UNIVERSITY OF DHAKA

Dept. of Accounting & Information

Systems

Course: Principles and practices of taxation (i)

Course Code: 3105

Course Instructor: Dr. Mohammad Tarek

Subject: Assignment on Budget.

Assigned by Courtesy by

Dr. Mohammad Tarek Group 4

Assistant Professor Batch:19th
Dept. of Accounting & Information Section: C
Systems

Date of Submission: March 30, 2015

 Members
of
Group 4

Name ID
Enayet Hossen Imran 19-161

Abdullah Siddique 19-162

Md. Golam Kibreya 19-163

Md. Moshiur Rahman 19-164

 Letter of Transmittal

30th March, 2015

Dr. Mohammad Tarek
Professor, Accounting & Information Systems
University of Dhaka.

Subject: Application for submitting report on Budget.

Sir,
This is Group-4(19162, 19162, 19163, 19164) from department of accounting and information
systems, section C. You had assigned us to submit a report on Budget. It was nice experience
throughout the whole assignment completion process. So we are submitting our report to you
We hope to get feedbacks from you on our article.

Sincerely yours,
Group-4
Batch: 19th
Section: C
Dept. of Accounting and information systems
University of Dhaka
Abstract
This study is in the area of changes in National Budget of Bangladesh for the fiscal year 2014-
15. The main objective of this study is to get familiar with the changes in national budget and
effects of budget in different sectors. This study also includes the different types of budget
preparation and their effects. The national budget of Bangladesh for the fiscal year 2014-15 is
passed on the parliament. There are many new policies and act were established and enacted in
different sectors. The budget and the revised budget of last year had some major issues to impose
on. This report is based on these changes in the Budget of 2014-15.

Introduction
The budget is a central policy document of government, showing how it will prioritize and
achieve its annual and multi-annual objectives. Apart from financing new and existing
programmes, the budget is the primary instrument for implementing fiscal policy, and thereby
influencing the economy as a whole. Alongside other instruments of government policy – such
as laws, regulation and joint action with other actors in society – the budget aims to turn plans
and aspirations into reality. More than this, the budget is a contract between citizens and state,
showing how resources are raised and allocated for the delivery of public services. Such a
document must be clear, transparent and credible if it is to command trust, and to serve as a basis
of accountability.
While a government’s budget directly or indirectly affects the lives of every one of its citizens, it
can have the greatest impact on certain groups, such as the elderly, children, the poor, rural
residents, and minorities. The wellbeing and prospects of these people can hinge greatly upon
government decisions on raising and spending money. Budget cuts tend to have the greatest
impact on programs that benefit the poor and vulnerable, as other items, such as interest on the
debt, the public-sector wage bill, or military expenditures, are more likely to have first claim on
scarce funds.

Survey objectives
The main objective of this survey was to get familiarity with the national budget of Bangladesh
which is the main document of fiscal policy of the country. Other objectives were:
1. To analyze the major changes in budget;
2. To find out the effects of budget on different categories of participants of the budget;

Survey questions
The study was started with the following questions in mind:
1) What are the broad principles/ philosophies used in the preparation of the budget?
2) What are the new things of national budget of 2014-15?
3) How and why the budget deficit, surplus and debt have an effect on different participants
of the budget.

Definitions of different types of budget

Balanced budget
A balance budget(particularly that of a government) refers to a budget in which revenues are
equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists ("the accounts
balance"). More generally, it refers to a budget that has no budget deficit, but could possibly
have a budget surplus. Mathematically, balanced budget occurs when,

Revenues = expenditures

Budget surplus

A situation in which income exceeds expenditures. The term "budget surplus" is most commonly
used to refer to the financial situations of governments; individuals speak of "savings" rather
than a "budget surplus." A surplus is considered a sign that government is being run efficiently.
Mathematically, it occurs when,

Revenues > expenditures

Budget deficit
A status of financial health in which expenditures exceed revenues. The term "budget deficit" is
most commonly used to refer to government spending rather than business or individual
spending. Mathematically, it can be expressed as,
Revenues > expenditures

Debt
Here it is assumed that debt refers to the public debt. And public debt comes into effect when
there is a budget deficit. Government borrows internally as well as externally to finance its
activities. The debt of the government; the amount of borrowing by the government to meet
expenditures exceeding tax revenues.

Principles used in preparing budget

Budgeting practices can vary widely across countries in light of traditional, institutional and
cultural factors. However, based on the experience of the Senior Budget Officials (SBO) and the
extensive analysis of various aspects of budgeting conducted by the SBO and its networks over
recent years and related studies across the OECD (see Bibliography), the common elements of
modern budgeting practice among OECD countries can be presented as high-level principles to
guide and inform budgetary processes and reforms. Countries that organize their budgetary
affairs on the basis of these governance principles, complementing their successful national
approaches with international experiences, are well-placed to meet citizens’ expectations for
sound, stable and effective public governance. These principles deal with the various phases of
the budget process, the attributes of the budget document, as well as the wider context within
which budgets are formed. The OECD has developed, and is developing, more detailed
principles and recommendations for further guidance on specific elements of the overall
budgeting framework.

1) Budgets should be managed within clear, credible and predictable limits for fiscal
policy: A sound fiscal policy is one which avoids the build-up of large, unsustainable
 debts, and which uses favorable economic times to build up resilience and buffers against
more difficult times. This objective should be supported against the range of pressures
that can impede governments from effecting counter-cyclical or cyclically neutral
policies, and from using resource endowments prudently. Within these clear fiscal policy
objectives, top-down budgetary management should be applied to align policies with
resources for each year of a medium-term fiscal horizon. Overall budget targets for each
year should ensure that all elements of revenue, expenditure and broader economic policy
are consistent and are managed in line with the available resources.

2) Budgets should be closely aligned with the medium-term strategic priorities of

government: To promote alignment with the multi-year planning, prioritization and
goal-setting functions of government, the budgeting process should (a) develop a stronger
medium-term dimension, beyond the traditional annual cycle; and (b) organize and
structure the budget allocations in a way that corresponds readily with national
objectives. A medium-term expenditure framework (MTEF) is an important tool in
setting a basis for the annual budget. To be effective, an MTEF should have real force in
setting boundaries for the main categories of expenditure, for each year of the medium-
term horizon; should be fully aligned with the top-down budgetary constraints agreed by
government; should be grounded upon realistic forecasts for baseline expenditure (i.e.
using existing policies), including a clear outline of key assumptions used; should show
the correspondence with expenditure objectives and deliverables from national strategic
plans; and should include sufficient institutional incentives and flexibility to ensure that
expenditure boundaries are respected.

3) The capital budgeting framework should be designed to meet national development

needs in a cost-effective and coherent manner: Capital investment plans, which by
their nature have an impact beyond the annual budget, should be grounded in objective
appraisal of economic capacity gaps, infrastructural development needs and
sectorial/social priorities. The budgeting process should require a prudent assessment of
the costs and benefits of such investments; affordability for users over the long term,
including in light of recurrent costs; relative priority among various projects; and of
 overall value for money. Investment decisions should be evaluated independently of the
specific financing mechanism i.e. whether through traditional capital procurement or a
private financing model such as public-private partnership (PPP).

4) Budget documents and data should be open, transparent and accessible: Clear,
factual budget reports should be available to inform the key stages of policy formulation,
consideration and debate, as well as implementation and review. The annual budget
document itself, which shows the allocations for each public service area and revenue
policy measures under each tax heading, is of central importance. Budgetary information
should also be presented in comparable format before the final budget is adopted,
providing enough time for effective discussion and debate on policy choices (e.g. a draft
budget or a pre-budget report), during the implementation phase (e.g. a mid-year budget
report) and after the end of the budget year (an end-year report) to promote effective
decision making, accountability and oversight. All budget reports should be published
fully, promptly and routinely, and in a way that is accessible to citizens. In the modern
context, “accessibility” requires that budget documents be available on-line, and that all
budget data be presented in open data formats, i.e. in formats which can be readily
downloaded, analyzed, used and re-used by citizens, civil society organizations and other
stakeholders.

5) Debate on budgetary choices should be inclusive, participative and realistic: As well

as having access to budget documents and data, parliament and citizens should be able to
engage with and influence the discussion about budgetary policy options, according to
their democratic mandate, competencies and perspectives. The national parliament has a
fundamental role in authorizing budget decisions and in holding governments to account.
The parliament and its committees should have the opportunity to engage with the budget
process at all key stages of the budget cycle. The clear setting-out of medium-term
budgetary envelopes (see point 2 above) should help the parliament to contribute to the
processes of budget priority-setting ex ante as well as ex post.
6) Budgets should present a comprehensive, accurate and reliable account of the public
finances: As a contract of trust between citizens and the state, it is expected that the
budget document should account comprehensively and correctly for all expenditures and
revenues of the national government, and that no figures should be omitted or hidden
(although limited restrictions may apply for certain national security or other legitimate
purposes). To underpin trust, this expectation should be made explicit through formal
laws, rules or declarations that ensure budget sincerity and constrain the use of “off-
budget” fiscal mechanisms. Budget accounting should show the full financial costs and
benefits of budget decisions, including the impact upon financial assets and liabilities.
Accruals budgeting and reporting, which correspond broadly with private sector
accounting norms, routinely show these costs and benefits; where traditional cash
budgeting is used, supplementary information is needed. Where accruals methodology is
used, the cash statement should also be used to monitor and manage the funding of
government operations from year to year.

7) Budget execution should be actively planned, managed and monitored: Once

authorized by parliament, the budget allocations should be implemented fully and
faithfully by the agencies of government, with oversight throughout the year by the
central budget authority (CBA) and line ministries as appropriate. Cash disbursements
should be profiled, controlled and monitored prudently, and the roles, responsibilities and
authorizations of each institution and accountable person should be clearly regulated. A
single, centrally-controlled treasury fund for all public revenues and expenditure is an
effective mechanism for exercising such regulation and control; special-purpose funds,
and ear-marking of revenues for particular purposes, should be kept to a minimum.

8) Performance, evaluation and value for money should be integral to the budget
process: Parliament and citizens need to understand not just what is being spent, but
what is being bought on behalf of citizens – i.e. what public services are actually being
delivered, to what standards of quality and with what levels of efficiency. Performance
information should be routinely presented in a way which informs, and provides useful
 context for, the financial allocations in the budget report. It is essential that such
information should clarify, and not obscure or impede, accountability and oversight.
Accordingly, performance information should be limited to a small number of relevant
indicators for each policy program or area; should be clear and easily understood; should
allow for tracking of results against targets and for comparison with international and
other benchmarks; and should make clear the link with government-wide strategic
objectives.

9) Longer-term sustainability and other fiscal risks should be identified, assessed and
managed prudently: To promote a stable development of public finances, mechanisms
should be applied to promote the resilience of budgetary plans and to mitigate the
potential impact of fiscal risks. Fiscal risks, including contingent liabilities, should be
clearly identified, explained and classified by type, so as to inform consideration and
debate about the appropriate fiscal policy course adopted in the budget. Fiscal risks
should also be quantified as far as possible, and the mechanisms for managing these risks
should be made explicit and reported in the context of the annual budget.

10) The integrity and quality of budgetary forecasts, fiscal plans and budgetary
implementation should be promoted through rigorous quality assurance including
independent audit: The CBA needs to command the confidence of a broad range of
stakeholders – across government, within parliament and the public, and internationally –
in the quality and integrity of its budgetary forecasts and fiscal plans and in its ability to
manage budgetary implementation and delivery. In the first instance, governments should
invest continually in the skills and capacity of staff to perform their roles effectively –
whether in the CBA, line ministries or other institutions – taking into account national
and international experiences, practices and standards.
The New Things of National Budget of
2014-2015:
In the National Budget 2014-15, many new projects and acts have been formulated and enacted.
The National budget for the next fiscal was proposed Tk. 250506 crore. The estimated revenue
receipt for the next fiscal year has been estimated at Tk. 182954 crore. Thus, the budget deficit in
fiscal 2014-2015 will be Tk. 67552 crore which is 5% of GDP. Over the past 5 years, revenue
collection has increased from 10.7 percent to 13.3 percent of GDP. At the same time, the size of
public spending has increased from 15.7 percent to 18.3 percent of GDP. The target over the next
5-years would be to augment resource mobilization to 17 percent and increase the size of the
budget to 22 percent of GDP.

Graph- 1: Development and non-development budget 2014-15.

(ministry of finanace)
Estimates of Revenue Collection
The revenue receipts for FY 2014-15 has been estimated at Tk. 1 lakh 82 thousand 954 crore
which is 13.7 percent of GDP, of which NBR tax revenue is Tk. 1 lakh 49 thousand 720 crore
(11.2 percent of GDP). Revenue from Non-NBR sources has been estimated at Tk. 5 thousand
572 crore (0.4 percent of GDP). In addition, Tk. 27 thousand 662 crore (2.1 percent of GDP) will
be collected as Non Tax Revenue (NTR).

Estimates of Expenditure:
The total expenditure for FY 2014-15 has been estimated at Tk. 2 lakh 50 thousand 506 crore
(18.7 percent of GDP). The allocation for non-development and other expenditure has been
estimated at Tk. 1 lakh 70 thousand 191 crore (12.7 percent of GDP). Expenditure for ADP has
been estimated at Tk. 80 thousand 315 crore (6 percent of GDP).

Budget Deficit and Financing:

The overall budget deficit will be Tk. 67 thousand 552 crore, which is 5 percent of GDP. Of this
amount, Tk. 24 thousand 275 crore (1.8 percent of GDP) will be financed from external sources
and Tk.43 thousand 277 crore (3.2 percent of GDP) from domestic sources. Of the domestic
financing, Tk. 31 thousand 221 crore (2.3 percent of GDP) will come from the banking system
and Tk. 12 thousand 56 crore (0.9 percent of GDP) from savings certificates and other non-
banking sources.

Living Standard:
The national budget of 2014-15 fiscal year shows that Per capita income has increased to USD
1190 in 2014 from USD 843 in 2009. The rates of poverty and extreme poverty have gone down
to 26.4 percent and 11.9 percent respectively in 2014 from 33.4 percent and 19.3 percent in
2009.
Year Per Capita Income( Poverty Extreme poverty
USD)
2009 843 33.4% 19.3%
2014 1190 26.4% 11.9%

Budget proposal contains various programmes worth Tk. 1,500 crore to eradicate extreme
poverty.

Power Sectors:
Power generation capacity has now gone up to 10341 MW which was only 4931 MW in 2009.
The people are now free from sufferings caused by terrible load shedding. The Government
gives Priority to the power, gas and port development. They will increase power generation from
the present 10,341 MW to 24,000 MW and ensure that the real supply does not fall below 80
percent of actual generation.

National Agriculture Policy 2013:

The Government has formulated the ‘National Agriculture Policy 2013’ with the targets of
sustaining the achievements in agriculture, commercializing this sector and ensuring food and
nutrition security. 78.4 percent of the total agricultural and rural credit target of Tk. 14 thousand
595 crore has been distributed.

Agriculture, Water Resource and Rural

Development
Subsidies for fertilizer, seeds, irrigation and other agricultural inputs will continue. Governent
proposed an allocation of Tk. 9,000 crore for this sector in FY 2014-15.

Educational Sectors:
It is reported that as many as 26 thousand 193 schools have been nationalized while 1 lakh 4
thousand 776 teachers have been absorbed. Besides, 3 thousand 901 headmasters and 83
thousand 392 assistant teachers have been recruited. Government is planning to provide 45 lakh
illiterate adolescent and people belonging to the age group of 15-45 years with basic literacy and
livelihood training. As part of National Education Policy, government has taken up a number of
programmes to upgrade the primary education level up to class VIII by 2018.

Labor Policy:
The government has re-fixed the monthly labor wage from a paltry sum of Tk. 1600 to Tk. 5300
and also amended the Labor Policy.

Manpower Export:
As a result of our successful diplomatic efforts, it has been possible to export manpower to 159
countries including 62 new ones, more than 8 lakh Bangladeshis have been legalized in Saudi
Arabia.

Political Unrest
In the run up to the 10th national election there had been a serious political unrest in the first six
months of the current financial year. Various political parties and alliances observed a total of 45
days strike and blockade during July 2013 to January 2014. On the other hand, due to political
unrest, the target of tax revenue had to be revised downward at Tk. 1 lakh 30 thousand and 178
crore in FY 2013-14 by reducing Tk. 11000 crore which is around 1 percent of GDP.

Rate of Inflation:
At the end of June in the last fiscal year, point to point inflation was 8 Percent. Government
believes that the general inflation in Bangladesh will be hovering around 7.0 percent by June
2014 and will reduce further at the end of the next fiscal year.
Export
Export has increased by 13.2 percent till April 2014, year on year. We are assuming that export earnings
and import expenditure may increase by approximately 15 percent.

Remittance
Remittance has declined by 4.8 percent till April 2014 of the current fiscal against last fiscal
year’s growth of 12.6 percent.

Skill Development Training

Considering the demand of the day we have identified six priority sectors in the first phase,
which include
1. Garment industry.
2. Construction sector
3. Information technology
4. Light engineering
5. Leather and footwear industries and
6. Ship building.

Strategy for Women Empowerment and

Children Welfare
A special allocation of TK.100 crore will be provided in the budget for the next year for
development of women. I propose to allocate Tk. 50 crore for the projects for children welfare in
the budget for FY 2014-15.

Creative Talent Hunt

Last year for the first time, government launched a programme titled ‘Creative Talent Hunt’ to
recognize and reward the young talents. This practice will continue in future.
Telemedicine and Health Insurance:
Government is aiming at raising average life expectancy to 72 years by 2021.

Development and Expansion of

Communication Infrastructure:
Contract signing for the construction of Padma Multipurpose
Bridge will be done this month and construction will be completed
by 2018.
 Construction of a tunnel underneath the Karnaphuli river in Chittagong
 Conversion of nationally important highways into four lanes gradually
 Continuation of investment to reform and modernise railways
 Construction of circular rail road track around Dhaka city.
 Construction of the 3rd Sea port at Payra in Patuakhali.
 Construction of a sea port and an LNG terminal at Moheshkhali
 Making Biman a profitable organisation by improving its management and enhancing the
capacity of passenger transport.

The Padma Bridge

It will create a direct road link between 19 districts of south-west region and Dhaka along with
northern region of Bangladesh. Once completed, this will induce a growth to the tune of 1.2
percent of GDP per year.

Prevention of Traffic Congestion

Government has taken proper initiatives to implement the MRT Line-6 project from Uttara to
Motijheel under the supervision of Dhaka Transport Coordination Authority (DTCA) as per
plan. Meanwhile, the Metro Rail Act, 2014 has been sent to the cabinet for its approval.

Railway
Construction and reconstruction of 441 km rail line is under way. Government will construct in
phases the Dhaka-Mongla and Chittagong-Cox’s Bazar rail lines.

Civil Aviation
In order to improve passenger service, two Boeing 777-300 aircrafts have been procured.
Procurement of two Boeing 737- 800 aircrafts is underway. Hopefully, another four Boeing 787-
800 aircrafts will be added to the Biman fleet by 2019.

Extension of Housing Facilities

We are committed to ensure ‘Housing for All’. Accordingly, we have started developing around
44,316 plots and also constructing 32,258 flats in Dhaka City

Financial Sector
To make the banking system more dynamic, Bank Companies (Amendment) Act, 2013 has
been enacted by amending the earlier act. In FY 2013-14 we approved the establishment of 9
banks in private sector including 3 under the ownership of non-resident Bangladeshis all of
which are now in operation. In the meantime these banks have opened 71 branches across the
country. These banks have been asked to channel 5 percent of their total credit to the agriculture
sector in order to bolster investment in this sector.

Income Tax and VAT

(in crore)

Income Tax and Corporate Tax Excise, VAT & Turnover Tax
Income Corporate Travel Total Excise Import Local Turnover Total
tax tax tax VAT VAT tax

25,480 31,120 900 57,500 1,150 16,850 37,570 7 55,580

Simplification of Income tax return form
A new two page simple income tax return form has been introduced to simplify tax payment
system. It can be downloaded easily from the website of National Board of Revenue
(www.nbr.bd.gov);

E-Payment System
Using the Q-Cash network under the platform of e-payment of NBR, income tax, customs duty
and VAT can be paid.

E-TDS System & Tax Administration Retrieval

System
Tax information retrieval System is being created at the Central Survey Zone under the project
‘Tax Administration Capacity and Tax Payers Service’ (TACTS).

E-Filing
In order to automate the work of the income tax wing, a project titled ‘Strengthening Governance
Management Project’ (SGMP) has been taken up with the assistance of Asian Development
Bank (ADB). Under this project, procurement and installation of software, hardware,
networking, server etc. will be completed by the end of 2015.

Tax Payers Service Centre

In order to intensify self-compliance of the tax payer through better services, ‘Taxpayers
Information & Service Centers’ have been opened in Dhaka, Chittagong, Sylhet, Khulna,
Comilla and Rajshaji. Three more taxpayer service centers will be opened in Rangpur, Bogra
and Barisal very soon.

Paperless Customs Procedure

ASYCUDA World system of customs clearance is in operation. It is expected that by the end of
this year, paper less custom management will be introduced in all customs station/housed across
the country.
Recognition of Highest Income Taxpayers &
Recognition of Highest VAT Payers
This encouraging process also has been undertaken by the government.

Income Tax Income Tax

Government places the proposals on income tax slabs for individual taxpayers and rates
applicable for all taxpayers for the FY 2014-2015.

Proposals

(a) Threshold of Taxable Income of Individual Tax Payer

Types of Tax payer Threshold of Taxable Income

General Tax Payer
Women tax payer and tax
payers of 65 years of age and
above
Existing Proposed
Tk. 2 lakh 20 thousand Tk. 2 lakh 20 thousand
Tk. 2 lakh 50 thousand Tk. 2 lakh 75 thousand

Physically handicapped Tk. 3 lakh Tk. 3 lakh50 thousand

War-wounded gazette Tk. 2 lakh 20 thousand Tk. 4 lakh

freedom fighters

(b) Individual Tax Rate:

Total Income Tax rate
On first, Tk. 2 lakh 20 thousand of taxable Nil
income
On next, Tk. 3 lakh of taxable income 10 percent
On next, Tk. 4,00,000/- of taxable income 15 percent
On next, Tk. 5 lakh of taxable income 20 percent

On next, Tk. 30 lakh of taxable income 25 percent

On the balance of taxable income 30 percent
(c) Company Tax Rate:
Company Tax Payer Existing Proposed
Publicly Traded Company 27.5 percent 27.5 percent
(subject to
certain conditions)

Non-Publicly Traded 37.5 percent 35 percent

Company
Bank, Insurance and 42.5 percent 42.5 percent
Financial
Institution(other than
Merchant Bank)

Merchant Bank 37.5 percent 37.5 percent

Cigarette Manufacturer
Publicly Traded 40 percent 40 percent
Non-Publicly Traded 45 percent 45 percent

Mobile Phone:
Publicly Traded 40 percent 40 percent
Non-Publicly Traded 45 percent 45 percent

Dividend Income Minimum 20 percent 20 percent

Turnover Tax 0.50 percent 0.30 percent

(budget speech, table-8)

Tax Holiday
 Government proposes to exempt all donations through banking channels to girls’ schools
or colleges and vocational and technical institutions from payment of tax.

 Government proposes to treat all donations through banking channel to national level
research institutions established under any law engaged in research work in the field of
agriculture, industry, science and technology as totally exempted from tax payment.

 Government proposes propose to extend the existing tax holiday facilities from June,
2015 to June, 2019.
 Government proposes to enhance the tax exemption limit for agriculture sector from
Tk. 50 thousand to Tk. 2 lakh.
Changes in holiday of least development
areas:
(Budget speech 2014-15, page-77)

Supplementary duties at import level

The Value Added Tax and Supplementary Duty Act, 2012 is scheduled to be implemented
from 1st July, 2015.

(Budget speech 2014-15, page-84)

VAT Tobacco and tobacco products
Tobacco and tobacco products are injurious to health. The world is witnessing movements
against use of tobacco. Despite that the use of tobacco products are growing. Nearly 60 thousand
people die and 4 lakh people become crippled every year in Bangladesh due to smoking.
Treatment of tobacco related disease is also very expensive. For this reason, I propose to impose
1 (one) percent ‘Health Development Surcharge’ on all imported and domestically produced
tobacco products.

(Budget speech 2014-15, page-93)

Effects of Budget Deficit

Immediate effects
Tax Payers:
Tax payers pay lower amount of tax. Therefore tax revenue falls short of government
expenditure. Hence, their disposable income increases and which turn forces consumption to
increase.
Social Security of the economically disadvantaged people:
The government spends a higher amount than its income. So, a large goes to economically
disadvantage people as transfer payment, i.e. adult, widow allowances etc. As inflation occurs,
they may find themselves into a trap.
Unemployed individuals:
Government spends more than its income when there is a budget deficit. Thus, productive sector
develop in turns create employment opportunities. Unemployed get relief of their unemployment
problem and their standard of living increases.
University of Dhaka student:
They have a large allotment per head. So, infrastructural development occurs here. Also a better
environment for education be ensured.
A domestic garment manufacturing industry (exporter):
An exporter will get a lower real money balance in exchange of his goods and services because
of the inflationary effect in the economy. On the other hand he/she has to finance his activities
with a higher cost of capital. That may derives him/her to a deeper problem. But the government
may through its expansionary policy reduces these types of problems i.e. reducing tax rates in
designed sectors, providing subsidy. Thus, the government may protect the local industries.

A European clothing company (importer):

Economic development in the country causes price and output to rise simultaneously. Also, the
government debt increases to back up increased spending. Here, the domestic exchange rate falls
in comparison with the currencies of other countries. Thus, the importer has to pay a higher
amount in exchange. That in turn causes him to pay higher tax on import cost. Hence, his/her
cost base increases and in turn creates a cost-push inflation.

Gross Domestic Products (GDP):

Since the government expands its expenditure program, it causes productive sectors to develop
which in turn raises productivity and employment and consumption in private sector increases.
Though it causes price and interest rate to rise, which may have a negative effect upon
investment that in turn causes output level to fall, the overall GDP rises.

Subsequent effects
Tax payers:
Government increases tax to repay its outstanding debts resulting in a tax burden upon the tax
payers. Therefore, their disposable income and consumption fall. Thus private savings decrease.
Social Security of the economically disadvantaged people:
The cuts its expenditure program to economically disadvantaged people. But they may find out
some benefits resulting from deflationary effects in the economy. It is to be said that these
benefits be too small to recover the previous mentioned problem.
Unemployed individuals:
Inexperienced or newly employed individuals may loss some of their jobs in public sector,
because the government cuts its expenditure program. But lower interest rate and available
loanable funds may encourage the private sector to stimulate its activities that may in turn to
some extent elevates the unemployment problem. Given it may not be too enough to recover all
the losses from public sector.
University of Dhaka students:
Government allotment falls to the students of University of Dhaka to balance the budget or even
to make a surplus and to pay out all or part of its outstanding debts.
A domestic garment manufacturing industry (exporter):
As the government pay out its obligations Exporters can finance their activities at lower cost.
Also, they can earn a higher amount in exchange of their goods or services given there is a
deflationary effect. Investment stimulates because of lower rate of interest.

A European clothing company (importer):

As the exchange rate rises importers pay out a lower amount in exchange. Also, they pay
lower tax which causes their cost to fall and a fall in price level emerges. They also have
available funds to finance their activities at lower cost.

Gross Domestic Products (GDP):

As the interest rate falls investment through private sector stimulates but government expenditure
and consumption fall while recurring from budget deficit. Hence, overall GDP of an economy
decreases.
Effects of Budget Surplus
Budget surplus means that the government has an excess in revenue over the expenditure.

Immediate effects
Tax payers:

Since the public revenue is more than its expenditure, the tax payers are paying a higher
amount of tax. Hence, their disposable income and consumption decreases simultaneously.
Also, the private savings fall.

Social Security of the economically disadvantaged people:

As the government saves funds while it is a surplus budget, the government allots lesser
funds to this classes of people. Because of the deflationary effect, they may get some
benefits it may not be too enough.

Unemployed individuals:
Employment rises when production stimulates. When the economy creates surplus budget
that is the government cuts its expansionary program unemployment in the public sector
rises. But availability of loanable funds derives private sectors to run its productivity at a
lower cost. Hence, employment in this sector goes up. But the net change in unemployment
depends upon the proportionate size of the private and the public sector. Given it normally
happens that employment falls.

University of Dhaka students:

Granting in this sector decreases because of the government’s contractionary policies.
Hence, infrastructural development hampers.

A domestic garment manufacturing industry (exporter):

Exporters can finance their activities at lower cost. Also, they can earn a higher amount in
exchange of their goods or services given there is a deflationary effect. Investment stimulates
because of lower rate of interest.
A European clothing company (importer):
As the exchange rate rises importers pay out a lower amount in exchange. Also, they pay
lower tax which causes their cost to fall and a fall in price level emerges.

Gross Domestic Products (GDP):

Since two major components of GDP i.e. consumption and government expenditure, fall and
only one component i.e. investment, stimulates the overall GDP falls.

Subsequent effects

Tax payers:
Since the government has an excess, it will charge a lower amount of tax upon the tax
payers to balance the budget or even to make a deficit. Hence, the tax payers will be having
a higher disposable income and higher consumption. Also, the private savings increases.
Social Security of the economically disadvantaged people:
The government shall expand its expenditure program to economically disadvantaged
people. Also, it will use the surplus amount to pay out its current obligations.

University of Dhaka students:

Probably it will not have any effect upon the students. Because the government will try to
spend its excess in paying its outstanding debts.

A domestic garment manufacturing industry (exporter):

As the government pays out its outstanding debts or a major part of it, most of the money
supply goes in hand of private sector which make the loanable funds available by the
lending institutions. That is these institutions can lend these funds in productive sectors at a
lower rate of interest which stimulates production and employment. That in turn creates
inflationary effects. Hence, the exporters, though produces more, earn comparatively less as
the exchange rate falls.
A European clothing company (importer):
Importer also have available funds but they are to pay a higher exchange price as the
inflation increases.
Gross Domestic Products (GDP):
As the government expands its activities, consumption increases from higher disposable
income, investment stimulates for lower rate of interest, GDP and employment rises.

Effects of Debt
Here it is assumed that debt refers to the public debt. And public debt comes into effect when
there is a budget deficit. Government borrows internally as well as externally to finance its
activities. So the effects upon the determined categories of people should be similar to some
extent to the effects of budget deficit.

Conclusion
The national budget of a country determines the policies and activities of the whole year. The budget
itself also is the representation of the government. The budget shows the success in implementation
and also the failure. The revised budget helps to take necessary steps to control and the fiscal budget
adds new act and policy. Bangladesh government passed the FY budget 2014-15 and looking forward to
implement as per budget.

References
1. Budget speech 2014-15
2. Budget speech 2013-14
3. Budget at a glance Business News 24 BD.html
4. http://www.thedailystar.net/budget-2014-2015-a-case-for-plain-land-ethnic-groups-27653
5. http://www.thedailystar.net/energy-sector-is-key-28657
6. http://www.mediabangladesh.net/tk-250506-crore-bangladesh-budget-2014-15-7-5-gdp/
7. https://www.linkedin.com/pulse/20140715162838-39121268-budget-14-15-bangladesh
8. http://www.thedailystar.net/newspaper
9. http://mybangla24.com/the_daily_star_online_newspaper.php
10. pd.org.bd/wp-content/uploads/2014/06/CPD-An-Analysis-of-the-National-Budget-for-
FY2015_Final_June.pdf
11. www.mof.org.bd