Finance Minister AHM Mustafa Kamal announced Budget for 2020-21 (FY21) on June 11, 2020. This budget draws extra attention as it was announced at a time when the Bangladesh economy has been bleeding from the deadly coronavirus outbreak. Protecting lives with limited resources and securing the livelihood of people have become the major concerns for the government. Budget FY21 is expected to give the framework to deal with this crisis situation created by pandemic as well as rejuvenate the economy so that the growth momentum can quickly recover with minimal damage.
Check out the dashboard prepared by Magpie Analytics on Budget FY21. This dashboard gives a cluttered free presentation of latest budget along with previews of earlier budgets. It is divided into eight pages, each containing a separate theme. Each page is filled with multiple visuals, slicing and dicing the data from different perspectives so as to make the analysis easier.
The major aspects of Budget FY21 as illustrated in the dashboard are given below:
Expenditures (Operating and Development)
Budget size or total expenditure has been raised by 8.56% compared to FY20’s proposed budget. Operating expenditure is 61.82% of total expenditure and noted a growth of 12.22%. Total allocation to health sector is BDT 292.47 billion (3.0% of GDP) which is mere 13.65% higher compared to last year. Interest payment constitutes 11.23% of total expenditure and noted a growth of 11.79%. Food security is highly important amid present pandemic and limited foreign trade activity. Bangladesh is now 3rd in global rice production. Allocation to agriculture sector is thus crucial to remain better off in terms food availability. In budget FY21, agriculture allocation bagged 5.28% of total expenditure of which 3.19% is operating and 2.09% is development expenditures.
Sustaining the economy is the theme of Budget FY21 and likewise development expenditure is allocated accordingly. Development expenditure (including Annual Development Programme) budget is BDT 2150 billion which is only 1.59% higher than last year. The sectoral growth chart in the dashboard reveals the priorities and focus of the government. Social security and welfare, education and technology, transport and communication, power and energy noted 15.01%, 8.93%, -1.76% and -4.62% growths in FY21 budget. However, allocation concentration of top four sectors has remained almost same (72.65% in Budget FY21 which is 72.45% in revised budget FY20).
Budget FY21 targets revenue of BDT 3780 billion with a growth of 0.05% compared to FY20’s proposed budget and 8.59% compared to revised budget of FY20. Revenue to GDP ratio falls to 11.92%. 87.3% of the revenue will come from NBR tax revenue, 3.97% from non-NBR tax revenue and 8.73% from non-tax revenue. NBR tax revenue target is fixed at BDT 3300 billion (10.4% of GDP) which is 1.35% higher compared to FY20’s budget. VAT is projected to cover 33.1% of NBR tax revenue. Share of Income Taxes and Supplementary Duty are set at 27.5% and 16.0% respectively. In terms of growth, VAT collection target is set at BDT 1251 billion which is 1.7% higher than last years revised budget.
With a revenue growth target of 0.05% and expenditure growth target of 8.56% government goes for a higher deficit this year. Budget deficit for FY21 is BDT 1900 billion which is 30.69% higher than FY20’s proposed budget deficit. Budget deficit is expected to hit 6% of GDP, the highest since FY08. It was 5.5% in revised FY20 budget.
Bank borrowing (44.73% of deficit) and foreign debt (40.0% of deficit) are expected to take major load of deficit financing. Following lackluster sale of saving certificates the government has cut non-bank borrowing (saving certificates) target to 13.15% of deficit which was 20.0% in Budget FY20.
Mammoth net foreign borrowing target of BDT 760 billion (USD 8.94 billion) is set for FY21 with a growth of 19.03%. Revised borrowing target for FY20 is USD 6.20 billion. Surely the government is eyeing to get a large chunk of Covid-19 related funds from multilateral organizations. Bangladesh government’s outstanding foreign debt stood at USD 38.40 billion in 2019 (12.69% of GDP).
Bank borrowing target has been raised by 79.41% to BDT 849.98 billion compared to last year. Government’s outstanding domestic debt stood at 16.97% of GDP in January 2020.
An important question that you are likely going to ask is what are changes that the government proposed for different duties and tariffs on imported goods. Because, at the end of the day, duties and tariffs constitute a big part of a product price and can directly impact your personal consumption. The ‘Operative Tariff’ page of the dashboard gives a perfect solution. Here the products are categorized along with their respective Harmonic Codes (HS Code). You can also type in a product name / HS Code and check the proposed duties and tariffs rates. For example, in FY21 budget, the government has imposed CD at the rate of 5% on imported onions, increased RD from 10% to 15% on several raw materials belonging to steel industry. In terms of reduction, the government has withdrawn 15% VAT on gold. The government has also reduced CD on inputs for compressor and footwear industries.
If you are less interested into specific product but eager to have a glance on industry impact of Budget FY21, you can move on to ‘Budget Implications’ page. The government has removed VAT on all Covid-19 related medicines and waived import duties on raw materials of hand sanitizers and this you will find under Healthcare tab. Income Tax tab will let you know that individual’s tax exemption ceiling has been increased from BDT 250,000 to BDT 300,000. Corporate tax rate for unlisted company has been reduced by 2.5%. If smoking is of any concern for you then Tobacco tab will show you the price and SD changes that are proposed in the budget. The 5% SD increase on the services provided through mobile phone SIM card is listed under Telecom tab.
The great lockdown caused by Covid-19 has significant economic implications and the Budget FY21 is the blueprint of fiscal measures that the government has come up with to weather the storm. The ‘Covid-19 economic update’ page will fetch you with additional measures that Bangladesh has taken to address the crisis. It lists both the fiscal and monetary measures taken so far to tackle the impact of pandemic. You can also check the fund size that the Bangladesh government has intended to receive from various multilateral organizations. Here, the dashboard also gives a donor’s eye view of Bangladesh’s economy. Except World Bank, all other organizations are expecting country’s GDP growth to improve in FY21. Even in first half of 2020 when most of economies have reported deep negative growths, Bangladesh’s GDP growth is projected to remain positive in forecasts of all the donors. Projections of other macro indicators like inflation, current account balance, external sector growths are available here to explore!