Fiscal policy of Bangladesh in 2020-21

fiscal policy of bangladesh

The main vision and mission of fiscal policy are collecting revenue and controlling expenditures by continuing economic stability, investment-friendly situations, poverty alleviation, and skilled manpower. According to the budget management act-2009, this country is allowed to accept a deficit budget.

The total revenue collected by the Bangladeshi government in 2019 was TK 350795 billion and in 2018 it was TK 263911 billion. In the fiscal year, 2020-21 total revenue and the foreign grant are TK 3, 82,012 crores. At that time in 2020-21, the total expenditure is TK 5, 68,000 crores.

Importance of fiscal policy

Fiscal policy is the basic calculation of income and expenditure of a government. To conduct the functions of government smoothly, increase productivity, spending money on public welfare-oriented services; the government collects money from tax and excludes tax services.

Fiscal policy includes:

  1. Estimate revenue collection
  2. Estimate expenditure plans
  3. Detecting the source that fills the budget deficit.

A well-balanced fiscal policy can maintain economic stability and accelerate economic growth. Fiscal policy has a full impact on high yield, full employment, and poverty alleviation.

Proper fiscal policy preparation and implementation is the constitutional responsibility of the government. In fiscal policy, the government balances total collecting resources and expenditures to ensure an investment-friendly and full employment situation in an economy.

The fiscal policy ensures constancy and dependency on persons/institutions of economic activities and government income/expenditure.

Objectives of Fiscal Policy in Bangladesh

  1. Increase the growth of capital accumulation to increase investment.
  2. Increase employment opportunities to reduce unemployment
  3. To increase the economic growth rate and overall production.
  4. Implement the poverty alleviation program to reduce poverty.
  5. To make a stable price level.
  6. To ensure social welfare and social security.
  7. Control monopoly on the market.
  8. To ensure proper utilization of resources.
  9. Encourage private investments.
  10. Equal distribution of income and resources.
  11. Take proper projects for underdeveloped areas.
  12. Develop the social and economic infrastructure.

Sources of government income of BD

To fulfill national expenditures government collects money from different sources which are called government income or government revenue.

The main source of government income is revenue. Direct and indirect tax constitutes revenue.  The tax revenue (NBR) is 58.1% of the total budget. Which is worth Taka 3,300 billion.

Sources of government income

There are some other important sources of government income in BD. Those are- income from government-owned lands, fines, extra currency circulation, donations, foreign aid, loans, fees, duty, and income from the business.

The total revenue collection for budget 2020-21 is TK 3,82,013 crore. From which tax revenue is TK 3,45,000 crore, non-tax revenue is TK 33,000 crore, and foreign grant is TK 4,013 crore.

Revenue collection (Taka in crore)

Budget 2020-21 Revised 2019-20 Budget 2019-20 Actual 2018-19
Tax revenue 3,45,000 3,13,068 3,40,100 2,25,957
Non-tax revenue 33,000 35,002 37,710 25,921
Foreign grants 4,013 3,4544,168 1,677
Total3,82,013 3,51,523 3,81,978 2,53,556

Public expenditure

Here is a calculation of the Bangladeshi government’s operating expenditure, development expenditure, and other expenditures.

the top spending sector of the government is education and technology and its budget share is 15.1%.

The most shocking news is that the second top spending sector of this government is interest on debts. The government takes budget to finance its deficit budget. Its budget share is 11.2%.

operating and developmwnt budget 2020-21

The operating budget in the budget of 2020-21 is TK 3,48,180 crore, the Development budget is TK 2,15,043 crore, and others are TK 4,777 crore.

Government of BD’s expenditure ( In crore Taka)

Budget 2020-21 Revised 2019-20 Budget 2019-20 Actual 2018-19
Operating expenditure 3,48,180 2,95,280 3,10,262 2,38,110
Development expenditure 2,15,043 2,02,349 2,11,683 1,51,055
others 4,777 3,948 1,245 5,941
Total 5,68,000 5,01,5775,23,190 3,91690

Balancing budget and financing

Every year Bangladesh takes a deficit budget policy. Overall the budget deficit is about 5% of total GDP. In 2020-21, the total budget deficit will be more than 1,90,000 crore taka, which was TK 1,53,508 crore taka in the budget 2019-20.

Deficit budget financing

Budget 2020-21 Revised 2019-20 Budget 2019-20 Actual 2018-19
Foreign borrowing 88,82463,659 75,390 44,790
Foreign debt repayment 12,820 10,950 11,542 13,501
Domestic borrowing 1,09,983 97,345 77,363 1,06,845
Overall deficit (% GDP) -5.8 -5.3 -4.8 -5.4

Finance Division, Ministry of Finance

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