Macroeconomic Situation in Bangladesh

Members Conference on
An Analysis on Macroeconomic
Performance of Bangladesh
By
Md Shahadat Hossain FCA

Council Member-ICAB
Published by
The Institute of Chartered Accountants of Bangladesh

Dhaka, May 15, 2014
Members Conference on
An Analysis on Macroeconomic Performance of Bangladesh
By
Md Shahadat Hossain FCA

Council Member-ICAB
Published by

Dhaka, May 15, 2014
About the Key Note Speaker
Mr. Md. Shahadat Hossain FCA was born in 1965. He completd his Master in Accounting from
University of Dhaka. He became Associate Member of the ICAB in 1993 and Fellow Member is 1998.
He is a partner of Shahadat Rashid & Co., Chartered Accountants.
A Council Member of ICAB since 2007, Mr. Hossain was the Vice President of ICAB in 2009 & 2011,
Secretary of Dhaka Regional Committee (DRC)-ICAB in 2004 and Chairman of Technical & Research
Committee (TRC) of the Council ICAB in 2011. He has been working for different standing and nonstanding Committees of ICAB for the last ten years and also worked in the Governmental and Public
sector Enterprises Accounting Committee of the Board of South Asian Federation of Accountants
(SAFA).
He took part in the Board of Directors of Bangladesh Cable Shilpa Sangtha (An enterprise of Government
of Bangladesh) and Haripur Power Plant (A Strategic Business unit of Bangladesh Power Development
Board). He was also involved in different law framing Committee like Direct Tax Act, Companies Act,
Multi Level Marketing Act, Society Registration Act etc.
He writes for the different Daily News Papers and Journals on Banking, Budget, Accounting, Education
and Agriculture etc. He presented papers on Bangladesh Financial Reporting Standards and Tax &
Banking Issues. Mr. Hossain participated in TV Talk Shows and Radio Program on Education and other
Professional Issues. He received awards from the Private television channel authority 'Channel-I' as one
of the winners of the special essay competition of the program Hridoy-A-Mati -O-Manus. Mr. Hossain
is the author of the book Bangabandho -O-Bangladesher Orthoniti.
Page 02
Members Conference on An Analysis on Macroeconomic Performance of Bangladesh
CONTENTS
Page
Introduction...........................................................................................................................................4
National Income....................................................................................................................................4
Fiscal Policy..........................................................................................................................................8
Budget allocation for development and non-development expenditure..............................................11
Deficit Budget.....................................................................................................................................14
Balance of Payment ............................................................................................................................15
Credit Policy .......................................................................................................................................18
Inflation...............................................................................................................................................20
Business Regulation............................................................................................................................22
Capital Market ....................................................................................................................................22
Wealth Concentration .........................................................................................................................22
Employment........................................................................................................................................23
Poverty Alleviation .............................................................................................................................23
Recommendations...............................................................................................................................25
Annexer-1......................................................................................................................... 27-29
Annexer-2...............................................................................................................................30
Page 03

Introduction
The economy of Bangladesh is based on agriculture, industry and Services. According to the International
Monetary Fund, Bangladesh ranked as the 36th largest economy in the world in 2012 with a gross
domestic product of US$ 174 billion. The economy has grown at the rate of 6 -7 % per annum over the
past few years.
The objective of this analysis is to have an overview on nature, motion, prospect and limitations of
macroeconomic scenario prevailing in the country with various information of different sectors of
economy and their analytical results which are very useful for the profession like accounts, finance etc.
Recommendations as regards to tax calculation, fund allocation and ensuring transparency and
accountability of public fund for ensuing national budget are also the objectives of this analytical
presentation. This paper has emphasized on the nature of macroeconomic performance of the country in
the recent past. To get such nature and motion, the information has been compared in some cases year to
year, in some cases as a whole four to five years.
The economic policy of a country represents economic growth, full employment, price stability and
balance of payment stability. In view of assessing the achievement of the objective of economic policy
and macroeconomic position of our country sector wise trend of national income, detailed of some
important sectors, present fiscal policy, status of budget allocation for some important areas, financing for
the budget, balance of payment position, credit policy, inflation scenario, employment position and
poverty level have been analyzed and presented below.
National Income
National income is the money value of all goods and services produced in a country during a year.
Calculation of national income of a country is very important, it helps to assess and compare the progress
achieved by a country over a period of time .It estimates economic development and it helps to know how
far development objectives were achieved. In Bangladesh every year National Income is calculated
showing the contributions of various sectors. The amount of national income is increasing year after year.
Sector wise contributions of last three periods (2003-04, 2007-08 and 2012-13) are presented below
Sl.
No.
01.
02.
03.
04.
05.
06.
07.
08.
09.
10.
11.
12.
13.
14.
15.
Total
1
2
3
Main sector
Agriculture & Forest
Fisheries
Mining
Industry(Manufacturing)
Electricity, Gas and Water resources
Construction
Whole sale and retail marketing
Hotel and Restaurant
Transport and communication
Financial service institution
Real estate, lease and other service
Public administration and defense
Education
Health and social service
Community, social and private service
2003-041
2007-082
2012-133
Remarks
17.97
5.11
1.11
16.16
1.59
8.83
13.97
0.68
9.79
1.65
8.30
2.63
2.40
2.22
7.59
100.00
16.18
4.65
1.21
17.77
1.59
9.13
14.37
0.70
10.44
1.81
7.49
2.76
2.58
2.31
7.01
100.00
14.33
4.37
1.34
19.54
1.73
9.37
14.05
0.75
10.80
2.16
6.73
2.88
2.90
2.49
6.54
100.00
Decreasing
Decreasing
Increasing
Increasing
Increasing
Increasing
Decreasing
Increasing
Increasing
Increasing
Decreasing
Increasing
Increasing
Increasing
Decreasing
Bangladesh Economic Review -2009, P-23

Bangladesh Economic Review - 2013, P-21
Bangladesh Economic Review - 2013, P-21
Page 04
The above information reflects that there is no remarkable ups and downs of the sector wise contributions
of national income. It is also appeared that the contributions of Industry (Manufacturing) one of the core
sector, is the increasing trend and the consequential effect of such increasing trend results the of other
core sectors such as Agriculture, forest and fisheries towards decreasing trend. Apart from keeping
contribution in national income the other positions, of some important sectors are described below.
Agriculture
Bangladesh is an agricultural country. Major part of Gross Domestic Product (GDP) comes from
agriculture. 51% of total people directly and indirectly depend on agriculture for their livelihood. In
national income contribution of agriculture sector is remarkable. Though the rate of contribution of this
sector is decreasing gradually in terms of percentage, the reason behind such downward trend is not the
reduction of quantitative production of this sector, rather the increasing rate of contribution of other
sectors like industry, construction etc. It is worthwhile to mention that a lot of improvement has taken
place in agriculture sector in comparison with the recent past. During the last few years shortage of
fertilizer, price hike of fertilizers when season comes, sufferings of farmers for collecting the fertilizer,
filing certificate case against the farmers, incurring huge loss on sale of crop were the common scenario
of the country. Although all the problems have not yet been removed, no doubt the situation has
improved. For example some important comparative statistics are presented below:
Element
Supply of Fertilizer(000 MT)4
Land under irrigation(Lac hector)5
Disbursement of Krishi loan(TK in cror)6
Production of food grain(Lac MT)7
Average rate of production of paddy per acre
Average cost of production of per kg paddy8
Average selling price of per KG paddy9

Average profit/loss of per KG paddy
Average of five
years
(2004-2008)
3496
56.37
Average of five
years
(2009-2013)
3816
65.09
% of
increase/
decrease
9.15%
15.47%
7,163
311.21
1255 kg
Tk. 13.73(Nov-08)
Tk. 14.00
Tk. 0.27
11,658
375.08
1387 kg
Tk. 15.76 (May-12)
Tk. 18.00
Tk. 2.24
62.75%
20.52%
10.52%
14.79%
28.57%
829%
From the above chart it appears that more or less in all the areas of agriculture improvement has taken
place during the last five years in comparison with the immediate before five years. Use of fertilizer and
land under irrigation has increased. Remarkable increase has taken place in disbursement of agricultural
loan. Overall production cost of paddy has increased but selling price of paddy has increased at higher
rate compared with that of production cost which ultimately increases the profit margin of farmers due to
production of paddy. Despite having improvement still there remains a scope for development. For
example the seeds which we use in our country at present give production of 3.1 MT paddies per hector.
On the other hand, in Australia, Japan and South Korea production quantity is 9.5, 6.67 and 6.93 MT per
hector respectively10. The soil of Bangladesh is more fertile than that of many other countries. So, the
main reason behind such poor production is want of qualitative seeds. Middlemen and business syndicate
are the major problem in marketing agricultural products. A substantial part of farmers of our country
4
5
6
7
8
9
10
Bangladesh Economic Review 2013, P-95

Daily Prothom Alo, dated 29 April 2009 and 27 February 2012
Daily Prothom Alo
Daily Ittefaque 12 November 2004
Page 05
normally receive their finance from NGOs and money lenders. Problem in respect of this type of loan is
the high rate of interest. It is pertinent to mention that during the last 20 years almost 50 lac acres of
agricultural land has been reduced. During the year 1983 the amount of cultivatable land of the country
was 2crore 2 lac acres. But by the year 2005 that cultivatable land declined and stood at one crore 57 lac
acres. For fulfilling the food demand of the increased population there is no other alternative to increase
the rate of production. Therefore, for the development of the country whatever sector is emphasized, in no
way agricultural sector should be given less priority. The priority will be relating to and to increase the
production and reduce the production cost and all possible steps that need to be taken in this respect.
Fishery
Fishery is other important source of national income. Almost 4.57% of national income comes from
fisheries sector. As an agricultural country there remains a lot of potentiality of this sector. A substantial
part of our population is directly and indirectly depends on this sector.
This sector of economy of the country has come under development during last five years .For example
remarkable improvement has taken place in production of fish, Despite having improvements in this sector
there remain various limitations, of which absence of specific fishery policy is one. A part of village people
who live on fishery are known as fishermen. They live on selling fish at market after collecting them from
river, khal, beel, hawor, bawor etc.But most of the small rivers have become dry. For example, once the
Tista was a river of strong current but now this Tista is a dead river. Like the Tista many rivers have become
dry but no steps from the government have been taken to dredge those rivers. Most of the rivers and khalbeel areas have been grabbed by the powerful and rich people of the society. The fishermen are being
hindered in catching fish by those powerful rich people. Abnormal price hike of fish catching implements
such as boat, bamboo, fishing net, net color etc is another major problem for the fishermen. Most of the
fishermen suffer from dearth of capital. Taking this opportunity money-lenders provide advance to the
fishermen to facilitate catching fish from big river and sea. But the fishermen are compelled to sell all the
fishes they catch to the money lenders at a cheaper rate. As a result no surplus value remains with the
fishermen. So all of their labor and efforts are spent for the benefit of the money-lenders. Attack by pirates is
another major problem for the fishermen. At the time of returning after catching of fish they are attacked by
the pirates. Due to having no alternative job and due to financial stringency, the fishermen go to catch small
size hilsha (Jatka) fish from the river despite government prohibition. Due to this nefarious activity every
year the country loses fish valued taka three thousand crore on an average11.
Industry (Manufacturing)
In national income contribution of industry sector is remarkable. During the year 2012-13 contribution to
national income from industrial sector was 19.54% as against 17.77% of that of the year 2007-08. Last six
years contribution of industry (Manufacturing) sector is as under.
Year
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
11
12
Percentage (%)12
17.77
17.90
17.94
18.42
18.96
19.54
20
19
18
17
16
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Daily Prothom Alo, 22 April 2009

Page 06
Percentage of contribution of Industry (Manufacturing) Sector

From the above graphical presentation it appears that in national income contribution of industrial sector
is in increasing trend year after year. Though the trend is increasing in this sector there remain lots of
limitations. For example, there are a huge numbers of commercial organizations under the ownership of
the government. Some important organizations of them are, Bangladesh Jute Mills Corporations (BJMC),
Bangladesh Textile Mills Corporation, Bangladesh Sugar and Food Industries Corporation. A huge
amount of establishment cost is being incurred for all the above organizations but revenue received from
them is not satisfactory as compared to expenditure incurred. This results in the abnormal loss every year.
The reason behind such loss of the state owned organizations are lack of proper planning,
mismanagement etc. For example Sugar and Food Industries Corporation is one of the commercial
organizations of the Government. But maximum units of this corporation are incurring loss every year.
The main reasons of such loss are:
Less recovery rate. In Pakistan recovery rate is 9% where as in our country sugar recovery rate is less
than 7%
Administrative, selling and financial overhead is abnormally high compared with that of neighboring
countries
The above two reasons are mainly responsible for increasing loss by sugar mills. This is evident from
the fact that despite purchasing sugarcane at higher rate sugar mills of neighboring countries are
making profit. On the other hand, in our country only due to lack of proper management farmers are
being deprived of profit as well as mills are incurring a huge loss.
Bangladesh Railway is another commercial organization of the Government. Every year BR is incurring
huge amount of operating loss . The reason behind such loss is less price of ticket compared to its cost of
service. But still there remain various other reasons of such abnormal operating loss.
There are more than 1670 acres of land under the ownership of Bangladesh Railway and they are
under the illegal possession of influential people of the country. As a result BR is being deprived of
revenue from those lands approximately of Tk. 50 crore in each year.
Abnormal consumption of fuel is also another reason of such huge operating loss.
Micro Industry
Micro Industry is another sub sector of national income. This sector includes various categories of micro
industries. For example, various metallic industry, chemical industry, wood industry, hand loom, bamboo
and cane industry, various cottage industries etc. Last six years contribution to national income by Micro
Industry is above five percent. Another important contribution of this sector is that a major part of the
total population remains involved with this sector. But this sector is suffering from various disadvantages.
For example, shortage of adequate capital is one of them. According to a survey report as prepared by
MIDAS during the year 2003 almost 5,64,658 micro enterprises had been closed down, 51% of which
were due to want of adequate capital. As per another report of Asian Development Bank (ADB) in the
year 2001 the growth of micro industries was being hindered seriously due to want of capital. Though
substantial improvement has taken place but it cannot be denied that still there remains scarcity of capital
for this sector. For example news published in the daily Prothom Alo on 18 February 2014 that due to
shortage of capital poultry firms is suffering. Lack of capacity of maintaining proper accounts is another
obstacle to flourish the micro industry.
Page 07
Electricity
Electricity is another important sector of national income. Almost 1.29% of national income comes from this
sector. It will be agreed by everybody that contribution to national income is not the objective of this sector.
Main objective of this sector is to keep running all the economic activity of the country. The situation of
electricity of the country six years back is known to all when there were 18 electric generation centers which
included 85 electricity generation units. The ages of 36 units out of the 85 range from16 to 41 years. Generally
by 15 years a unit becomes obsolete. Within last six years tremendous improvement has taken place in
electricity generation and supply condition. During the 2006-07 installed power generation capacity was 3718
MW13 and maximum power generation was also 3718 MW. During the month of May 2014 installed power
generation capacity arrived at 10,241 MW and maximum power has been generated as on 31 March of current
year 7356 MW14. So, within six years electricity generation capacity has improved by 129% which is no doubt
a remarkable achievement.
Wholesale and Retail
Wholesale and retail are other important sources of national income. On an average 14.44% of national
income comes from this sector. Though this sector is contributing substantial part of national income, the
general people specially end consumers of the products are not satisfied with the pricing of products as
determined by the wholesalers and retailers. Main objections are:
Business syndication is the main problem in our country as regards to wholesale business. Specially,
in case of imported product wholesalers determine the sale price altogether jointly at a high rate for
earning more profit which creates financial burden on the general consumers of the country.
In case of essential products there remains a huge price gap between the wholesale price and the retail
price. In some cases as regards to essential products it is found that products of retail level were being
sold to the consumers at a markup of more than 40% above its wholesale price which is considered to
be abnormally high.
Fiscal Policy
Fiscal policy means policy related to National Exchequers activities. The main objective of the National
Exchequer is to properly manage income and expenditure of the government. The main sources of income
of the government are tax and non-tax receipts. On the other hand, government expenditure covers
revenue expenditure. Each and every year the government announces its fiscal policy in its budget.
Budget is not merely a statement of revenue receipts and expenditure of the government; rather it reflects
the economic activity and revenue policy of a particular period of time. Each year the government
announces two types of budget in which expected revenue income and expenditure of a financial year are
mentioned. The main sources of revenue income are income Tax, Value added tax, import duty, wealth
tax, stamp duty etc. The main sectors of revenue expenditures are education, health, defense, agriculture,
rural development etc. Apart from the revenue budget each year government prepares an Annual
Development Plan (ADP) for development of the country. The main sources of fund of Annual
Development Plan are surplus of revenue budget, foreign aid, donation from foreign countries, imposition
of additional tax etc. We can look at the following table of revenue collection as one of the main elements
of fiscal policy of last seventeen years15.
13
14
15

www.bpdb.gov.bd
Bangladesh Economic Review 2013, P-314 & 315. Year 2013-14 from Budget of 2013-14
Page 08
Year
Total
Revenue
Taka in
crore
Tax
Revenue
Taka in
crore
Non-Tax
revenue
Taka in
crore
1997-98
19020
15390
3630
1998-99
19767
16167
1999-00
20074
2000-01
% of
GDP
% of
increase
of revenue
% of
increase
of tax
revenue
% of
increase of
non-tax
revenue
9.50%
9.40%
7.92%
16.20%
3600
9.00%
3.93%
5.05%
-.83%
16079
3995
8.47%
1.55%
-0.54%
10.97%
24342
19778
4564
9.60%
21.26%
23.01%
14.24%
2001-02
27893
21332
6561
10.21%
14.49%
7.86%
43.76%
2002-03
31120
24950
6170
10.35%
11.57%
16.96%
-5.96%
2003-04
35400
28300
7100
10.63%
13.75%
13.43%
15.07%
2004-05
39200
31950
7250
10.57%
10.73%
12.90%
2.11%
2005-06
45722
37312
8410
10.99%
16.64%
16.78%
16.00%
2006-07
52542
41055
11487
11.30%
20.40%
10.30%
36.00%
2007-08
60,539
48,012
12,527
11.30%
15.22%
16.95%
9.05%
2008-09
69,180
55,526
13,654
11.25%
14.27%
15.65%
9.00%
2009-10
79,484
63,959
15,528
11.50%
14.89%
15.19%
13.72%
2010-11
95,187
79,052
16,135
12.09%
19.76%
23.60%
9.75%
2011-12
114,885
96,285
18,600
12.79%
20.69%
21.80%
15.28%
2012-13
139,670
116,824
22,846
13.45%
21.58%
21.33%
22.83%
2013-14
167,459
141,219
26,240
14.09%
19.90%
20.88%
14.86%
From the above chart it is observed that revenue and tax revenue of last four years at higher rate compared
with those of previous years. Average increasing rate of revenue for the financial years from 2009-10 to
2012-13 was 19.23% as against that of 15.45% for the financial years from 2004-05 to 2008-09.It is
pertinent to mention that the main reason behind such increase of revenue is the increase of tax revenue
which is the main income for the state, funding public expenditure and other costs, tangibly expressing the
common efforts of the community. Taxes are good ways for financing the costs of public goods and
expenditure whose consumption by one person does not decrease the consumption by others and, at the
same time, for which it is costly or impossible to prevent consumption.
Composition of direct and indirect tax is another important issue to be paid attention to. Year wise direct
and indirect tax collection position are presented below16:
16
Bangladesh Economic Review 2013, P-314 & 315. Year 2013-14 from Budget of 2013-14
Page 09
Year
Direct tax
Taka in crore
Indirect tax
Taka in crore
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
4,100
4,789
5,270
5,850
6,960
8,539
11,005
13,538
16,560
22,105
28,.061
35,300
18,332
16,630
18,961
21,780
24,650
28,690
32,516
34,965
39,462
44,440
53,495
64,309
76,959
41,146
Direct tax as % of total

tax revenue
Indirect tax as % of
total tax revenue
19.8
20.2
19.5
19.2
19.5
20.8
23.9
25.5
27.2
29.2
30.4
31.5
30.8
80.2
79.8
80.5
80.8
80.5
79.2
76.1
74.5
72.8
70.8
69.6
68.5
69.2
90
80
70
60
50
Series
1
Series
2
40
30
20
10
20
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
20 7
07
-0
20 8
08
-0
20 9
09
-1
20 0
10
-1
20 1
11
-1
20 2
12
-1
20 3
13
-1
4
Direct tax as % of total tax revenue (Series 1)

Indirect tax as % of total tax revenue (Series 2)
From the comparison of direct tax and indirect tax, as collected through NBR, it appears that incidence of
indirect tax is approximately four times of direct tax. During the year 2002-03 contributions of direct tax
and indirect tax were 19.8% and 80.2% respectively. A remarkable change has taken place composition of
direct tax and indirect tax form the year 2008-09 when contributions of direct tax and indirect tax was
25.5% and 74.5%. It is also important to mention that such composition has reached at 31.5% direct tax
and 68.5% indirect tax. Main observations as regards to the direct tax are that the tax which is being
collected in the name of direct tax is also contributing a negative impact in the society as an indirect tax
only because of its collection procedure. As mentioned earlier, the main characteristic of direct tax is, it is
progressive and cannot be shifted on others. But in many cases the present collection procedures of direct
tax are facilitating to shift tax payers tax liability to others. An example may be presented to make it clear.
According to the fundamental principles of tax law, tax payable amount of a company will be determined
based on its net profit as presented in its annual audited financial statements. If the company earns a net
Page 10
profit, it will have to pay tax at a determined rate. On the contrary, if the company incurs a loss for a
particular period of time, it will not have to pay any tax. Suppose a company X earned Tk.200 net profit in
the year 2011. In that case it will not be able to distribute full amount of Tk.200 as dividend among its
shareholders. It will have to pay Tk.75 as tax (assuming tax rate is 37.5%) to the government and the
balance Tk.125 may be distributed among its shareholders as dividend. So, according to principle of direct
tax the excess purchasing power will be taken away by the amount of Tk.75 from the shareholders of the
company. There is no scope to shift this tax liability on others by the shareholders of the company X. But
presently there is a tax law by dint of which tax of the company X is not collected based on net profit, it is
collected on turnover/revenue of the company. Suppose the company X is selling its goods to the company
Y (customer). Under the tax law, the company Y is given the responsibility to deduct tax from the sales
price of the company X which is considered as the final tax irrespective of year-end profit or loss. Under this
system if the company X sells goods of Tk.100 to the company Y, tax of Tk.4 (assuming rate of tax
deduction at source is 4%) will be deducted by the company Y and Tk.96 will be paid to the company X.
The company X knows that Tk.4 which has been deducted by the customer will not be refunded despite
incurring the loss at the end of the year. Therefore, it will be considered as cost not as tax payment in
advance. Since this tax will be considered as cost, subsequently the company X will increase the sale price
of the product to Tk.104 as against Tk.100 so that after deducting tax it can get Tk.100 as before. By this
manner the company X gets opportunity to shift its tax liability to its customers and according to the
principle of indirect tax it is contributing to increase the rate of inflation as well as inequality in the society.
This system of direct tax is distorting not only the principle of direct tax but also the accounting system.
Budget allocation for development and non-development expenditure
As earlier mentioned through the fiscal policy collected revenue is spent for different purpose, such as
development of human resources, ensuring social safety, defence etc. All the expenditure must be for the
welfare of the general people. Some observations on the allocation and utilization of fund are presented
below;
Health services
Health sector is an important sector of the country. Budget allocation for last five years is as follows17.
2009-10
Taka in
crore
6,271
% of total
budget
6.18%
2010-11
7,287
5.68%
2011-12
7,667
5.03%
2012-13
9,130
4.82%
2013-14
9,470
4.26%
Year
% of total budget (Series 1)
17
Budget for the year 2013-14
Page 11
During the last couple of years some mentionable advancement has taken place in this sector. Reduction
of death rate of five years below children and death due to pregnancy from 65 per thousand to 53 per
thousand and from 3.48 per thousand to 1.94 per thousand respectively is one of them. Due to reduction
of child death rate, receiving United Nations MDG Award by the Prime Minister is a remarkable
achievement. Despite having achievement as mentioned above there remain lots of problems in this
sector. Some of them are, in many hospitals of the country there is shortage of various components such
as sufficient number of doctors, nurse, ambulance, generator etc. People are not getting proper treatment
from the hospitals. Medicine shortage is a common scenario for all the hospitals of the country.
According to the opinion of the specialist, through utilizing the present staff strength and instruments
properly providing health service is possible to 60% people, but according to a survey report published
in the daily news papers only 22% people of the country are getting health service from the public health
organization, while those organizations are run by the finance which is collected from general people of
all walks of life18. Another adverse information in this sector is undesired existence of differential
treatment of the rich and the poor people. According to the survey of World Bank, Directorate of health
and Central Medicine Store, it has been observed that half of medical equipments are not utilized for
service of the people, packets are not opened in case of 21% equipments.11% equipments are damaged
before use. 10% equipments are partially and another 11% equipments are not used despite having usable
condition19. During the year 2012 the survey was conducted on 50 hospitals of Dhaka, Khulna and Sylhet
divisions. Based on the scenario as described above it will be logical to mention that whatever might be
the success and limitations of the sector which is responsible to fulfill the fundamental rights of the nation
it can be said that allocation of budget for health sector is not sufficient.
Interest payment:
A major part of revenue budget is spent for interest payment on loan from internal and foreign sources.
During the last six years budget allocation for payment of interest is as follows20:
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Interest
payment
15,358
14,867
15,622
20,351
23,347
27,743
% of
budget
17.20%
14.64%
12.18%
12.44%
12.18%
12.47%
30,000
20,000
10,000
0
20
08
-0
9
20
09
-1
0
20
10
-1
1
20
11
-1
2
20
12
-1
3
20
13
-1
4
Year
Budget allocation for payment of interest

Interest is a non productive expense. Every year a huge amount is being spent for interest purpose. Again,
according to economic theory, excess interest cost hampers the economic growth of a country. Eventually
interest is such a cost which may increase in such a manner that after payment of interest cost there may
not have any money left over for anything else. To avoid this situation the only way is to keep constant
monitoring on the trend of national debt and the interest cost of the budget. It is pertinent to mention here
18
19
20
Daily Ittefaq, 11 February 2005

Daily Ittefaq, 29 February 2014
Budget for the year 2013-14
Page 12
that the rate of payment for interest expenses is in increasing trend. During the year 1974 when the
country was under reconstruction expenses for payment of interest was only five percent but by
increasing such rate in the FY2011-12 that has arrived at 17.5 percent of total non-development
expenditure. So the rate of increasing the interest expenses is not negligible at all.
ADP Implementation
As earlier mentioned, Annual Development Plan (ADP) is one of the elements of budget. Usually in every
year the original allocation figure and the revised figure testify completely different picture. Below are the
twenty one years ADP pictures presented21.
Financial year
Revised ADP
Tk in crore
Actual ADP implementation

Tk in crore
Rate in %
1991-92
7,150
6,024
84
1992-93
8,121
6,550
81
1993-94
9,600
8,983
94
1994-95
11,150
10,303
92
1995-96
10,447
10,016
96
1996-97
11,700
11,041
94
1997-98
12,200
11,037
91
1998-99
14,000
12,509
89
1999-00
16,500
15,471
94
2000-01
18,200
16,200
89
2001-02
16,000
14,090
88
2002-03
17,100
15,434
90
2003-04
19,000
16,796
88
2004-05
20,500
18,771
92
2005-06
21,500
19,473
91
2006-07
21,600
17,916
83
2007-08
22,500
18,455
82
2008-09
23,000
19,668
86
2009-10
28,500
25,917
91
2010-11
35,880
33,007
92
2011-12
41,080
38,020
93
The shortfall of implementation of Annual Development Plan (ADP) is one of the obstacles of economic
growth of the country. In implementing ADP the unique feature observed is that during half of the year the
implementation is very poor and slow, in terms of expenditure. Instances are presented below.
21
Page 13
Name of the period
Period covered
ADP implementation status
July to December 06
6 months
25%
July 07 to February 08
8 months
30%
July 08 to January 09
7 months
34%
7 months
38%
7 months
35%
7 months
38%
7 months
38%
From the above chart it appears that during the first seven months of financial year (2012-2013) i.e up to
January 2013 the ADP has implemented only 38% of total target. Without achieving the real output the
last half becomes booming. In many cases it has also been seen that after partial completion of a project
under the ADP no further allocation is given and as such, the project remains incomplete for long period
of time. Due to having incomplete projects including road, bridge, culvert etc they do not come into use
of the general public. On the other hand, the main part of ADP finance comes from foreign aid, donation,
loan etc. For foreign loan interest has to be paid. This is also another form of misuse of government fund.
Deficit Budget
Deficit budget is one where the estimated government expenditure is more than expected revenue. Though a
healthy practice for any government is to have a balanced budget, in the developing countries like
Bangladesh, where huge resources are needed for the purpose of economic growth & development, it is not
possible to raise such resources through taxation. Deficit budgeting is the only option and accordingly every
year the government is preparing and implementing deficit budget. As regards to the amount of budget
deficit, there remains a lot of debate. In recent years the amount of budget deficit is being maintained more
or less five percent of GDP .It is true that for economic development of our country deficit budget is
essential, but there remains a question how far the maintenance of the amount five percent of GDP, which is
equivalent to almost 30 percent of total budget, is reasonable. It will have to keep in mind that budget deficit
increases national debt, more national debts compel to pay more interest and more interest cost plays
positive role to increase the budget deficit.
Page 14
So, to keep control over the amount of interest payment with a view to not hampering the economic growth of
the country it is essential to watch the amount of national debt. The amount of such national debt can only be
possible to be calculated correctly when budget deficit is reconciled with the national debt.
Another important aspect is the calculation procedure of the of budget deficit. When a government plans to
spend more than its income, it resorts to financing the additional spending through a budgetary deficit. So,
the traditional definition of a budget deficit is the difference between total government expenditure and the
revenue received. But a complete and technical definition of deficit will be the difference between the size
of the government debt at the end of the year and the corresponding size of the debt a year later. Thus, the
budget deficit is funded by a national debt. Actually the national debt is the accumulation of all the budget
deficits for every year since the country has been in existence. In our country since its existence budget
deficit has been being determined on the basis of traditional method. Due to calculation of budget deficit by
this method and having no reconciliation system, there remains a huge difference between the accumulated
balance of budget deficit and the balance of national debt which may create question about the
completeness of accumulated balance of budget deficit. In the context of Bangladesh economy calculation
of budget deficit through technical method is essential. Because more budget deficit assists to increase the
national debt. Since the date of independence of Bangladesh to 30th June 2012 according to previous budget
records total revenue collected by the different governments of the country is Tk. 867,649 crore (annexer-1).
During the same period total non-development expenditure incurred Tk. 763,648 crore and development
expenditure incurred Tk. 395,521 crore i.e total expenditure (development and non-development) incurred
Tk. 1,159,169 crore (annexer-1). So, the accumulated balance of deficit finance as on 30th June 2012 is Tk.
291,520 crore. According to economic theory total debt balance of the country as on 30th June 2012 should
be Tk. 291,520 crore. Taking information from different sources it is seen that as on 30th June 2012, balance
of foreign loan is Tk. 174,765 crore22, balance of loan from bank is Tk. 92,028 crore23 and loan by selling
savings certificates is Tk. 63,917 crore24. Total debt balance as on 30th June 2012 is Tk. 330,787 crore. From
the above calculation it may be observed that there remains a difference of Tk 39,190 crore between
accumulated deficit balance and total debt balance as on 30th June 2012.
Balance of Payments
The Balance of Payments is the summary statement or statistical record of a countrys international
economic transactions with the rest of the world over a certain period of time presented in the form of
double-entry bookkeeping. Stability of Balance of Payment is one of the important tools to measure the
macroeconomic performance of the country.
22
23
24
Bangladesh Economic Review 2013, P-363 (Dollar converted into BDT applying prevailing rate)
Bangladesh Bank Monthly update March 204, P-20
Page 15
Balance of payment position of our country of the year 2013-14 (July-Dec) compared with that of the
year 2005-06 is presented below.
Head of account
Export
Import
Balance of Trade
Service
Receipt
Payment
Income
Receipt
Payment
Current Account
Capital account
Finance Account
Errors and omission
Overall Balance of
Payment
Balance for the year 2005-06

(USD in million)25
10,422
13,301
(2,879)
(1110)
1296
2406
4561
5481
920
572
242
(24)
(425)
Balance for the year 2013-14

(July-Dec) (USD in million)26
14,511
16,947
(2,436)
(1,899)
1676
3575
6030
7245
1215
1695
216
259
310
365
2,480
From the above details it is revealed that despite having negative position of all the areas such as balance
of trade, service, finance etc, the balance of payment position of the country is surplus. During the six
month period from July to December 2013 overall Balance of Payment arrived at $ 2480 million. During
the year 2005-06 the overall balance of payment position was $ 365 million. So, balance of payment
position for the year 2013-14(first half) has increased compared with that of the year 2005-06 by almost
14 times. Major contribution of such improved position of balance of payment is the increasing trend of
foreign remittance which is being earned by the manpower export in various countries of the world and
Foreign Direct Investment (FDI).
Foreign remittance
Foreign remittance has substantial contribution to make the position of Balance of Payment positive in
our country. Foreign remittance status of last seven years is presented below:
Year
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
(July-Feb)
25
26
27
Foreign remittance
(USD in million)27
4802
5979
7915
9689
10987
11650
12843
14461
9207
16000
14000
12000
10000
8000
6000
4000
2000
0
2005-06
2007-08
2009-10
2011-12
2013-14

Bangladesh Bank Web
Bangladesh Economic Review 2013, P-360 & Bangladesh Bank Web
Page 16
Foreign remittance US$ in million

Although above information clearly represents that the amount of foreign remittance is in increasing trend
the manpower export from Bangladesh is declining. Manpower export has declined because in importing
countries of manpower, employment has been falling due to recession, also wages have been falling. In
this connection not only the export of manpower is declining but also the amount of repatriation is
increasing. For example during the first six month of 2010 the number of repatriation was 26,095 but
increasing such number during the same period of the year 2011 arrived at 61,000. So the amount of
foreign remittance which is the only source of maintaining our balance of payment position is being
affected in both the ways of export and repatriation. However, very recently the situation is improving
due to taking various steps by the present government.
Foreign Direct Investment
Increasing trend of foreign direct investment is another reason of improving Balance of Payment position.
Foreign Direct Investment (FDI) is such investment where the investor invests his savings to a business
beyond his own country. In Bangladesh the first idea of Foreign Direct Investment was conceived as a
means of disinvestment of nationalized industries. With this objective, Foreign Private Investment
Development and Protection Act 1980 and Bangladesh Export Processing Zone Act were promulgated.
But no remarkable result was achieved. Subsequently, due to creation of foreign market of readymade
garments foreign investors were attracted to invest in Bangladesh. Meanwhile, Investment Board Act
1989 was promulgated. Separate Export Processing Zone (EPZ) was also established. Special facilities
also were offered to the investors thorough national budget. Services of different infrastructures such as
gas, electricity, water, etc were also extended gradually and FDI also increased day by day. Discovery of
significant gas fields further stimulated financial potentiality of Bangladesh, Trade and exchange
liberalization, current account convertibility, emphasis on private sector development, liberalization of
investment regime, and above, extending of infrastructure and service facilities to the private sector are
some of the underlying factors which promoted the flow of FDI into Bangladesh during 1990s.
Statistics of last five years Foreign Direct Investment is as follows28:
Year
2008-09
USD in million
960.59
2000
2009-10
913.02
1000
2010-11
779.04
500
2011-12
1194.88
2012-13
1730.63
1500
Serie
0
2008-09 2009-10 2010-11 2011-12 2012-13
Foreign Direct Investment (US$ in millions)

Though the trend of FDI in Bangladesh is increasing, no doubt the country is lagging behind to attract
more FDI in comparison with other neighbouring countries. Reasons behind such lacking are:
Government policy is obviously an important factor influencing inflows of FDI; there are other equally
28
Bangladesh Bank Web
Page 17
important factors. So far as the investment related policies of the government are concerned, these are fine
in spirit, but their actual implementation continues to create obstacles for both local and foreign investors.
An inefficient and not-too honest bureaucratic system is primarily responsible for this problem. All the
administrative barriers are in fact generated from this non-investment-friendly bureaucratic system.
Balance of Trade
One of the major components of Balance of Payment of a country is Balance of Trade. From the inception
of our country balance of this component is negative. Last couple of years export and import position is
presented below29.
Year
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Export
10,526
12,178
14,111
15,565
16,205
22,924
24,288
26,900
Import
14,746
17,157
21,629
22,507
23,738
33,658
35,516
34,300
Import as percentage of export

140%
141%
153%
145%
146%
147%
146%
128%
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Series
1
Series
200506
200607
200708
200809
200910
201011
201112
201213
Import (Series 1) & Export (Series 2)

Above data of export and import reflect that the export position as well as the import position of the
country is in increasing trend almost at the same rate. As a result there is no contribution of balance of
trade to improve the Balance of Payment position of the country.
Credit Policy
Capital is one of the essential elements of any industry and business enterprise. This capital is supplied by
the entrepreneurs and by the bank or financial institutions. Without capital provided by the bank or financial
institutions in the form of loan, no industry or business enterprise can be operated. So, in consideration of
contribution to national income banking sector may not be so important but to keep the economy running
29
Bangladesh Economic Review 2013, P-79 & 80. Year 2012-13 from budget of 2013-14.
Page 18
and to create the employment opportunity banking sectors contribution is invaluable. Despite having such a
lot of contribution in the economy, adverse impact for abnormal rate of default loan is a remarkable issue for
banking sector which distorts the credit policy of the country. Default loan balance of banking sector of the
recent past is presented below30.
Year
Loan balance
Amount of default loan
% of default loan
2010
3,62,185
22,709
6.27%
2011
3,78,247
23,149
6.12%
2012
4,38,615
42,726
9.74%
2013
4,76,151
40,583
8.52%
Based on Percentage of default loan
Based on amount of default loan
Up to the end of December 2011 default loan total amount of Tk. 20,844 crore was written off31. Taking into
consideration of such written off loan total volume of default loan arrived as on December 2013 Tk. 63,570
crore which was 13% of total outstanding loans and advances. It is worthwhile to mention that at the end of the
year 2004 amount of total default loan was Tk. 18,727 crore. After nine years the amount of default loan
increased more than three times. Other important issue of prevailing credit policy of the country is that as an
agricultural country, agricultural sector of Bangladesh is a thrust sector .Small scale and cottage industry is
emphasized by all the governments to reduce the poverty of the country. Total contribution of agriculture and
small scale and cottage industry is almost 20% of GDP. Despite having a remarkable contribution in national
income, there is a serious discrimination in disbursement and recovery of loan for agriculture, small scal &
cottage industry. Outstanding loan balance of agriculture and small scale & cottage industry of the recent past
is presented below.
Outstanding loan balance as at
the end of year 2013
4,76,151
Particulars
Total loans and advance
Agricultural loan32
33
Small scale and cottage industry
% of total loans and

advance
28,841
6%
5,792
1%
In consideration of outstanding loans and advance balance from the above chart it appears that
agricultural and small scale & cottage industry are holding only 6% and 1% respectively which are very
30
Daily Prothom Alo of 25 February 2012, 18 February 2014 and Bangladesh Bank Web.
BD News.com 25 January 2013
32
33. Bangladesh Bank Monthly Update March 2014, P-10
31
Page 19
negligible in consideration of contribution to the national economy in the form of income and
employment generation of those two sectors. Inadequate disbursement of loan for the agricultural, small
scale and cottage industry is not the only problem of present credit policy of the country. Abnormal
pressure for recovery of such loan is also another hindrance to grow the agriculture, small scale and
cottage industry sectors. In this connection at the end of the year 2013 total default loan of agricultural
sector, is only Tk 5897 crore which is 14% of total classified loan. But to recover such loan, farmers are
pressurized in different manners which are completely against the growing environment of those sectors.
It is pertinent to mention here that farmers feel fear thinking that if the loans are not repaid timely,
certificate case will be filed against them. In this connection for example two circumstances as published
in the daily news papers may be mentioned. According to news published in the daily Ittefaq on 24 March
2012, total 173 certificate cases have been filed against the farmers to collect the default agricultural loan
of only Tk3,156,000 by one of the state owned commercial banks. But on the other hand according to
news published in the daily Prothom Alo of 2 April 2012 one large industrial loan, balance of which is
almost Tk 22 crore, has been rescheduled thirteen times without following the norms of rescheduling by
the same state owned commercial bank .The present market value of collateral of such loan is only Tk
2.23 crore. So in respect of recovery, the loan is completely doubtful. But in spite of knowing the fact the
loan has been rescheduled by the bank. Comparing the fact of these two loans it can be mentioned that in
the present credit policy of the country there remains discrimination as regards to sanction, disbursement
and recovery of loan to lower income level people and to higher income level people. Due to these
problems many farmers prefer to obtain finance from NGOs and money lenders. Due to obtaining loan of
high rate of interest farmers of the country as a whole have to incur extra burden of huge interest every
year. So, it is needless to present any other example or data to prove that present credit policy needs some
revision to increase the economic growth, create employment opportunity and reduce economic inequality
of the country.
Inflation
Inflation is another vital issue for hindering macro economic growth in our country. Year on year,
inflation has risen rapidly though mostly in FY2011, settling at 10.2% in June 2011.After June 2011
inflation rate is also not satisfactory. Inflation position of recent past is as follows.
Rate of inflation34
9.9%
6.7%
7.3%
8.8%
10.6%
7.5%
7.4%
7.5%
7.4%
Year/Month
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
December-13
January-14
February-14
During first half of financial year 2011-12 average inflation rate arrived at 11.31% which seems to be
higher. Though from the above chart it seems that after the FY 2011-12 inflation rate is in downward
trend but still it appears to be high. Due to existence of high inflation rate the people of lower income
level are facing serious financial constraint. According to the information of a survey report published
recently that the costs of food, conveyance, house rent and medical treatment have gone up almost
34
Page 20
double compared with the recent past .Abnormal rate of inflation has also contributed to economic
inequality. There are various reasons of inflation. In our country money supply is being increased year
after year. The growth of broad money supply compared with some important goods (rice, wheat, fish,
milk, meat, fertilizer, cement & petroleum) available for consumption is presented below.
Particular
Amount of broad money supply(M2)35
Goods available for consumption (annexer-2)
2007-08
2012-2013
248,795 crore
565,906 crore
450.49 Lac MT
499.75 Lac MT
Average Growth
rate
20%
2%
From above table it may be observed that during the year 2007-08 total amount of broad money supply
was Tk. 248,795 crore, during the year 2012-13(December-2013) that broad money supply arrived at Tk.
565,906 crore i.e. an average per year growth rate was 20%. But the average growth rate of some
important consumable goods was only 2%.Example as presented above reveals the higher supply of
money which is one of the reasons of prevailing inflation of the country.
Increase of fuel price in global market is one of the reasons of price hike of essentials in local market.
Due to increase of fuel price, production cost and carrying costs of the products are increasing.
Abnormal dependency on indirect tax is one of the reasons of instable price of goods. Due to charging
indirect tax in the form of duty and value added tax, the cost of the commodity increases and it
contributes for cost push inflation. For example during the year 2004-05 total indirect tax was collected
Tk. 25 thousand crore but in the year 2011-12 the amount of collection of indirect tax is Tk. 64 thousand
crore. The yearly average rate of increase of indirect tax is 15% which seems to be abnormally high.
Abnormal devaluation of local currency compared with foreign currency is one of the reasons of price
hike of commodities. Especially during recent years this has happened abnormally. For example as on 31
December 2009 one dollar was equal to 69.27 taka, on the same date of 2010 by decreasing 2.13% value
of one dollar arrived at 70.75 taka. But after one year i.e. as on 31 December 2011 by decreasing almost
16% value of one dollar stood at 82 taka. Due to the devaluation of the local currency in such manner
prices of imported goods have gone up abnormally
Due to increase of prices in international market especially abnormal price hike of fuel and other food
items in international market prices of essential commodities in local market have increased. From a
research activity it has been published recently that due to increase of price in international market,
purchasing capacity of poor people has reduced at 11%36.
Abnormal increase of government expenditure is playing a vital role to increase the inflation in the
country. During the year 2008-09 total amount including development and non-development expenditure
was spent Tk. 89,316 crore but in the budget of financial year 2013-14 that amount has been estimated
Tk. 222,491 crore. Average rate of increase of annual expenditure is more than 20%.
Relaxed monetary policy is also another cause of high rate of inflation. Especially in the recent years
loans have been disbursed abnormally. According to the information during the year 2009 there was a
huge amount of liquid assets in the nationalized commercial banks. For example at the end of the year
2008 total amount of liquid assets in the nationalized commercial bank was Tk. 20 thousand crore. During
35
36

Daily Prothom Alo, 16 October 2011
Page 21
last three years the bank disbursed loans in such a manner that all the nationalized banks have been
suffering due to shortage of liquid fund. All the nationalized banks are to be maintaining their Cash
Reserve Rate (CRR) by taking short term loan from other commercial banks. Due to relaxed monetary
policy during the years 2010 and 2011 the growth rate of public consumption was 8% whereas in the
years 2008 and 2009 such growth rate of public consumption was 6%.This incremental rate of public
consumption creates demand pull inflation.
Business Regulation
Marketing of products at reasonable price is another important element for economic growth. Lower
margin of agricultural, small and micro enterprise products compared to that of large and medium scale
industrial products contributes to increase the economic inequality of the country. In our country one of
the hindrances to grow the small and micro enterprises is to sell the products at reasonable price. Lower
selling price at farmer level of various agricultural products such as potato, paddy and others are the
examples of the situation described above. The main reason behind such marketing scenario is the
absence of business regulation. Besides, the mentioned example above, there are many other problems
for proper marketing of products of small and micro enterprises. Middlemen and business syndicates are
the major problems in marketing the agricultural products. So from above discussion it reveals that lack
of proper marketing system is contributing for increasing the economic inequality of the country.
Business syndication is the main problem in our country as regards to wholesale business. Specially, in
case of imported products, wholesalers determine sales price altogether jointly at a high rate for earning
more profit which creates financial burden on the general consumers of the country.
As elsewhere mentioned of this paper in case of essential products there remains a huge price gap
between wholesale price and retail price. In some cases as regards to essential products it is found that
products of retail level were being sold to the consumers at a markup of more than 40% above its
wholesale price which is considered to be abnormally high.
Capital Market
In national income Capital Market has substantial contribution but till to date this market has not achieved
full confidence of the investors. One of the adverse scenarios is the concentration of market capital.
According to the latest information in terms of one analytical result of sector wise involvements of capital
market, it reveals that almost 50% of total market capital is invested under one sector which is banking
sector. In respect of sector wise dividend payout ratio the banking sector also remains at first position.
The investors of our country are not well educated in this area; as a result sometimes without having
genuine basis market price of shares is being increased and/or decreased. Nevertheless, there remains a
considerable scope to improve the capital market. Present volume of market capital of our country is only
25.50% of GDP, whereas in Pakistan it is 36.2% and in Sri Lanka 32.01%.
Wealth Concentration
Wealth concentration is a theoretical process by which, under certain conditions, newly-created wealth
concentrates in the possession of already-wealthy individuals or entities. According to this theory, those
who already hold wealth have the means to invest in new sources of creating wealth or to otherwise
leverage the accumulation of wealth, thus are the beneficiaries of the new wealth. Over time, wealth
condensation can significantly contribute to the persistence of inequality within society.
Page 22
As example of wealth concentration, savings from the upper-income groups tend to accumulate much
faster than saving from the lower-income groups. Upper-income groups can save a significant portion of
their incomes. On the other hand, lower-income groups barely make enough to cover their consumptions,
hence only capable of saving a fraction of their incomes or even none. Assuming both groups earn the
same yield rate on their savings, the return on upper-income groups savings are much greater than the
lower-income groups savings because upper-income groups have a much larger base.
In our country there remains a serious wealth concentration. One of the important categories of wealth is land.
According to news published in the daily news paper, in one hand 50 percent of total population of the country
is completely landless; on the other hand only 6.2% of total population is holding 40% of total land of the
country37. So this example reveals the existence of serious wealth concentration of the country.
Employment
Full employment is one of the criteria of sound macroeconomic position of a country. Present
unemployment rate is 4.59% and in the year 2005-06 the rate was 4.24%.A table showing the data of
unemployment position of the two periods is presented below38.
Particular
Total workforce(in millions)
Employment workforce(in millions)
Unemployment (in millions)
% of unemployment
2005-06
49.5
47.4
2.1
4.24%
2010
56.7
54.1
2.6
4.59%
The above table shows that both the employment and the employment workforce are in increasing trend.
Although the main reason of increasing unemployment is population growth it has recently lessened to
moderate to 1.34% per year, but the working age population have been expanded at 2.5% to
2.8%.However, government has taken initiative to reduce the unemployment problem. For example, to
create employment opportunity with the view to making the young unemployed boys and girls total taka
11.90 billion (1189.76 crore) has been disbursed during the period from 2009 to February 2013.Through
this programme total 563,211 employment opportunities have been created.
Another important issue in labour market is the determination of wages by the market. Under the law of
supply and demand, the price of skill is determined by a race between the demand for the skilled worker and
the supply of the skilled worker. The price rises when demand exceeds supply, and vice versa. For a
businessman who has the profit motive as the prime interest, it is a losing proposition to offer below or
above market wages to workers. The data of the table presented above show that during the year 2013 total
demand of labour is 57 million as against the supply of total labour in same time is 59.6 million. So, the
demand of labour is lower than its supply which results lower rate of wages with the consequential effect of
contribution to economic inequality in the country. To address this issue government has recently
promulgated the law determining the minimum wages rate. However, necessary steps to determine the
minimum wages by the respective authority is not sufficient.
Poverty Alleviation
Poverty is one of the economic problems in our country. At present 31 percent people of the country live
below the poverty level. Again according to global hunger index, 41.4 million (4.14 crore) people i.e.
almost 26 percent of total population are affected for want of nutrition. One of the reasons of poverty is
37
38
Daily Ittefaque, 11 December 2004

Daily Prothom Alo, 29 January 2012
Page 23
prevailing inflation at high rate. As per one calculation, if food price increases at 10 percent, 2.5 percent
people of the country come below the poverty level39. Due to high rate of inflation national consumption
cost has increased at higher rate than income increasing rate. According to news published in the Daily
Prothom Alo dated 12 December 2012, during the five years period from year 2005 to year 2010 income
has increased by 59% but consumption cost has increased by 84%. As a result national savings is not
increasing expectedly and invesstment are decreasing instead of increasing. Another important cause of
poverty is lack of policy to create a fairer distribution of income and wealth. But the economic policy
especially monetary policy, fiscal policy and allocation of resources are not adequate in favour of
ensuring fairer distribution of income and wealth. For example under fiscal policy abnormal dependency
on indirect tax and dependency on deficit finance cause the inflation of a country. In our country more
than 80 percent fund of budget comes from sources which is inflationary in nature. The policy of
allocation of resources in the national budget is also not in support of the poor people of the country. As
an agricultural country a major part of poor people are under the agricultural sector. If we look at the
allocation of resources for agriculture sector in recent past, it can be seen that the allocation is in
downward- trend. In the agricultural sector, total development and non development expenditure has been
estimated in the budget of financial year 2012-13 Tk. 122,759 million which is almost 18 percent lower
than that of the previous year. Total budget has been increased 16 percent compared to that of the
previous year. If we consider the inflation, allocation in agricultural sector has been reduced by 21
percent. Similarly, to support the poor people, another sector is health. Poor people are not able to take
modern medical treatment from modern hospitals. They are to depend on district, upazilla and union
parishid level government hospitals. In the budget of financial year 2013-14 Tk. 94,700 million has been
allocated under health sector which is only four percent higher than that of the last year. If prevailing
inflation is considered, the allocation under the heading health sector has been actually reduced by three
percent. As earlier mentioned shortage of doctor, nurse, medical equipment, medicine is a common scenario
in all levels of hospitals. Due to shortage of sufficient budget, people of almost every upazilla are not being
able to get proper medical treatment. According to the opinion of the expert, through utilizing the present
staff strength and instruments, proper health service is possible to be provided up to 60% people, but
according to a survey report published in the daily news papers, only 22% people of the country are getting
health service from the public health organization. It is very much reasonable to raise a question that despite
prevailing such a situation in health sector of the country how far only four to six percent of total allocation
for this sector is feasible.
In the every year budget a substantial portion is allocated in the name subsidy which is only for the poor
people. But there remains a doubt about perfect distribution of subsidy among the genuine poor people of
the country. According to the result of one research, only 12 percent of hard core poor people are getting
benefit of government safety net activities and those, who are getting benefit of such safety net activities
from 16 to 20 percent, are not eligible to get such benefit40. Proper performance of various activities under
social safety projects is another important issue. In many cases it happens that the money of employment
program for hard core poor people has not been utilized due to not implementing the program for the
negligence of implementing authority41.
Despite lot of decisions, planning as taken by the policy makers of the country which have adverse impact
on way to reduction of poverty level we will have to admit that various steps, projects and activities have
also been taken by the government to reduce the poverty. Continued increasing the budget allocation for
39
40
41
Daily Prothom Alo, 30 April 2012

Daily Prothom Alo, 16 October 2011
Daily Prothom Alo, 11 July 2011
Page 24
social safety (in amount), reduction of fertilizer price, reopening 12,203 community clinics reducing gap
of direct and indirect tax etc are the remarkable steps to reduce the poverty level of the country. As a
result of taking various important steps for poverty alleviation during the year 2012 number of hard core
poor people has come down to two crore 53 lac from three crore 72 lac of the year 1990-91.It has been
planned to bring down the poverty level to half of existing by the year 2015. But government has
achieved this plan ahead of target date i.e within the year 2012.As recognition of this success Bangladesh
has received award from The International Organization for South-South Cooperation(IOSSC) award
and award from Food and Agriculture Organization (FAO) of UNESCO.
Recommendations
On the basis of analytical results of various economic parameters as mentioned above it can be said that
Bangladesh is a country of steady and sustainable growth. GDP growth rate is on an average 6% to 7%.
Poverty level is in declining trend. Bangladeshs strong growth and success in poverty alleviation have also
attracted the international communities attention. But as a growing country despite having a steady growth
there are also some shortcomings regarding full employment, monetary policy and price stability. To make
the economic growth more dynamic, to protect the high rate of inflation, to reduce the inequality of the
society steps may be taken to increase the share of direct tax. For increasing the share of direct tax new tax
payers need to be identified. It is pertinent to mention that five percent of high income level people are
holding almost 27% of GDP. According to this information five percent of the population i.e. seven million
peoples average yearly earnings is more than Tk. 300,000 which exceeds the minimum threshold of taxable
income. So, the number of tax payers of the country should be almost seven million but at present Tax
Identification Number (TIN) holders are only two million.
To keep the inflation within the tolerable range through controlling the demand pull inflation the annual
money and credit growth may be consistent with the growth rate of commodities.
The program for social safety which has been taken by the government may be continued with larger
form. In addition to that subsidization of products like providing goods and services that everyone needs
cheaply or freely (such as food, healthcare etc), governments can effectively raise the purchasing power
of the poorer members of the society. But to remove the objections as mentioned earlier and to ensure
their proper distribution assistance of various professionals may be taken.
Minimum wage legislation which has been introduced by the government for the garment workers the
minimum limit and area of industry may be increased to make consistent with the prevailing inflation and
raising the income of the poorest workers.
To create employment opportunity for resolving unemployment problem in the country through
increasing the growth of small and micro enterprises the government should take effective steps to ensure
sufficient amount of credit and to creating marketing opportunity to sale the products of small and micro
enterprises.
Page 25
According to present government accounting system there is no reconciliation between accumulated

budget deficit and amount of government debt which is essential to confirm both the balance. Due to non
reconciliation of those differences, frauds and errors may remain undiscovered. To ensure the
transparency and accountability those issues may be resolved with the assistance of professional
accountants.
Overall budget size may be kept within maximum 15% over the previous years budget.
Unnecessary development activities may be avoided to reduce the pressure on deficit budget, government
debt, interest expenses and finally to keep control over inflation of the country.
Sufficient amount of budget may be allocated for health sector for providing maximum health service to
the rural poor and hard core poor people.
Page 26
Reconciliation of Accumulated Deficit Balance with Liability

Annexer-1
Particular
Revenue Receipt
Non Development Expenditure
Annual Development Program
Total Expenditure
Accumulated Deficit
BDT in crore
867,649
763,648
395,521
1,159,169
291,520
Financed by:
Foreign Loan
174,765
Bank Loan
92,028
Liability for National Saving Certificate
63,917
Total Liability
Difference
330,710
39,190
Page 27
Summary of Budget for the Period since inception of the Country to 30 June 201241
Annexer-1
Year
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
Page 28
Revenue
Budget
222
224
377
470
757
966
1,245
1,376
1,812
2,193
2,767
2,768
3,397
3,465
3,754
4,717
5,146
5,822
6,778
7,822
9,517
11,060
12,280
14,210
15,512
17,145
19,624
19,700
21,345
24,173
27,670
31,120
35,400
39,200
44,868
49,472
Non Development
Expenditure
269
213
364
470
599
768
1,036
1,053
1,194
1,408
1,662
2,038
2,414
2,803
3,313
3,956
4,730
6,170
6,740
7,310
7,900
8,510
9,150
10,300
11,814
12,535
14,544
16,765
18,444
20,662
22,692
25,307
28,390
34,664
38,070
45,412
Annual Development
Program
265
402
464
525
950
999
1,257
1,483
2,082
2,364
2,391
2,688
3,006
3,167
3,628
4,439
4,150
4,622
5,717
5,269
6,024
6,550
8,983
10,303
10,016
11,041
11,037
12,509
15,471
16,151
14,090
15,434
16,817
18,771
19,473
17,916
Summary of Budget for the period since inception of the country to 30 June 201242
Annexer-1
Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
Total
42
Revenue
Budget
60,539
69,180
79,484
95,187
114,885
867,649
Non
Development
Expenditure
57,922
67,603
78,136
84,188
102,130
763,648
Annual
Development
Program
18,455
19,668
25,917
33,007
38,020
395,521
i)
Statistical Yearbook of Bangladesh 1975, P-157-58
ii)
cKvkK -we`v cKvk, msKjK: G. wU. Gg AvjgMxi, wRqv -Lvj`v miKvii A_gx Gg, mvBdzi
ingvbi 12wU evRU eZv, P-10-11
iii) Bangladesh Economic Review 1998, P-105

iv) Bangladesh Economic Review 2013, P-314, 315, 319 & 326
Page 29
Statement of Important Goods Available for Consumption43

Annexer-2
Lac MT
Goods
Rice
For the Year 2012-13
289.31
301.10
8.44
10.36
Fish
25.63
33.90
Milk
26.50
34.63
Meat
10.40
25.32
Fertilizer
38.86
49.45
Cement
39.22
31.97
Petroleum
12.13
13.02
Total
450.49
499.75
Wheat
43
For the Year 2007-08
Bangladesh Economic Review 2013, P-92, 101, 103, 332 & 334
Page 30

Macroeconomic Situation in Bangladesh

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