Post on 03-Apr-2018
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Government
Budgeting inBangladesh
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Constitutional and Legislative
Aspects of the Budget
The article 87 of the constitution requiresthat, a statement of the estimated receipts
and expenditure of the government inrespect of each financial year shall have tobe laid before the Parliament.
This statement is called Annual FinancialStatement and This is the name given tothe budget in the Constitution ofBangladesh.
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Structure of the National Budget
T a x N o n - t a x
R e v e n u e s G r a n t s L o a n s
R e c e i p t s
C h a r g e d
E x p e n d i t u r e
O t h e r
E x p e n d i t u r e
R e v e n u e A c c o u n t
C h a r g e d
E x p e n d i t u r e
O t h e r
E x p e n d i t u r e
D o m e s t i c c a p i t a l A c c o u n t
N o n - D e v e l o p m e n t
R e v e n u e E x p e n d i t u r e C a p i t a l E x p e n d i t u r e
D e v e l o p m e n t
E x p e n d i t u r e s
C o n s o l i d a t e d F u n d
R e c e i p t s P a y m e n t
P u b l i c A c c o u n t o f t h e R e p u b l i c
A n n u a l F i n a n c i a l S t a t e m e n t /
T h e B u d g e t
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Consolidated Fund
According to the article 84 of the Constitution
all receipts of the government on account of
taxes, income from assets, borrowing,repayments of loan, etc. are credited to a
single fund called the Consolidated Fund.
No money can be withdrawn from the
Consolidated Fund except on the basis ofthe expenditure approved by the parliament.
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Public Account of the Republic
All other money received by any
government official and not credited to the
Consolidated Fund has to be credited tothe Public Accounts of the Republic.
The government holds this receipts in a
trusteeship.
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Government Receipts
Major sources of government receipts inBangladesh are as follows:
Revenues
-Tax Revenue
-Non-Tax Revenue Grants Loans
-Domestic Debt
-Borrowing from Banking System
-Non-Bank Borrowing-External Debt
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Government Expenditure
The expenditure budget of Bangladeshis divided into following two categories:
Non-Development-revenue expenditure
-capital expenditure
Development-revenue expenditure
-capital expenditure
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Charged and Other Expenditure
The annual financial statement shows separately
the sums charged on the Consolidated Fund;
and other expenditures. The parliament can discuss on the estimates of
charged expenditures, but they are not subject to
vote; Other expenditures require to be submitted as
demand for grants and are subject to vote.
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Coverage of the Budget
The government budget in Bangladesh includes
both revenue and expenditure of the
government;
The budget covers all government departments/
directorates/field offices and includes all
financial transactions of the government.
The central government budget does not includefinancial transactions of local governments or
state owned enterprises.
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List of Reading
Goode, Richard (1984), Government Finance in Developing
Countries, Brooking Institution, Washington.
Managing Government Expenditure, ADB, 1999.
Jones, R. and Pendlebury, M. (1996), Public SectorAccounting, Pitman Publishing, London.
Fiscal Policy for Stabilization and Adjustment in World
Development Report 1988, Oxford University Press, 1988.
Guidelines for Fiscal Adjustment, IMF,1995
Ministry of Finance, Government of the Peoples Republic of
Bangladesh (2004), Budget in Brief,
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What is Government
Budgeting?
A government budget is a statement of a
governments estimated receipts and
expenditure for a particular period, normally ayear.
The budget brings all the governments tax and
spending plans together.
Financial reflection of government activities orwhat the government plans to do.
P f G t
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Purposes of Government
Budgeting
Ideally a budget serves four mainpurpose:
First, it is a means of policy formulation. Second, it works as an instrument of
policy implementation; Third, the budget is an instrument of
legal control; and the budget documents are a source of
information on government decisions
and activities.
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Comprehensiveness of Budgeting
A government budget should cover all
government departments/agencies;
A national government budget should notinclude financial transactions of local
governments or state enterprises;
But it should include grants or loans to the local
governments, capital subscriptions, loans and
subsidies to state enterprises and any
dividends, interest and loan repayment from
them to the government
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Different Systems of Government
Budgeting
Traditional Line Item Budgeting
Performance Budgeting
Planning, Programming, Budgeting
System (PPBS).
Zero-Base Budgeting (ZBB)
Medium Term Budgeting
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Traditional Line Item Budgeting
the budget is prepared on a line item
basis;
the preceding years income andexpenditure are accepted as the standard
for the next years budget.
it becomes impossible to measure theperformance or activities of a department;
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Traditional budgeting does not require policy
analysis.
its incremental approach fails to consider
whether a particular item is still required or
the amount currently incurred is reasonable.
Once an item appears in the budget its
inclusion in future budget is taken forgranted and only incremental changes in the
item are considered.
Traditional Line Item Budgeting
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Performance Budgeting
Traditional budgeting does not relate inputsor costs with outputs and performance.
Performance budgeting emphasizesoutputs and performance rather thaninputs;
Output is measured in terms of the amount
of goods and services produced, thenumber of cases handled, the number ofpersons affected.
Efficiency is usually measured in terms of
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Planning, Programming,
Budgeting System (PPBS)
Also known as program budgeting;
Like performance budgeting, PPBS
emphasizes outputs;
PPBS creates scope for selection of the
most efficient alternative and enable the
decision-makers to allocate resources on
the basis of benefit/cost relationships.
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Zero-Base Budgeting (ZBB)
Zero-base budgeting means preparation of
budget from a zero base.
The concerned organization might be an oldor a new one, it is assumed that it is starting
as a new organization.
Previous patterns of expenditures are not
taken as the basis and each existing item of
expenditure has to be annually re-justified;
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Medium Term Budgeting
A new Budgeting approach generally known as Medium
Term Expenditure Framework (MTEF).
A Whole-of-government strategic policy expenditure
framework within which ministers and line ministries areprovided with grater responsibility for resource allocation
decisions and resource use.
to balance what is affordable in aggregate against the
policy priorities of the country. consists of a top-down resource envelop, a bottom-up
estimation of the current and medium-term cost of
existing policies and matching of these cost with
available resources.
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MTEF: the Basics
Rational approach covering 3-5 years
Covers both expenditure and income
Covers both capital and recurrent
Less detailed than budget
Sets resource envelopes for each sector/ministry
through medium-term
Budget should be first year of MTEF Rolling approach updated annually
Plans for year 2 onwards dont have same legal
force as budget
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Standard Government (Fiscal) Account
Revenue and GrantsTaxes
Non tax
Grants
Expenditures and Net Lending
RecurrentCapital
Net Lending-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Overall Balance (Surplus/Deficit)---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financing
Foreign (net)
Domestic
Bank
Non bank
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Revenues and Grants
Revenues: all non repayable receipts (i.e. receiptswhich do not give rise to an obligation of repayment),except grants
- Tax revenues: compulsory and unrequited receipts collectedby the government for public purposes (Income Tax, CustomDuty, VAT, Excise Duty etc.).
- Non tax revenues:Dividend/profits from public financial andnon-financial enterprises; interest, fees and charges,
property income. Grants: unrequited receipts from other governments or
international institutions.
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Expenditures and Net Lending
Expenditures:
- Recurrent or Current Expenditure:wagesand salaries; goods and services; interest payments;
subsidies and current transfers.- Capital Expenditure:acquisition of fixed assets
(government investment); capital transfers (transfersfor the purpose of acquiring capital asset)
Net Lending: loans given by government minusrepayments made by respective borrowers (e.g. loans togovernment employees, public enterprises, local bodies)