This document has been prepared by the Finance Team of SED for information purpose only of its members residing both in Bangladesh and abroad, on the basis of the publicly available information in the market and own research. This document is not directed to, or intended for distribution to or use by, any person or entity that is citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation . The information and data presented herein are the exclusive property of SED and any unauthorized reproduction or redistribution of the same is strictly prohibited . No part of this report should be copied or used in any other report or publication or anything of that sort without proper credit given or prior written permission taken from the authorized publisher of this report . This disclaimer applies to the report irrespective of being used in whole or in part .
3. FY’20 = Fiscal Year 2019-20
FY’19 = Fiscal Year 2018-19
R. FY’19 = Revised Budget for Fiscal
Year 2018-19
BDT = Bangladeshi Taka
BN = Billion (100 Crore)
MN = Million (0.10 Crore)
ADP = Annual Development
Program
Dev. Exp. = Development
Expenditure
GDP = Gross Domestic Product
TA = Total Allocation
SRO = Statutory Regulatory Orders
CD = Custom Duty
RD = Regularity Duty
SD = Supplementary Duty
Key Notations:
4. At a glance Budget 2019-20
• Presented By Finance Minister AHM Mustafa Kamal
• Presented before Parliament on June 13, 2019
• Passed on June 30, 2019
• Size of the Budget is 5,23,190 crore Taka
• Long on promises but short on specifics
• Dependence on NBR for revenue
• Aims at Bangladesh being a higher middle-income
country by 2030
• Focus on widening tax network
• GDP projected at 28,85,872 crore Taka
11. Share of Revenue in Budget 2019-20:
Revenue Income 13.1% of GDP
(previously 12.5%)
Revenue projected to grow faster
(19.3%) than public expenditures
(18.2%)
Development expenditure to
grow faster (22%) than operating
expenditure (16.3%)
VAT expected to grow by 17.4%
and Income Tax by 19.7%
12. Description Budget 2019-2020 (in Cr) Budget 2018-1920 (in Cr)
Operating Expenditure 3,10,262 2,82,415
Domestic Interest 52,797 48,377
Foreign Interest 4,273 2,963
Development Expenditure 2,11,683 1,79,699
ADP 2,02,721 1,73,000
Total Expenditure 5,23,190 4,64,573
Overall Deficit (Including
Grants)
1,41,212 1,21,242
Overall Deficit (Excluding
Grants)
1,45,380 1,25,293
Expenditure:
• Total expenditure is 18.1% of GDP (previously 17.4%)
• Budget Deficit 5% of GDP (same as previous one)
13. Sector Share (%) Sector Share (%)
Public Service 18.4 Energy & Power 5.4
Education & Technology 15.2 Public Order & Safety 5.3
Transport &
Communication
12.4 Health 4.9
Interest 10.9 Housing 1.3
LGRD 7.2 Industrial & Economic
Services
.7
Defence Services 6.1 Agriculture 5.4
Social Security & Welfare 5.6 Others 1
Sector Wise Public Expenditure
in Budget 2019-20
Data source : https://mof.gov.bd
14. Description Budget 2019-20
(in Cr)
Budget 2018-1920
(in Cr)
Foreign Borrowing 63,848 50,016
Domestic Borrowing 77,363 71,226
From Banking System 47,364 42,029
From Non-Banking System 30,000 29,197
National Saving Scheme 27,000 26,197
Total Financing 1,41,212 1,21,242
97% of total foreign resources are for ADP projects
Financing:
17. • Total allocation is 43,230 crore Taka (8.3% of Budget and
1.5% of GDP)
• 24.5% increase from the previous budget (highest in the
last decade)
• Agriculture received 21% (Tk. 9000 crore) of total
allocation
• Power and Energy received 22% (Tk. 9500 crore) of total
allocation (3.3% increase from previous one)
• BJMC received 9% (Tk. 4000 crore) of total allocation
(previously 4100 crore)
• 1% cash incentive for RMG export
• 2% cash incentive for remittance inflow
Subsidy and Incentives:
18. • Total 1475 projects
• 38.7% of total public expenditure (previously 37.7%)
• 7% of GDP; 17.2% higher than the previous budget
• Project aid to finance 35.4% of total ADP
• Transport has the highest allocation (26 % of total) with 257
projects
• Power : 12.5% of ADP with 90 projects
• 41 new projects (0.4% of ADP), 673 continuing projects (57%
of ADP), 297 carryover projects (7.9% of ADP)
• Highest foreign aid for Power (39%) and Transport (35.4%)
sector
• 43,919 crore Tk. (21.7% of ADP) Allocated for 14 mega projects
Annual Development Program:
19. • No change in tax rate or slab of personal income tax
• Minimum net wealth exemption limit Tk. 3 crore (2.25 crore before)
• Corporate tax structure is unchanged
• Minimum tax for mobile companies: 2% of turnover (previously 0.75%)
• Reduced tax rate for RMG will continue for 1 more year (12% corporate tax;
10% if there is green building certificate)
• Reduced tax for textile sector (15% income tax) will continue for 3 more
years
• Corporate tax for Banks, Insurance, FI, Merchant Banks : 37.5% if publicly
traded, 40% for non-publicly traded.
• Tax exempted yearly turnover limit for SMEs Tk.50 lac (previously 36 lac)
• Inclusion of 8 new potential manufacturing sectors (total 26 now) for tax
holiday
• Opportunities given to invest illegal money in Real Estate and industrial
undertaking in economic zones
Tax and VAT:
20. • Tax exemption and rebate to enhance inclusivity
• Tax rates and exemptions to boost capital market
• Tax offices to be set up in every upazilla and tax zones to be
increased from 31 to 63. New 7 units will be set up.
• Aim to widen the tax net
• Reduced VAT rate of 5%, 7.5%, 10% along with standard 15%
• VAT exemption to assist small & medium traders, women
entrepreneurs, marginal groups, disabled groups, to reduce
health cost and risk, to grow local industry
• Advanced tax rate introduced in import stage
• Duties on import of raw materials for cancer medicine, gold
(commercial), several ingredients in poultry, dairy, fish feed,
parts of firefighting equipment decreased
Tax and VAT:
21. Agriculture
• Allocation in agricultural sector is
decreased ( to 5.4%)
• Crop insurance
• Tax reduction for importing
machinery
• Tax incentive for local machinery
producers
Power Sector
• Deviation from power sector master plan
• Subsidy almost doubled
Education
• 2.1 % of GDP (UNESCO Target: 6%)
• Reduction in Tax for English
Medium Schools ( From 7.5% to 5%)
Health
• Allocation has fallen
• Tax reduction in various products
• 0.9% of GDP (WHO Target: 5%)
Some important sectorial Issues:
22. Impact on Banking sector:
• Loan rescheduling may shortly control current growth in NPL . Whereas CDLC and
steps towards willful defaulters may help to restore firmness in the sector if
executed in a proper way.
• Increasing paid - up capital may reduce earnings in the short run but in the long -
run will strengthen bank’s capital base .
• Dividend paying banks may become less attractive in days ahead because of
Banks’ dividend policy. Banks’ dividend policy may also be changed as to increase
their paid - up capital. Banks may move towards paying stock dividend more than
cash dividends .
• Amendment of Bank Company Acts may create some provocations for merger or
consolidation of weak banks with strong ones
• Bringing down the interest rate to single digit will be challenging because the
growing cost of funds for ongoing liquidity crisis . But limiting the spread to 4 %
may lower profitability of some Banks and FIs which currently enjoy spread
above this limit .
23. Impact on Insurance sector:
A pilot project for ‘crop insurance’ will be introduced to save the farmers from the
financial loss.
Insurance of properties generated from large projects will be covered by the local
insurance companies .
Insurance for ‘loss of profit ’ will also be introduced .
Accident insurance for factory workers will be implemented .
The government is planning to introduce livestock insurance, small insurance for
poor women and health insurance for government employees and common people
. Digitization of the insurance sector and its high rate of penetration have been
planned .
With the assistance of Jiban Bima Corporation, the existing system will be
reformed and converted into an integrated insurance system for bringing all
government employees under the insurance coverage .
Preparations have been taken to bring the expatriate workers under the insurance
scheme, which will be implemented shortly .
24. Impact on Telecom sector:
• Increase in the SD rate on services provided through mobile phone SIM / RIM
cards will result in increase in the existing voice call rates along with other
services . Average minutes per user will decline while OTT (Over the top - call
though mobile apps) will increase significantly due to increase in SD rate
followed by government led floor price hike of voice calls in last year . Overall
revenue of mobile operators might decline due to lower contribution from voice
calls .
• Local Internet Protocol Telephony Service Provider will be benefited due to
differential tariff structure at significantly subsidized rates compared to SIM/RIM
based operators . Increase in cellular operators data consumption driven by
higher app based calls won’t be sufficient to offset expected de - growth in voice
revenue .
• Increase in minimum turnover tax will bring additional burden for telecom
companies that are incurring losses ( I.e. Bangla link ) .
• Growth in smartphone sales may slow down due to increased custom duty that
might ultimately result in lower than expected cellular data growth . Locally
produced/ assembled brands (Samsung, Walton, Symphony etc. ) will be
benefited
25. Impact on Entrepreneurs:
• The governments allocation of tk 100 crore for start-ups will help to create new
entrepreneurs and decrease the challenges of unemployment.
• The price of workplace safety equipment like fire extinguisher has been reduced
so that it will help to ensure the safety of the workplace.
• Increasing cash incentives on export on garments items by 1% was too little but
government proposed an allocation of tk 2,825 crore as cash incentive on
government export receipts. It will help in the growth of export of garment
items.
• The SME sector emphasise on tax free turnover limit and has proposed to
increase it to tk 50 lakh to 3 crore from 36 lakh, and it will help in encouraging
the youth of Bangladesh.
• In this budget, VAT was relaxed for women entrepreneurs but no such facilities
were given for income tax. Thus this budget disappoint our women
entrepreneurs.
• According to BEA, Bangladesh has around tk 5 trillion to tk 7 trillion of black
money. Black money holders will not face any question if they invest in
industries like EZ’s and high tech parks only paying a certain amount of tax.
26. 1. The revenue (% of GDP) is relatively stabled over the last 10 years
without major improvement, however the gap between the
performance and the target of revenue collection has increased
over time.
2. Although the target for public investment (% of GDP) has been
met but total investment scenario is still lagging behind due to
low contribution from private sector . Hence, private investment
should be increased.
3. Government is borrowing through Shanchoypatra paying higher
rate that is not a good side considering future consequence. So
this dependency on Shanchaoypatra should be reduced or the
rate can be modified.
4. Banking sector should have been given extra attention to ensure
monetary and overall economic stability.
Some other recommendations:
27. 5. BOP has to be improved to strengthen our economic stability.
6. Agriculture sector received 20.8% of the total allocation (Tk.
9,000 crore) – almost similar allocation since FY14 . More
allocation should be given to this sector.
7. ADP implementation rate for FY18 was 70% (lowest since FY07).
So implementation rate should be increased to ensure proper
development of the economy.
8. The top 5 sectors have received 70.1% of total ADP allocation –
concentration ratio of ADP allocation has been increased to
67.7% from 66.2% in ADP FY19 from RADP FY19. Concentration
ratio of ADP should be minimized.
9. Have to lower the income tax rate for the first slab and increase
tax rate for higher slab to ensure balanced income distribution.
Some other recommendations:
28. 10. Opportunities to invest black money in real estate under Special
tax treatment (19BBBBB) has been made more relaxed by
reducing tax rates that should be increased.
11. To support increased tax revenue target tax offices should be set
up in every upazilla level.
12. Government budget for education (% of GDP) remained at 2.1%
in FY20 which is considerably lower than UNESCO target of 6%.
13. Government budget for health (% of GDP) is considerably lower
than the target stipulated in the 7FYP and WHO benchmark 5%.
14. Focus has to be given on raising private investment and
attracting much-needed foreign direct investment.
15. Allocation on entrepreneurship development should be used
efficiently to foster the economic growth.
29. This document has been prepared by the Finance Team of SED for information
purpose only of its members residing both in Bangladesh and abroad, on the basis
of the publicly available information in the market and own research. This
document is not directed to, or intended for distribution to or use by, any person or
entity that is citizen or resident of or located in any locality, state, country, or other
jurisdiction where such distribution, publication, availability or use would be
contrary to law or regulation . The information and data presented herein are the
exclusive property of SED and any unauthorized reproduction or redistribution of
the same is strictly prohibited . No part of this report should be copied or used in
any other report or publication or anything of that sort without proper credit given
or prior written permission taken from the authorized publisher of this report . This
disclaimer applies to the report irrespective of being used in whole or in part .
Disclaimer:
30. Name Designation Email
Mohammad Tolip khan CFO Khan.tolip@yahoo.com
Al hasan ACFO al.hasan@primebank.com.bd
Syad muaz hossain hridoy ACFO Muazdubi18@gmail.com
Lubna Jahan lubnajahan.mimu@gmail.com
K.M. Najib Hayder
Samiya Tasnim Maisha
Rafin Ahmed
Sayed Anamul Haque
Manager
Manager
Manager
Manager
k.m.najib.hayder@gmail.com
samiyamaisha5@gmail.com
ahmedrafin.du@gmail.com
sayedanamulhaque7@outlook.com
Team Finance :
31. Thank You
TEAM FINANCE
Suvastu Arcade Level # 8, Suite # 850
46-48 New Elephant Rd, Dhaka 1205
Phone numbers: +880 1709644153
E-mail:info@sed.org.bd
