddenly our budget looks so inadequate. However,
this budget aims to considerably increase Bangladesh's per capital budget expenditure from
around 90 dollars spent in F2009 to 129 dollars inFY2011.
Bangladesh with a huge population compared to its smaller economy, is also set to gradually
increase its per capita public investment. Bangladesh's per capita development (including non-
ADP development) expenditure was less than 22 dollars in FY2009. The budget for FY2011aims
to increase that per capita development expenditure to 42 dollars.
Finance Minister Abul Maal Abdul Muhith proposed the budget for the 2010-11 fiscal year in
the parliament on Thursday, accounting for 16.9 percent of the GDP with a target of 6.7 percent
GDP growth. The GDP is projected to increase 8 percent by2014.
0
50
100
150
200
250
300
350
400
450
500
BANGLADESH INDIA INDONESIA PAKISTANSource: Author's calculation based on budget data of various ministries
PER CAPITAL BUDGET ALLOCATION (US$)
FY09 (A)
FY10 (B)
FY11 (B)
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38 Finance Minister Muhit proposed 2010-11 fiscal year budgets with huge deficit of
Tk393.23 billion, or 5 percent of the GDP. The proposed budget for the 2010-11 FY shows an
increase of 20.15 percent from the current years revised budget.
Foreign loan
7%
Foreign GRANTS
4%
Tax revenue (NBR)
54%
Tax revenue (NON-
NBR)
3%
NON- Tax revenue
14%
Domestic Financing
18%
NON-DEVELOPMENT & DEVELOPMENT BUDGET:2010-11
(1,321.70 BILLION)
RESEOURCES COMING FROM
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Price Up:
1. Reconditioned cars: New budgets proposal to reduce depreciation facilities forreconditionedcars from the current 50 percent to 25 percent means that they will beco
me prici
2. Motor vehicles: Taxes for motor vehicles between 1000cc and 1500cc and microbusesbelow1800cc will also increase.
HOUSING, 0.9
RECREATION,
CULTURE &
RELIGIOUS AFFAIRS,1.2
INDISTRIAL &
ECONOMIC SERVICE,
1.1
MISCELLANEOUS
EXPENDITUR , 8.2
EDUCATION &
INFORMATION
TECHONOLOGY, 13.2
INTEREST, 11.1
TRANSPORT &
COMMUNICATION,
6.3
LOCAL GOVT. &
RURAL DEV, 8.1ENERGY & POWER,
4.6
HELTH, 6
AGRICULTURE, 7.1
DEFENCE, 6.1
PUBLIC
ADMINISTRATION,
7.1
SOCIAL SECURITY &
WELFARE, 7
PUBLIC ORDER &
SECURITY, 4.6
PENSION, 3.1
SUBSIDIES, 5.8
NON-DEVELOPMENT & DEVELOPMENT BUDGET 2010 - 2011
(TAKA 1,321.70 BILLION)
Use of Resources
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3. Apartments: Muhith proposed a flat rate of direct tax at source for the next fiscal'sbudget. Real estate developers will have to pay tax at the time of registration of
apartments or buildings.Tk 185.80 per square feet for apartments at posh residential
areas, namely Gulshan Model Town,Banani, Baridhara, DOHS,
Dhanmondi, Lalmatia, Uttara, Basundhara, Motijheel, Dilkusha,Dhaka Cantonment andKarwan Bazar, and Khulshi, Agrabad and Panchlaish of Chittagong.
For all other areas, realtors will pay tax of Tk 74.32 per square feet.
4. Cigarettes/ bidis / gul, chewing tobacco: New taxes On cigarettes.5. Air tickets.6. Imported air-conditioners.7. Imported refrigerators.8. Imported papers will see their prices rise.9. Juice, energy drink, fruit drinks, mineral water10.Ceramics/ stones, tiles and mosaic, particle boards and laminated boards11.Ceramic made bathtub and Jacuzzi, sink, basin12.Shampoo/Cosmetics13.Filament bulbs14.Paints
Price Down:
1. Locally manufactured refrigerators, freezers
2. Locally manufactured motor cycles
3. Energy-saving lamps
4. Plastic and rubber sandals
5. Coconut oil
6. Skimmed milk
7. LCD/LED panels are also expected to get less expensive.
Last year, Mr. Muhith introduced Public-
Private Partnership (PPP), special allocations for creating jobs for ultra-poor and establishment
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of a national service center to facilitate people with jobs who have qualifications up to the
higher secondary level. The budget for the next year is also expected to address these areas.
ImportanceThe government did not extend any opportunity of whitening money to the 62 sectors under
four categories industries; share market; Balancing, Modernization, Rehabilitation and
Expansion; and purchase of apartments like in last fiscal year.
The facility will be provided if the money is invested to BIFF by paying ten percent flat tax and
no question would be raised about the sources of the money
0
10
20
30
40
50
60
70
FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11
Source: Author's calculation based on budget data
PROPOSED AND IMPLEMENTED BUDGETS AS% OF GDP
PROPOSED BUDGET REVISED BUDGET
ACTUAL IMPLEMENTATION BUDGET DEFICIT
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Experts say if the government allows whitening of black money, tax on that should be much
higher than what is paid by regular taxpayers. Regular taxpayers now pay 10 to 25 percent tax
on their income.
The opportunity will work as an incentive to acquire more black money. On the other hand, it
will be desensitized for honest people, said Transparency International, Bangladesh (TIB)
Executive Director Dr Iftekhar uzzaman.
On moral ground it is unethical. On financial ground it is illogical as the revenue the
government earns through this never meets the satisfaction, he added.
Often the opportunity of whitening black money gives an escape route to the corrupt, said
Anti-Corruption Commission (ACC) Chairman Ghulam Rahman.
Experts also say the opportunity of investing black money in BIFF would be a nice escape route
for the big corrupt. Transparency International Bangladesh has expressed concern over theprovision of legalizing disclosed money in the budget for 2010-2011. It said the provision would
encourage corruption in a massive way. The national chapter of the Berlin-based anti-
corruption watchdog said Friday the payment of 10 per cent tax under Bangladesh
Infrastructure Finance Fund would allow whitening of illegally earned money.
It will encourage corruption in a massive way, TIB executive director Iftekharuzzaman said,
adding undisclosed money is widely referred to as black money. He said the move is also
contrary to the governments election pledge and it would cause of financial irregularities. The
finance minister in his budget speech proposed that anyone could invest undisclosed money in
bonds issued by Infrastructure Finance Fund by paying 10 percent tax.
The government has created the BIFF to finance big infrastructure projects including those
in power and energy sector. Initially, the government gave Tk 1,600 crore to the fund. There is
scope for the private sector to invest in the fund.
Pushing for a stronger capital Market
As the budget day approaches the people involved in share trading are increasingly wary of
fiscal punches that might hit them below the belt. A couple of months back ,the National Board
of Revenue as part of its plan to widen tax net wanted citing of TIN
(Tax Identification Number ) in every BO account. Panicky investors dumped stocks due to the
uncertainty and unclear policy of NBR. Also recent reports that the government would impose 5
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per cent gains tax on profit of over Tk 0.5 million
canset a lingering bearish trend. Capital market has long been considered as theengine of
economic growth and any unwanted interference or unfriendly move
canhave a severe impact on the economy and can cause significant erosion of shareholder weal
th especially those of retail investors.
Boosting Manpower Exports
Life of a Bangladeshi worker in traditional job markets like UAE and Malaysia hasnot been facile
for the past 12 months or so. Recently reports of six Bangladeshi workers who were released
from UAE after the government paid blood money worth9.5 million taka, highlights the not
so positive image of Bangladeshis in the Middle East, which has severely slowed down
manpower exports to the Gulf region. While in FY 08-09, close to a million Bangladeshis left
their motherland for greener pastures abroad, the story seems bleak this year as only about
25% of that are expected to fetch jobs abroad. Although recessionary trends loomed largethroughout 2009, more than 6.5 million Bangladeshis working overseas added over$10 billion
to the burgeoning foreign exchange coffers, which constitute more than 3810% of Bangladesh's
GDP. Remittances are a major lifeline for the country and any drastic fall in the supply
of greenbacks can set back Bangladesh's economic upsurge by some years.
Attracting FDI
Crippling power shortages and other negative factors resulted in a severe 52% drop
in FDI during the first half of FY10-11.
Bangladesh received $297 million incomparison to $603 million it received for the same period
of FY09-10. This compares with $843 million in FDI, which Bangladesh received in 2005, it will
be highly unlikely that FDI in 2010 will reach the same level Bangladesh achieved 5 years back.
While the global financial meltdown has been attributed as a significant factor to lower FDI
inflows, one cannot deny that a country's existing infrastructure and energy situation are also
responsible for driving away the investors.
Tackling climate change
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Bangladesh is among the few countries in the world which not only faces the wrath of floods
but also severe bouts of drought. Scientists predict that due to
climatechange, Bangladesh might experience a 3-
foot sea level rise by 2050, whichthreatens to displace more than 3 crore Bangladeshis. Banglad
esh took poleposition in the 2010 Global Climate Risk Index which ranks 170 countries mostsusceptible to global climate change. While a $100million Climate Change Fund has been set
up, it remains to be seen whether our generation will witness any fruitful developments as far
as combating climate change is concerned.
Macroeconomic Scenario
GrowthThe global economy has turned around and recovered from recession faster than expected. The
process and pace of recovery, however, varied in different regions of the world.. According to
the latest forecast, the world economic growth is expected to reach 4.2 percent in 2010
whereas it shrank to 0.6 percent in 2009.In 2009, among five ASEAN countries, Malaysia and
Thailand experienced negative growth, Philippines recorded a growth of 1 percent and
Indonesia and Vietnams growth was around 5 percent. According to this economic outlook, the
growth of developing Asian economies has been projected at 8.7 percent in 2010. In the case of
South Asia, it will be 7.4 percent. The macro-economic trends in the current financial year in my
discussion on various macroeconomic indicators later in my speech
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Export
While export of commodities and services had shrunk by 20.4 percent globally due to economic
downturn in 2009, Bangladesh managed to achieve a 10.3 percent growth in export. This isobviously a commendable achievement for Bangladesh. Due to the global recession, export
earnings have increased by only 1 percent during July- April of FY2009-10. It is to be noted that
export earnings are on the rise since March 2010 and in April this has increased by 19 percent.
Import
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Due to recession, prices of commodities in global market as well as volume of imports have
declined. While imports shrank by 12 percent in the developed countries and by 8.4 percent in
the emerging and developing economies, import growth of Bangladesh stood at 4.1 percent
in2009-10. In the first ten months i.e. up to April of FY2010-11, import expenditure has
increased by 0.8 percent compared to the corresponding period of the previous financial year.Import has, however, increased by 24.9 percent on the basis of L/Cs opened during July-April
period. The good news is that the import of capital machineries and raw materials has
increased by 54 percent and 12.5 percent respectively on the basis of L/C opened during this
period which will have a positive impact on the economy in the near future
Remittance
The global remittance flows in 2009 decreased by 5.3 percent. Whereas, with an increase of
19.4 percent, remittance flow in Bangladesh reached to US$ 10.7 billion in 2010. The
remittance flow of first eleven months with an increase of 14.9 percent stood at US$ 10.1
billion in FY2010-11.
Foreign Exchange Reserve
Our foreign reserve exceeded US $ 10 billion mark for the first time in November 2010 due tohigh growth of remittance flows. As on 1 June 2011, the balance of reserve remained stable at
US $ 10.2 billion which is sufficient to foot the bill for five and a half months imports.
Exchange Rate
If we look at the value of currency, we will observe that the currency exchange rate, especially
the exchange rate of Taka against US Dollar remained stable due to sufficient supply of foreignexchange in the money market. During the July-March period of current fiscal, the average
exchange rate of Taka against US Dollar was TK. 69.2. During this period, Taka depreciated by
only 0.6 percent. Bangladeshi exporters are still able to maintain export Competitiveness as the
real effective exchange rate of Taka remains below the nominal exchange rate
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Some Important Sectors
Power
The ongoing power crisis has aggravated peoples sufferings, slowed down industrial
production and hampered trade. In January 2009, Country electricity production capacity
(dated capacity) was 5000 MW, but monthly average actual production was 3525 MW. The
huge gap between our production capacity and actual production is attributable to; firstly,
around one-third of our power plants is exceedingly old and should be scrapped. Secondly,
many of our power plants remain idle due to lack of adequate supply of gas. Thirdly, our
transmission and distribution system is extremely defective and inadequate. In order to
strengthen transmission and distribution of power in next the 3 years, we have pledged to add
837 km of power grid lines, 17 sub-stations and more than15,000 km of distribution lines. Out
of which, we have been able to construct, since January 2009 till now, 252km of power grid
lines, 10 sub-stations and 6,091 km of distribution lines.Apart from measures taken to stepup power generation, efforts are underway to have proper load/demand management. By
changing the closing hours of shopping malls and shops,
About350 MW of demand and by changing the area wise weekly holiday of commercialorganiza
tions /supermarkets, about 150 MW of demand for electricity was reduced. By next June, 200
MW power could be saved through the use of energy saving bulbs. Moreover, steps have been
taken to include the provision for use of solar power in National Building Code, install solarpanels in government organizations, replace Incandescent bulbs with Compact Fluorescent
Lamp (CFL) bulbs and change conventional street lights with lead as well as solar bulbs. In short,
Ministry has identified resolution of power crisis as the top priority sector and is working
relentlessly for its development. We strongly believe that we will be able to create a rare
example of development in this sector.
Energy
At present, about 2000 million cubic feet gas is produced daily from 17 out of 23 gas fields in
the country while the daily gas demand is about 2300 million cubic feet. In the context of
overall development of the country, the daily demand for gas has increased to 2500 million
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cubic feet. As supply is lower than demand, it is creating low pressure in supply of gas in
different parts of the country. In order to address the situation, gas drilling programs have been
rescheduled to expedite the ongoing short, medium and long-term plans for quick increase of
gas generation. As per our commitment made in the previous budget, agreements with two
companies are in the process of being concluded for gas exploration in 3 off-shore blocks of thecountry. BAPEX has taken up programs to drill exploration wells at Kapashia, Mobarakpur,
Sundolpur and Srikail.For rapid development of gas distribution system, circumventing the
traditional procedures, Petro-
Bangla has adopted Fast Track Program to conclude production enhancing activities.Furthermor
e, a Gas Development Fund has been created as pledged in the previous budget to enhance the
capacity of BAPEX for exploration of oil and gas. Formulation of a policy in this regard is
underway.
356 km gas transmission pipeline will be constructed to expand gas facility across the country,
especially the western and south-western zones. Extensive use of CNG in the automobiles is
making the ever increasing gas crisis all the more complex. A number of steps have been taken,
including the use of pre-paid meter system, to prevent the misuse of natural gas. Due to the
ongoing gas crisis, we could not generate 800-1000 MW of power from the existing
power Plants. Minister proposed allocate Tk.6, 115 crore for power and energy sector,
development and non-development combined, for the next financial year. This allocation is
61.5 percent higher than the revised budget of the current fiscal year.
Agriculture Development
Agricultural Inputs Assistance Card
Another major success of the present Government in agriculture Sector is the distribution of
agro-input assistance cards among 1.82 crore farmer families throughout the country. Anamount of Tk. 750 crore has been distributed among 92 lakh boro-farmers across the country
to help them purchase diesel in the boro-season of FY2009-10. By showing this agro-input card,
farmers are now able to open a bank account with only Tk 10. By utilizing this card, I hope that
in future, we will be able to bring agro-input assistances in a more transparent manner directly
to the farmers doorsteps
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Subsidy in Agriculture
In the budget for FY2009-10, an allocation of Tk. 3,600 core was made for granting subsidy on
fertilizers and other agricultural programs to reduce the cost of production in agricultural
sector. Later, we increased the amount of this subsidy to Tk. 4,950 core. Ministry proposes
an allocation of Tk. 4,000 core for subsidy in agricultural sector in the budget for FY2010-11.
Seeds
Another major input of agriculture is seed. Under the program of supplying high yielding variety
seeds to the farmers, in FY2010-11, targets have been fixed to produce and distribute
1,18,450MT and 84,838 MT of high yielding variety of seeds through Bangladesh AgriculturalDe
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velopment Corporation (BADC) and Agricultural Extension Department respectively.Besides,
actions are being taken to increase the capacity of seed storages from 40,000 MT to 1,00,000
MT. In 2010-11, we have adopted schemes to grow hybrid paddy in 12 lakh hectares and
salinity resistant Bri-47 in 50 percent of salinity affected 10 lakh hectares of land.
Agricultural Credit
In the current fiscal year, up to April 2010, agricultural loan of Tk. 8,949 crore has been
distributed against a target of Tk. 11,512 crore through public and private sector banks and
financial institutions. This is 16 percent higher than that of the corresponding period of last
year. In the next fiscal year, they will raise the target of distribution of agricultural loan to Tk.
12,000crore.
Fair Price for Agricultural Products
The fact that Government want to ensure that farmers get fair prices
for their produces.Emphasizing this issue, we have taken steps to organize Farmers Marketing
Group andFarmers Club throughout the country along with developing 128 agro-markets at
the Upazila level and 30 such bazaars at the district level to facilitate marketing of
agricultural produces. Moreover, we have built one wholesale market infrastructure in each 15
districts and60 growers market in another 16 districts of northern region. We have also built a
central market at Gabtoli in Dhaka to establish linkage with all these markets.
Health
Government measure to appoint new health professionals at the field level is
commendable. It will be important to address the supply-side of the problem by
introducing special Incentives (both monetary and in-kind) for the existing and newly
recruited medical practitioners serving in the rural areas. For this, the government
should consider allocating targeted fund in the upcoming budget.
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The existing Maternal Health Care Voucher Scheme should be continued and expanded
to at Least 60 upazillas from the existing 45 upazillas. Special attention needs to be
given to monga prone, char and haor areas.
Tax exemption for equipment for disabled people is still limited. Government mayconsider reducing the duty on import of these items.
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Livestock
Re-Excavation of Gorai River
Immediately after the present Government came to office, we undertook, in the shortest
possible time, a 4-Year GoraiRiver Dredging Project with an estimated cost of Tk. 942.14
crore, at the behest of the Honble Prime Minister.
River Training and Management
Sustainable river management is essential in the interest of protecting environment as well as
for ensuring proper utilization of water resources. A 15-year strategy costing about Tk. 50,
000crore, prepared at the behest of Honble Prime Minister with the aim of river training and
sustainable river management through capital dredging, is under active consideration of the
Government. This document will provide short, medium and long term plans including detailed
feasibility surveys.
Development of Haor and Wet Land
People of the Haor areas of the country's north-eastern region are more poverty stricken than
the other regions. Crops in this region are very often damaged by flash floods from hills.
Evaluating
the past and present statusof haors and swamps, an integrated master plan incorporatingsustai
nable and appropriate applied Strategy and management is being formulated for comprehensiv
e development of hoar areas including crop protection and protection from waves.
Food SecurityTo meet the commitment, Government 139 food go downs are being constructed to enhance
the food storage capacity in northern part of the country. Besides, two projects to build
another 333food go downs across the country having storage capacity of 2.19 lakh MT food
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grains are awaiting final approval of ECNEC.
Communication Sector
Roads and Bridges
Construction of Padma Bridge should be completed on a priority basis. Already, the scheme
design for this bridge has been finalized. While preparing the design, effects of climate change
were taken into consideration. According to the work plan, construction work will begin in2010and be completed by 2013.Considering the socio-economic development
including improvement of communication network for a larger section of population in the
south and south-western regions of the country, steps have been taken, in consonance with
Governments election pledges, to construct about 6 km long second Padma multipurpose
bridge at Paturia-Goalanda point.
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RailwaysRailway Expansion
The ongoing implementation of Bangladesh Railway Sector Improvement Project for moderniz
ing the railways at a cost of Tk. 3,600 crore is progressing well. As part of this program, roughly
TK. 3000 crore worth of restoration work of 686 kilometer rail line for reestablishing sub-
regional railway link and construction of double-line rail-track between Tongi-Bhairab Bazar
sections have been
undertaken.Construction work of railway track connecting Tarakandi to Bangabandu Bridge will
becompleted within this fiscal. This railway link will ease communication between the western
and other regions of the country including the greater Mymensingh region
TelecommunicationDigital Infrastructure
Dial-up internet connection has been established in upazilas having digital exchanges. With the
objective of installing optical fiber line to facilitate nationwide internet connectivity as
promised, steps have been taken to extend broadband connections to 200 upazilas by bringing
them within the fold of optical fiber network through the Next Generation Network (NGN)
based Telecommunication System Project for Bangladesh. Two WiMAX licenses have been
issued for providing speedy broadband services. 4409 Union Perished bhaban will be brought
under optical fiber network. Steps have also been taken to establish 1 crore land phone
connections across the country and turn 8 thousand rural post offices in phases into
Community Information Centers(CIC) within a short span of time
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Civil AviationNew and Modern Airport
Government took up diverse activities for the development of civil aviation. Already, a pre
feasibility study has been completed for the construction ofBangabandhu Sheikh
MujibInternationalAirport at the outskirts of Dhaka. This Airport will have all the amenities ofan international aviation hub.
Development of Existing Airports
Besides, modernization of Shahjalal International Airport will be completed by FY2011-12.Apart
from this, programs undertaken for the development of Coxs Bazar and Barisal Airports will be
implemented from the next financial year. Moreover, a feasibility study is underway to Upgrade
the Khanjahan Ali STOL Port into a full-fledged domestic airport.
Overall Education Development
Education is a fundamental human right and also a social capital. Our Government has
always placed highest emphasis on the education sector adopting it as one of the core
strategies
for Poverty alleviation and development. With this end in view, the Government has alreadyapp
roved the National Education Policy 2010 with 24 targets, as a step towards introducing a
modern employment-oriented education system. Implementation of this education policy
will pave the way for introduction of a unified curriculum and syllabus by integrating various
systems to establish knowledge-based and technology dependent Digital Bangladesh.
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Private University Act
The existing laws are not adequate to improve the quality of higher education and to meet the
rapidly increasing multi-faceted demand for such education. To this end, for establishing privateuniversities and ensuring their proper management, Private University Act, 2009 has
been placed before Parliament, as promised in the last budget.
Welfare of Freedom Fighters
Freedom fighters are the finest sons of the soil. In the current fiscal year, we enhanced the
honoraria of the freedom fighters who received the titles of honor by 40 percent. I, now,
propose to increase the allocation for such honoraria to Tk. 61.11 crore for the next fiscal year.
We also made a pledge in the last budget to formulate policy guidelines to provide rationing
facilities to the families of martyred freedom fighters who were given awards of honor and to
those who were wounded. With great pleasure, let me inform this august House that we have
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begun distributing rations to 25,816 members upon finalization of this policy. Apart from the
above program, we are actively considering the issue of raising the rate of
grantsmade to deceased freedom fighters families, finalization of a policy guideline to provideo
verseas medical treatment to wounded freedom fighters of Liberation War, extending VIP
facilities to the freedom fighters who have received awards of honor and those wounded in theWar and giving all freedom fighters opportunity to travel free on trains, buses and launches as
honored citizens
Exploring New and Potential Labor Market
The despite global economic recession, 4, 75,000 workers went abroad in 2009. I have
mentioned earlier that from their earnings, US$ 10.7 billion was remitted which is the highest
ever remittance flow to the country. Due to global financial crisis, manpower export to Saudi
Arabia, Malaysia and Kuwait has declined compared to earlier times. Apart from the traditional
labor markets, we have started exporting manpower to other countries like Libya, Lebanon,
Sudan, and Algeria. Alongside, potential overseas labor markets are being explored by the
Government.
Coordination in Skill Development
Workers are not going abroad in a proportionate rate from different regions of Bangladesh.
Wearer vigilant in ensuring regional parity in work force distribution also. However, in this
regard, I would like to mention that the
National Skill Council
Under the chair of the Honble Prime Minister can make a significant contribution to manpower
development in the overall context of the country and in establishing appropriate coordination
among the concerned ministries and divisions.
Industry and Trade
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Prioritized Industries
I mentioned that as part of our strategy for industrialization, we shall attach priority to the
development of agriculture and labor intensive industry. The important sectors receiving
priority will be among others: agro-processing, readymade garments and knitwear, shipbuilding
and augmentation of Bangladeshs own merchant fleet, light engineering, pharmaceuticals, jute
and leather goods and furniture. Under the new Industrial Policy, export-oriented industries will
receive special incentives and support from risk fund as a thrust sector. Priority will be given to
foreign direct investment and investment by the non-resident Bangladeshis (NRBs) in installing
all kinds of renewable energy based power stations. In addition, incentives will be given
for establishing institutions like BSTI in the private sector to test the quality of goods produced
Labor intensive and environment-friendly industrialization
With a view to promoting labor intensive and environment-friendly industrialization, the land
development work for the installation of a 200- acre Leather Industrial City along
the Dhaleshwari riverside ofSavar-Keranigonj upazila has already been completed.
Establishment of a central effluent treatment plant and construction of a dumping yard is now
under way. A Pharmaceuticals Industrial Park is being built to facilitate growth of factories
for production of pharmaceutical raw materials. 25,000 people will find employment here.
Tourism industry
Tourism is a potential sector in the country. We have given special emphasis on the
development of this sector. A law titled BangladeshParjatan Board Act 2010 has already been
enacted to facilitate overall development, operation and promotion of the tourism industry and
services. Besides, The Bangladesh Conservation and Preservation of Tourism Areas and
Exclusive Tourist Zone Ordinance, 2010 has been promulgated for identifying and preserving
potentialareas for tourism, declaring exclusive tourist zones, attracting both domestic and forei
gninvestments in these areas and preventing erection of unplanned structures and related
operationsin the reserved areas. Moreover, we are continuing with the development programs
for improving tourism facilities in different parts of Bangladesh.
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Law and Order and Rule of Law
We want to guarantee the rule of
lawand justice. To this end, we have taken a firm stance against the extreme communal
forces and militants. We remain vigilant against
militancy across thecountry. We are taking appropriate steps to expedite the ongoing criminalp
roceedings and ensure that fair inquiry takes place in each case. By and large, the right to lodge
complaints against crimes and misdeeds has been established in the country and the law and
order situation in rural areas has greatly improved. In certain cases, there are complaints
against extortion and corrupt bidding practices and particularly in Dhaka, the tendency for
committing such offences cannotbedenied. In this regard, efforts are underway to strengthen the law enforcingagencies.We
have put political interference under the leash
United states
31.6%
Australia
12.5%
Germany
9.4%
United Kingdom
6.1%
Canada
4.9%
France
3.3%
China
3.2%
British
32.9%
Othars
26.2%
2010-2011 TOURISTS BY NATIONALITY
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Small and Medium EnterprisesCredit Target in SME Sector
Considering the SME sector as one of the main agenda of economic development, for the first
time in 2010, we have fixed a target of Tk. 23,995 crore as SME loan to be disbursed by
the banks and financial Institutions. The banks and financial institutions will distribute loans to
the SMEs and women entrepreneurs in accordance with the ascertained target.
SME Refinancing Fund
Under the SME Re-financing Scheme managed by Bangladesh Bank, an amount of Tk.1,
541crore has been refinanced from three funds up to April, 2010 to various banking and
nonbanking financial institutions. The beneficiary coverage of this scheme is 15,672 SMEs.
Public Welfare and Good Governance
Poverty Reduction and Employment Generation
Poverty Reduction and Social Security
Poverty reduction through acceleration of economic growth has been the principal focus
of discussions that I have made so far on various sectors. Ensuring social security ofthe poor and their empowerment through employment are at the heart of all of our
poverty reduction agenda.
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199. I mentioned in my previous budget speech that our overall social safety netframew
ork is divided into four categories: Provision of special allowances for different
Underprivileged sections so that the poor and the disadvantaged can face the incidence
of poverty to a certain extent
Employment generation for poverty reduction through microcredit and different funds/
Programs Food security programs for managing disaster and ensuring food security
Providing support to the new generation in the areas of education, health, training and
vocational competence to enable them to make strides breaking the circle of poverty.
Financial SectorSovereign Credit Rating
The remarkable aspect of our financial sector is that for the first time, Bangladesh has attracted
the attention of two internationally reputed agencies working on sovereign credit rating.
Recently, standard and poors (S&P) and Moody have enlisted Bangladesh in their Sovereign
Credit Rating system giving us BB- and Ba3 ratings respectively. According to these ratings,
Bangladesh has earned the equivalent status of Philippines, Indonesia and Vietnam in terms
of loan repayments. Though in South Asia, Bangladesh is behind India, it enjoys a higher status
in comparison to Pakistan and SriLanka. It is expected that these ratings will facilitate
higher foreign direct investment flows, reduce the cost of Letters of Credit (LC) and as a result,
imports will be cost effective and exporters will be benefited. It should be mentioned here that
inclusion in the rating lists has placed on us much higher responsibility. We will not let our
status to go down and strive to reach a better position. I would also like to mention that our
industrial andcommercial undertakings should also be aware of their own credit ratings andfor which we will allow more professional credit rating agencies to work in the country.
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Strengthening Banking System
In order to raise the level of efficiency of the banking sector of Bangladesh to international
standards by further strengthening of their activities and to make capital reserve morerisk tolerant and stronger, Basel-1 along with Bassel-2 are being implemented. However, we
have started implementing Basel-2 in its entirety since 1 January 2010. This will establish a
direct linkage between risk management and risk-based capital adequacy requirement in the
banking sector.
Controlling Money Laundering
In order to make the program for prevention of money laundering more effective, Money
Laundering Prevention Act 2009 and Antiterrorism Act 2009 have been enacted. By these Acts,
Insurance Companies, Money Changers, Companies remitting and transferring money along
with banks and financial institutions have been brought under the accountability regime of Ban
gladesh Bank. A Financial Intelligence Unit (FIU) has been established in Bangladesh Bank under
the Money Laundering Prevention Act 2009. Memoranda of Understanding (MOU) have also
been signed with seven countries for mutual exchange of information with foreign FIUs on cash
smuggling and financial transactions.
Reforms of Capital Market
Although capital markets of different countries of the world, especially New York, Tokyo,
London, Mumbai and few others collapsed in the face of global recession, the capital markets
of Bangladesh remained quite buoyant at that time. Market capitalization stood at 21.4 percent
of GDP following keen interests showed by the investors in the capital market. By the end of
April2010, capitalization rose to 34.2 percent. By the end of April 2010, the number of
BO(Beneficiary Owner) accounts has increased to 25, 06,000.
Investment
While presenting the budget of FY2010-11, Minister stated that in order to attract
foreigninvestment, They would emphasize on reducing the cost of doing business by ensuringad
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ministrative reforms and making utility services easily available. I am pleased to inform you
that, according to the report titled Doing Business2010 published by the World Bank and the
IMF, Bangladesh ranked 119th in Ease of Doing Business: Global Rank among 183 countries
whereas India ranked 13rd . In the current year, the sign of our sliding from this position is
amatter of concern. I express my firm commitment to correct this situation. Moreover,Bangladeshs ranking is 20 thin case of protection of investors. In addition, Bangladeshs
positions 71st
in terms of receiving loans and 89th
and 98th
in terms of tax payment and business
initiation respectively
DefenseModernization of Defense Force
Government would like the armed forces to remain above all controversies and to that end,
want to continue to enhance the defense capability of our country by restructuring the defensesystem. They are continuing with enhancing the facilities of higher training, providing modern
military hardware and other benefits for the defense forces while reinforcing our diplomatic
initiatives tonsure national security. In this context, I must mention that the members of our
defense forces simultaneously with making immense contributions towards improving the
image of the country by discharging duties with high reputation in different peace keeping
missions. Would like to express my personal gratitude to them.
Formulation of Defense Policy
Steps will be taken to formulate a national defense policy reflecting peoples expectations.
Government has already taken an initiative in this regard and expects to finalize the policy in
the next financial year. Taking into consideration the overall role of defense services in security
anddevelopment of the country and their glorious image in the international arena, Minister pr
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oposed allocate Tk.10,695 crore for defense sector in the budget for FY2010-11, which
isTk.1,512 crore higher than the allocation of FY2009-10.
Law and Order and Rule of Law
Improving the Law and Order Situation
Government wants to guarantee the rule of law and justice. To this end, they have taken a firm
stance against the extreme communal forces and militants. We remain vigilant against
militancy across the country. We are taking appropriate steps to expedite the ongoing criminal
proceedings and ensure that fair inquiry takes place in each case. By and large, the right tolodge complaints against crimes and misdeeds has been established in the country and the law
and order situation in rural areas has greatly improved. In certain cases, there are complaints
against extortion and corrupt bidding practices and particularly in Dhaka, the tendency for
committing such offences cannot be denied. In this regard, efforts are underway to strengthen
the law enforcing agencies. We have put political interference under the leash.
Strengthening the Police Force
Marine Police and Tourism Police have been formed in order to strengthen the police force
of the country. Steps are being taken to form Industrial Police. Restructuring of CID, SB and
Highway Police is also going on
Law and Justice
The present democratic Government has enacted The Code of Criminal Procedure
(Amendment)Act, 2009 following the separation of judiciary as stipulated in the Constitution.
Consequently, the separation of judiciary has taken firm roots. The number of Judges in the
Appellate Division of Bangladesh Supreme Court has been increased. In addition, necessarysteps are being taken to introduce Alternative Dispute Resolution (ADR) as a new and effective
strategy in both
lower and upper courts to accelerate the judicial process. In this regard the Legislative andParlia
mentary Affairs Division has been created under the Ministry of Law, Justice AndParliamentary
Affairs to draft new laws and revise and improve the existing laws.
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Combating Corruption
All-out Cooperation in Combating Corruption
Corruption is one of the impediments to development. Good governance cannot be ensured
without rooting out corruption. In this connection, I would like to add that we are not claiming
that we have driven away corruption of smaller degree at the lower levels after we assumed
office. However, I believe that no one will be able to cite an example of state level corruption.
Meanwhile, to ensure effective countrywide prevention of corruption, a number ofamendmentsin the existing Anti-
corruption Act have been approved by the cabinet. These proposedamendments are expected
to address the shortcomings of the existing Act. At present, it is being compared with the laws
of other countries. Moreover, we remain ever vigilant that enforcement of Anti-corruption Act
does in no way violate fundamental human rights. We want that Anti-
corruption. Commission (ACC) stays independent and remains accountable. Ensuring itsindepen
dence in conducting inquiries is given due importance.They have introduced on-
line tendering in order to ensure transparency in all public procurements. Apart from this,
Government has been maintaining a firm stance against waiver of principal amount whilerescheduling of loans as an effective step towards curbing the loan defaulting culture. We hope
that these steps will reduce corruption in different sectors.
Minimizing the Overall Income - Expenditure Deficit
In FY2008-09, the level of total government expenditure stood at Tk. 88,050 crore which stands
at about Tk. 1,10,000 crore in FY2009-10. Conventional wisdom suggests that it is desirable
for each of us to strike a balance between income and expenditure. Government, by and large,
operates following the similar principle as well. Nonetheless, government has the scope to
bridge the gap between its income and expenditure by some other means. Some of the gaps
are met from external assistance while some are met through domestic borrowing. In order to
strengthen our macroeconomic stability, we are constrained to keep our income-expenditure
gap within ascertain threshold limit. Considering our vast range of activities, we would like to
keep that limit within 5 percent of GDP. The estimates we have prepared for the next fiscal year
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shows that the government expenditure is going to be 16.9 percent of GDP.Consequently;
revenue has to be mobilized to the tune of 11.9 percent of GDP
Recently, a section of our society has become remarkably affluent. The government, however,
is not receiving due taxes from this section of the society. We need to provide a lot of
incentivesand motivations to expand our revenue base. For instance, we provide considerable t
axexemptions in areas where employment opportunities are created. As export helps increase
demand for production, we provide various incentives and tax holidays for exports.
Direct Tax
Income Tax Related Proposals Helpful for Implementing 'Vision 2021
The present Government has not proposed any change this year in terms of individual and
corporate tax rate. As many changes were made last year, we consider that there should be a
scope to assess
the impact of those changes. The present Government is pledgebound toestablish a society bas
ed on equity and justice by lessening social disparity. As such, Government has sincerely tried to
formulate an income tax policy that should help translate our 'Vision-2021' into a reality
provide tax holiday for industries engaged in manufacturing solar panel, energy saving
bulb and contraceptives (barrier contraceptive or rubber latex);
To make provision for allowing infrastructure depreciation allowance on physicalinfrastr
ucture like bridge, road, fly over, or any infrastructure to be built under Private Public
Partnership (PPP) initiative;
To introduce provision for investment in bonds issued under BangladeshInfrastructure
Finance Fund up to June 2012 upon payment of tax at a rate of 10% with a view to
developing physical infrastructure;
To introduce tax rebate on any assistance made to schools and colleges under MPO for
improving computer and English education and on donations made to conduct camps
for voluntary sterilization with a view to encourage Corporate Social Responsibility(CSR)
activities.
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Expansion of Tax Net
Government has a plan to bring at least five lakh new taxpayers into the tax net. Their mission
for expanding the tax net is based on the principle of creating a congenial atmosphere
for compliant taxpayers and ensuring highest vigilance to bring non-compliant taxpayers under
legal jurisdiction.
Capital Market
Capital market is one of the vital and sensitive areas of economic development. On the eve
of assuming office by the present Government, market capitalization in the stock market stood
at Tk. 1042.97 billion Which rose to Tk. 2557.47 billion on 31 May 2010. Government is firmly
committed to maintain a steady growth in and development of the capital market. Continuing
with the existing provision of keeping income of individual investors free from tax.
Value Added Tax
Modernization of VAT System
Establishing Digital Bangladesh is a key priority of the present Government. In order to digitize
the taxation system, I propose to introduce online VAT registration and return submission.
Specific software (Bangladesh VAT System-VAT) will be used for this purpose which will be
developed by a private firm under the direct supervision of NBR.
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Annual Development Program (ADP)
Of 9-10 projects included in the ADP, 580 projects with almost half of the total
allocation should be completed by FY11, while only 9.4% of the total allocation is for
new projects (Tk. 3,222 crore) 20Without carryovers, the ADP for FY11would have been Tk. 32,841 crore (85.6%)
A high proportion of allocation for top5 sectors is either for carried over projects from
previous fiscal years, orto be completed in FY11
Power and Education sectors projects are carrying over 29.1% and 33.0% of their
allocations respectively from the previous year
New
9%
Carryover
16%
Concluding in FY 11
31%
Continuing
44%
STRUCTURE OF ADP FY 11
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In order to improve the implementation rate and resource utilization, focus
should be put on the lagging performers
Failure to complete projects within the stipulated time also results in cost
escalationseparate estimation of the attendant cost hike should be reported
separately at the time of budget presentation
Completion of the projects in due time would allow inclusion of new projects in
the development programmer for the FY11Emphasis should be put on their
completion
Number of unapproved projects under ADP without allocation is quite high (797);
some of these are expected to be approved gradually in the course ofFY11.
Sequencing and priority must be maintained in approving such projects
PUBLIC FINANCE FARMWORK
FY11 budget targets a revenue mobilization of Tk. 92,847 crore. NBR is expected
to take the lead role (contributing to 86% of the incremental
revenue),particularly income tax, VAT and supplementary duties (these were thebetter performers in FY10)
Target for NBR Tax components should be within reach
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It is expected in the RB of FY10 that the other two components (non-NBR tax&non-tax) will recover during Q4 of FY10, but the trends of first three quarters of
FY10 does not indicate this
The current trend of revenue collection by Non-NBR and Non-Tax component
may result in some shortfall (perhaps about 3%). This shortfall will mean that
higher growth rates (20.4%) will be required that has been projected in FY11
Budget (16.8%) to reach the target set for FY11
Absence of Anti-corruption Strategy and Good
Governance
The budget speech does not address the governments stance about anti-corruption andstrategy for the establishment of good governance. It is somehow skipped which is not
desirable from an elected government having this issue deeply emphasized in their
election manifesto.
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Heavy Reliance on lending from Banks
The present budget aims at lending greater amount form the banks, which is 81%greater than that of the revised budget
of the last fiscal year. This will necessarily create an upwardpressure on the bank interes
t rate, ultimately worsening the stagnant private investment situation.
Aspects that are not made clear
The budget speech was much lengthy this time. Excluding theappendix, the 92-
page budget contains the expression of satisfaction as well as an overall description of
the economy by the finance minister. But the description of the revenue activities is
limited in the last 13 pages and revenue related matters in more 19 pages. How would
the budget affect the life in the next fiscal year is the prime interest of the mass people.
People have nothing to do with the total amount, revenue account, expenditure
account or development account in the budget. In this sense, the budget is not clear
enough to address the issues
Like tax increase or decrease, new areas to be taxed etc. which is the main
anxiety in the mass people.
Increase of income-tax cut from 3% to 5% at source in the import of goods is not
made clear in the appendix of the budget.
The amount of Value Added Tax (VAT) applicable on the retailers has been
increased. In Dhaka and Chittagong city
corporation areas, it will be Taka 6,000 instead of Taka4, 200 per annum. In the
other city corporation areas, the amount has been increased from Taka 3,600 to
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Taka 4,800.In the district cities and municipalities, the amount hasbeen increased
from Taka 2,400 to Taka 3,600. For the rest of the country, the increase is from
Taka 1,200 to Taka1, 800. In case of advance trade VAT (ATV), the increase is
from 2.25% to 3.00% and VAT for traders has been increased from 1.5% to 3.00%.
But all these information are not mentioned in the budget speech, may be thefinance minister expects only a circular from The NBR would be worth in
addressing this issue in a market system where the retailers and the whole sellers
regularly take part in a
blamegame while price of the essentials frequently riseunnaturally high.
Whitening of black money has been given another chance in disguise of investing
in an infrastructure development fund. The finance minister did not say anything
about it but it is carefully adjusted in the Income Tax Ordinance, adding a clause
19(c) to it.
The Budget and the Country Scenario
Although there have been enormous amount of plans and indexes regarding economic
development, the number of poor people
hasnot been decreased. Billions of Taka has been spent by thegovernment and NGOs in
thousands of projects but the result is not that good in the elimination of poverty. 75%
of the
wholepopulation still lives in mud and bamboo made dilapidatedhouses. Lighting at nigh
t is still done with kerosene lamp inalmost half of the total number of families. 60%
people do not have any radio or television set for entertainment. Less than one-thirdstudents complete the primary
schooling. This picture has been explored in the Basic OpportunitiesEvaluation Survey
done by the Bureau of Statistics in March,
2010. According to this survey, the percentage of populationbelow the poverty line is
41.20. The percentage of poor people is31.9 and the percentage of hard-core poor is
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9.30. The rate of annual economic growth has reached to 6% six years ago. Considering
this as an achievement, we are still left with the question that how the benefit of this
growth has been
distributingamong the citizens. Especially, the chronic increase of incomeand regional
discrimination urges more concentration on wealth and resource distribution policies.An overall assessment of budgeting in Bangladesh has come out in a seminar titled
Bangladesh Economic Status and Analysis of Budget 2010-2011 on June 19, 2010. In
the seminar,
renownedeconomist Rehman Sobhan opined that, Quantities areemphasized by most
of the people in terms of the implementation of ADP. But the outcome of ADP
implementation should be the concern
now.Another economist Wahiduddin Mahmud said, The economicgrowth rate should
be increased up to 8% in the next six years. But the traditional way of budgeting will not
help in this regard. It needs creative policies. He also added that Brazil, China another
fast growing economies adopted their own creative policies in recent time and thus
ensured higher and sustained growth.
Human rights violation and torture override Budget issues
The event of the so called 'shadow budget' that people saw after less than a week when BNP's
ex-energy adviser Mahmudur Rahman was arrested by the present regime and closed the daily
Amar Desh did not fare well in the eyes of the mass people. People are behind Mahmudur
Rahman and will not be behind BNP if they fail to take proper actions in right time. BNP as a
political party can gain momentum only by mobilizing people and protest and taking strong
stand on human rights
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Our Opinion
It will encourage corruption in a massive way.
Mismatch between fiscal and monetary policy is likely to be continued,
BAPEX, a company under Bangladesh Oil, Gas & Mineral Corporation (Petro Bangla), is
charged with the exploration and drilling of fossil fuel, mostly natural gas.
The finance minister Mr. Muhith, arguably a spendthrift, will find it difficult to finance
his big budget, although he is sure to bet on higher revenue growthas high as 20 per
cent.
To sustain farm growth, the budgetary measures have placed an emphasis on
agricultural productivity and diversifying agri-products.
The opportunity of investing black money in BIFF would be a nice escape route for the
big corrupt.
Conclusion
PM Sheikh Hasina to implement the vision of taking Bangladesh to the height of prosperity by
2021.We are aware that the road to Vision 2021 is not strewn with roses. Thousands of
obstacles are persistently impeding our journey towards reaching that aspired vision. In spite of
all these odds, we have never deviated from our resolute determination.The defining feature of
the upcoming budget will have to be enhancement of the ability of the development
administration to deliver on the ADP, particularly in the thrust areas such as generation and
maintenance power supply, infrastructure, and supporting accelerated economic growth with
macroeconomic stability and control of inflation. Capacity to flexibly respond to any
macroeconomic shock will need to be strengthened and toward this, a sophisticated system of
monitoring will need to be developed. If FY2009-10 has been the year of preparation; FY2010-
11 will be the year of delivery.