Government Budget Process Md Habibur Rahman Deputy Secretary

Government Budget Process Md. Habibur Rahman Deputy Secretary Finance Division

Definition and Constitutional Provisions Government Budget is a statement of a government’s estimated receipts and expenditure for a particular period of time, usually a year. u The word “budget” does not appear in our Constitution. Article 87 requires that an annual “statement of the estimated receipts and expenditure of the government” shall be laid before the Parliament. The next FY budget will draw its genesis from Article 93(3). u

Purposes of Budgeting Ideally a budget serves four main purposes: u Firstly, it is a means of policy formulation. u Secondly, it works as an instrument of policy implementation; u Thirdly, the budget is an instrument of legal control; u Fourthly, the budget documents are a source of information on government decisions and activities.

Coverage of the Budget § § The national budget does not include financial transactions of local governments, autonomous and semiautonomous bodies, sector corporations and enterprises. It includes grants, loans, investment in shares and equities and subsidies provided to them and dividends, interest payment and loan repayments from them to the Government.

Different Systems of Government Budgeting u Traditional Line Item Budgeting u Performance Budgeting u Planning, Programming, Budgeting System (PPBS. ) u Zero-Base Budgeting (ZBB)

Revised and Supplementary Budget u u Revised budget: The budget is revised during the second half of the financial year on the basis of performance and requirement. During the revision, the original allocation as earmarked in the Appropriation Act may increase or decrease Supplementary Budget : The amount increased during revision of budget requires to be approved by parliament. Hence the increased amount is submitted to parliament in the form of Supplementary Grants. These SG when approved by the parliament is known as Supplementary Budget

Structure of the National Budget

Consolidated Fund u § § All revenues received by the Government and all loans raised by the Government, and all moneys received by it in repayment of any loan, shall form part of one fund to be known as Consolidated Fund. All Tax and Non Tax Revenue Receipts; Grants; All Domestic (except National Savings Instruments) and External Borrowing; Food Accounts Receipts.

Public Account of the Republic u All § § other public moneys received by or on behalf of the Government are credited to the Public Accounts of the Republic. State Provident Fund National Savings Schemes § Renewal, Reserve and Depreciation Fund § Deposit Accounts etc.

Charged Expenditure u Sums required to meet expenditure charged upon the Consolidated Fund known as Charged Expenditure. § Remuneration payable to the President and other expenditure relating to his office Remuneration payable to: a) The Speaker and Deputy Speaker b) The Judges of the Supreme Court c) The Comptroller and Auditor General §

Charged Expenditure contd. § § d) The Election Commissioners e) The Members of the Public Service Commission The administrative expenses of, including remuneration payable to the officials of the Parliament, the Supreme Court, the Comptroller and Auditor General, the Election Commission and the Public Service Commission. All debt charges, for which the Government is liable, including interest, sinking fund charges,

Charged Expenditure contd. § § the repayment or amortization of capital, and other expenditure in connection with the raising of loans and the service and redemption of debt. Any sums required to satisfy a judgment, decree or award against the Republic by any court or tribunal. Any other expenditure charged upon the Consolidated Fund by the Constitution or by Act of Parliament.

Charged Expenditure contd. v The Annual Financial Statement relating to expenditure charged upon the Consolidated Fund may be discussed in, but shall not be submitted to vote of Parliament; v For expenditure charged upon the Consolidated Fund, no Demand for Grants is required to be submitted to the Parliament.

Other Expenditure u All other expenditure except charged expenditure is considered as other expenditure. Demand for Grants must be submitted for the vote of Parliament for incurring such expenditure

Non-Development and Development Budget u § § § Non development: Pay and Allowances Supplies and Services Repair and Maintenance and Rehabilitation Grant in Aid Subsidies and other transfer payments § Miscellaneous investment of Government and interest payment Food account § § Projects/programs outside ADP financed from Nondevelopment Budget

Contd. u Development: The Development Budget is basically the ADP translated into budgetary format with relevant Grants and Head of Accounts Number. It includes Non-ADP food assisted development programs and other programs/projects.

Development Budget TE = TR + DF or, DB + RB = TR + Do. F + FF or, DB = (TR - RB) + Do. F + FF Where, TE = Total Expenditure TR = Total Revenue DF = Deficit Financing DB = Development Budget RB = Revenue Budget FF = Foreign Financing Do. F = Domestic Financing

DB & ADP u u Annual Development Programme (ADP) is a planning Document prepared by the Planning Commission. Development Budget (DB) is a legislative document (as per article 87 of the Constitution) prepared by the Finance Division for approval of the Parliament DB = ADP + FFW + Non-ADP Income generation programme + Programme Financed from Rev. Bud FFW = Food for works project

Current and Capital Budget u many developing countries maintain separate current and capital budget. u current spending is equivalent to current consumption and should be financed by taxation. u capital expenditure is investment which will generate returns in future and should be financed by borrowing or other capital revenues or current surplus.

Structure of GOB Fiscal Account Revenues Taxes Non Tax Foreign Grants Expenditures and Net Lending Non Development Revenue Non-Development Capital Expenditure Food Account (net) Net Lending Structural Adjustment Expenditure Annual Development Programmes Financed from Non-Development Budget Non-ADP Employment Generation Programmes Non-ADP Food for Work and Transfer ------------------------------------------------------------Overall Deficit -----------------------------------------------------------Financing Foreign resource Foreign Loan Repayment of Foreign Loan Domestic resources Borrowing from the Banking System Treasury Bonds (term debt+T&T Bond) Treasury Bill

GOB Revenues Tax revenues: -NBR tax revenues Taxes on income and profit Taxes on property and wealth VAT Import duty Excise duty Supplementary duty Other taxes and duties -Non-NBR tax revenues Narcotics and liquor duty Taxes on vehicle Land revenues Stamp duty (non-judicial) Non-tax revenues Dividend and profit Interest Administrative fees and charges Fines, penalties and forfeiture Receipts for service rendered Rents, leases and recoveries Tools and Levies Non-commercial sales Defence receipts Other non-tax revenues Railway Post office T&T board Capital revenue

GOB Expenditures u u u Non-Development Revenue Expenditure: Pay and allowances, Goods and services, Interest Payments, Subsidies and current transfers, Block allocation, Acquisitions of assets and works Annual Development Programme (ADP): Total allocation for all investment projects and Technical Assistance projects. Non-ADP project expenditure: Allocation for on lending programme of the government (re lending to PKSF, Silk Foundation etc. ).

GOB Expenditures (Contd. ) Capital expenditure: Investment in share and equities and allocation for structural adjustment (manpower rationalization) u Net outlay for food account operation: Net position of food account transactions. u Non-ADP Development Expenditure: Development expenditure outside ADP but included in development expenditure (part of FFW, and transfer of resources for different development scheme under agreement signed between GOB and respective donor. ) u

GOB Net Lending Loans (excluding Project Loan) to -State owned enterprises/autonomous bodies ( BJMC, PDB, City Corporations, etc. ) - Government employees (House building, motor car, computer advance etc. ) minus Repayment of loans (principal amount) by -State owned enterprises/autonomous bodies -Government employees

Budget at a Glance

Reforms in Budgeting Process Introduction of MTBF u Unified one budget u District Budget u Local level planning instead of centralized planning u