‘Overview of National Budget 2019 - 2020’ MD. SHAHADAT HOSSAIN FCA Member Council -ICAB Dhaka – 16 June 2019 6/17/2019 1
OBJECTIVES The objective of this presentation is to have an overview about the impact of recently published national budget of the financial year 2019-20 on macro economy of the country. This presentation has been prepared on the basis of publicly available sources i.e. daily news papers, budget speech, website etc. 6/17/2019 2
VOLUME OF BUDGET FOR THE FY 2019-20 Budget 2019- Revised Budget Nature of Expenditure 20 (TK in 2018-19 % of increase Crore) (TK in Crore) Operating 311,507 269,092 16% expenditure Development 211,683 173,449 22% expenditure 523,190 442,541 18% Financing Revenue 377,810 320,399 18% Loan 145,380 122,142 19% 523,190 442,541 18% Volume of the budget is 18% of GDP 6/17/2019 3
REVENUE COLLECTION Comparison Comparison with revised 2019-20 2018-19 with budget budget (2018-19) (2018-19) % of increase/ % of increase/ (Tk. in crore) (decrease) (decrease) Sources of financing Tax on Income & Profit 100,719 13% 20% 113,912 Value Added Tax (VAT) 110,555 11% 17% 123,067 Import Duty 32,553 12% 16% 36,498 Supplementary Duty 48,766 - 6% 48,153 Other NBR revenue 3,608 10% 16% 3,970 Total NBR Tax 296,201 10% 16% 325,600 Tax other than NBR 9,727 49% 51% 14,500 Revenue other than Tax 33,352 13% 40% 37,710 339,280 11% 19% 377,810 6/17/2019 4
PROPORTION OF DIRECT TAX AND INDIRECT TAX Revised Budget Budget 2019-20 Budget 2018-19 2017-18 Direct Tax 113,912 35% 100,719 34% 95,167 34% Indirect Tax 211,688 65% 195,482 66% 184,833 66% Total (NBR Tax) 325,600 100% 296,201 100% 280,000 100% 6/17/2019 5
AVERAGE MONTHLY DEFICIT OF TAX COLLECTION Average monthly Period deficit (Tk in crore) July 2871 July-August 3637 July-October 4200 July-November 4395 July-January 4757 July-February 5142 July-March 5596 Deficit of tax collection has increased month after month. Revised budget for NBR tax collection is Tk. 2,80,000 crore but upto March 2019 collection was Tk. 153,477 crore. How far is it possible to collect of further Tk. 126,523 crore by next three months remain question? During the year 2017-2018, revised NBR tax collection was Tk. 225,000 crore but actual collection was Tk. 187,103 crore. Actual collection was 75% of original budget and 9% higher than the previous year’s collection. 6/17/2019 6
LOAN FINANCING Foreign Donation 4,051 3% 10% 4168 Foreign Loan 50,016 28% 47% 63,848 Loan from Bank 42,029 13% 53% 47,364 Loan other than Bank 29,197 3% (37%) 30,000 Total 464,573 13% 18% 523,190 6/17/2019 7
LOAN FINANCING Foreign loan budget has been increased by 28% compared with previous year’s budget and 47% compared with the revised budget which is good step. In the year 2017-18, actual foreign loan (including donation) was Tk. 26,489 crore as against revised budget Tk. 46,024 crore i.e 58%. Loan from saving certificates has been proposed to reduce and some ways and means like increasing tax has been mentioned. 6/17/2019 8
BUDGET ALLOCATION 2019-20 2018-19 Expenditure (Tk. in crore) (Tk. in crore) Defence 26,117 5.6% 29,067 5.6% Pension & Gratuity 26,046 5.6% 27,118 5.2% Transport and communication 55,405 11.9% 63,679 12.2% Interest 51,340 11.1% 57,118 10.9% Local Government and Rural 32,670 7.0% 37,884 7.2% Development Social Welfare and safety 23,799 5.1% 25,884 4.91% Public Administration & Safety 25,808 5.6% 26,793 5.1% Education and Technology 67,944 14.6% 79,486 15.2% Public Administration 14,611 3.1% 23,997 4.6% Health 23,393 5.0% 25,732 4.9% Agriculture 17,259 3.7% 19,359 3.7% Subsidy and Incentive 33,205 7.1% 33,459 6.4% Fuel and Electricity 24,920 5.4% 28,050 5.4% Others 42,056 9.1% 45,569 8.7% Total 464,573 100% 523,190 100% 6/17/2019 9
EDUCATION In the proposed budget of FY 2019-20 Tk. 79,525 crore i.e. about 3% of GDP and 15.2% of total budget has been allocated for education. Out of total budget for education sector 52% is for non-development spending. Budget for education and technology has been increased by almost 17% compared with the previous years budget. Lots of proposal in the budget for increasing facilities as well as improving quality education are available which is good initiative. 6/17/2019 10
HEALTH SECTOR Total allocation for health sector is Tk. 25,636 Crore which is only 4.9% of total budget and 10% higher than the previous year's budget of Tk. 23,393 Crore. Budget for health sector is not sufficient at all. Two crore 60 lac people are suffering from malnutrition. Under this circumstances, budget allocation for health sector only 4.9% is not adequate. 6/17/2019 11
AGRICULTURE Major part of the workforce (40.6%) depend on minimum (13.61%) GDP contributory and low growth rate sector (Agriculture). Under this circumstances, agriculture sector has been given minimum budget allocation only 3.7% which is far behind than contribution to the GDP. 6/17/2019 12
INTEREST Total allocation for payment of interest is Tk. 57,070 crore which is 10.9% of total budget and it is 11% more compared with previous year’s budget. Interest for foreign loan is Tk. 4,273 crore. Interest for Local loan is Tk. 52,797 crore. Total government liabilities as on 30 th June 2018 was Tk. 353,423 crore (Savings Certificate Tk. 239,328 crore and Bank Tk. 114,095 crore). Average rate of interest is more than 13% which seems to be high. 6/17/2019 13
SOCIAL SAFETY NET Total allocation for social safety net is Tk. 74,367 Crore which is 2.58% of GDP, 13.92% of total budget and 15% higher than the previous budget. Both rates of benefit and number of beneficiaries have been increased. For reduction of poverty level, it is undoubtedly a good step but special attention needs to be given for proper distribution. 6/17/2019 14
ADP IMPLEMENTATION Budget for the Annual Development program (ADP) has been allocated for the FY 2019-20 Tk. 202,721 crore which is 17% higher than that of the previous year’s budget and 22% higher than the revised budget. Tk. 32,000 crore has been allocated for five preferred fast track projects like Rooppur Power Plant, Metro Rail, Padma Bridge Matarbari Power Plant and Dohajari Rail Project. Sector wise highest allocation was for Transport sector Tk. 52,806 crore and second Hight for power sector Tk. 26,107 crore. In implementing ADP, the unique feature observed is that during first nine months of the year the implementation remains very poor and slow, in terms of expenditure. For example during the first ten months of FY 2018-19 (July – April) ADP has been implemented only Tk. 97,030 crore which is 55% of revised budget. Balance 45% equivalent to Tk. 79,590 crore has to be spent during the next two months. This happens almost every year. This practice may create scope of mis match of fund due to pressure on the fund. 6/17/2019 15
FOREIGN DIRECT INVESTMENT FDI position of the country is, to some extent in increasing trend. During the year 2018, FDI received by the amount of USD 3613.3 million which is 68% higher than that of the previous year. But it is also mentionable that despite having increasing trend of FDI, proposal for generating employment opportunity has decreased by 17%. 6/17/2019 16
INFLATION Year Inflation 2014-15 6.4% 2015-16 5.9% 2016-17 5.4% 2017-18 5.8% 2018-19 5.5% Inflation has been projected 5.5% for FY 2019-2020 6/17/2019 17
FOREIGN REMITTANCE Year Foreign remittance (USD in million) 2005-06 4802 2006-07 5979 2007-08 7915 2008-09 9689 2009-10 10987 2010-11 11650 2011-12 12843 2012-13 14461 2013-14 14116 2014-15 15170 2015-16 14717 2016-17 12769 2017-18 14982 2018-19 (July-April) 13303 Two percent incentive has ben proposed for remittance through legal channel 6/17/2019 18
BALANCE OF TRADE Year Million USD 2008-09 (4710) 2009-10 (5152) 2010-11 (9935) 2011-12 (9320) 2012-13 (7009) 2013-14 (6794) 2014-15 (6965) 2015-16 (6460) 2016-17 (9472) 2017-18 (11732) 2018-19 (July-April) (11928) 6/17/2019 19
DEFAULT LOAN 6/17/2019 20
POVERTY ALLEVIATION No doubt that poverty level is improving year after year but the rate of poverty reduction compared with GDP growth is not consistent. Last four periods information are : Period Average Rate of Rate of poverty GDP reduction growth 2000-2005 5.7% 1.8% 2005-2010 6.1% 1.7% 2010-2016 6.6% 1.2% 2016-2018 7.6% 1.3% There are various reasons for which despite accelerated economic growth in recent years, there has been much slower progress in poverty reduction, these are, Slow employment generation due to insufficient growth of private investment, poor public spending on education and health, getting inappropriate prices of agricultural products compared with production costs. 6/17/2019 21
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