Chapter-Four: Budget systems:

Issues to be discussed
 Nature of budget
 Budget cycle,
 Operation of budgetary process,
 State and local budget systems,
Earmarking and expenditure determination.
 Budget procedure of Bangladesh,
 Public Procurement Act of Bangladesh.

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 5.1 Understanding and defining Budget

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 Contd.

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 5.1 Meaning Budget
A budget is an estimation of revenue and expenses
over a specified future period of time and is usually
compiled and re-evaluated on a periodic basis.
Budgets can be made for a person, a group of
people, a business, a government, or just about
anything else that makes and spends money.
The budget of a government is a summary or plan
of the intended revenues and expenditures of that
government. There are three types of government
budget = the operating or current budget, the
capital or investment budget, and the cash or cash
flow budget.
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 Budget Defined

• A budget (from old French bougette, purse) is

a financial plan and a list of all planned
expenses and revenues.
• A government budget is a legal document that
is often passed by the legislature, and approved
by the chief executive-or president.
• The two basic elements :Revenues and
Expenses.
• Revenues are derived primarily from taxes and
non-tax revenue.
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 Contd
Government expenses include spending on
current goods and services, which economists
call government consumption ; government
investment expenditures such as infrastructure
investment or research expenditure; and
transfer payments like unemployment or
retirement benefits, Social Safety nets
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 Basis / Foundation of Budget

• Budgets have an economic, political and

technical basis.
• Unlike a pure economic budget, they are not
entirely designed to allocate scarce resources
for the best economic use.
• They also have a political basis wherein
different interests push and pull in an attempt
to obtain benefits and avoid burdens.
• The technical element is the forecast of the
likely levels of revenues and expenses
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 Types of Budget
Different Types of Budget
• Traditional incremental budgeting justify only variances versus past years actual
expenditure, based on the assumption that the "baseline" is automatically
approved
• Zero based budgeting every line item of the budget must be approved, rather
than only changes. During the review process, no reference is made to the
previous level of expenditure (Reverse to Traditional).
• Performance based budgeting is the practice of developing budgets based on the
relationship between program funding levels and expected results from that
program.
• Medium Term Budget Framework is a budgeting approach that links
Government’s policy priorities to resource allocations and resource allocations to
performance. Emphasizes the efficient use of limited public resources (both
development and non-development) And accounts for the results
• Program budgeting developed by U.S. president Lyndon Johnson, describes and
gives the detailed costs of every activity or programme that is to be carried out in
a budget. Objectives, outputs and expected results are described fully as are their
necessary resource costs, for example, raw materials, equipment and staff. The
sum of all activities or programmes constitute the Programme Budget.
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 5.2 Nature of budget and Principles of Budget

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 5.3 Budget Cycle/ Phases
A budget cycle is the life of a budget from
creation or preparation, to evaluation. Most
small businesses don't use the term “budget
cycle” but they use the process and go
through each of its four phases —
preparation, approval, execution and
evaluation.

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 Contd
• Budget Preparation: The first phase of the
budget cycle involves preparation by the
departments/agencies, ministries and finally
ministry of Finance
• Legislative Approval: Typically, the legislature
has the power to approve or reject a proposed
budget. They review it and vote. If approved,
it moves into the implementation phase.

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 Contd.
• Implementation and Execution: It is the duty of
the executive branch - primarily involves
distributing the budgeted resources to their
designated recipients within the government
and spending it as planned.
• Audit and Review: Finally, a budget is typically
audited and reviewed following implementation
to evaluate the efficiency and effectiveness in
order to guide future budgeting decisions.
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 Contd
The preparation of the Budget involves the Ministry of
Finance, along with multiple bureaucrats. Before the
Budget is prepared, expert advice is also taken from
economists and other stakeholders.

The cycle includes the following steps — estimating the

amount of expenditure and receipts, estimating the fiscal
deficit, trying to narrow the fiscal deficit, the presentation
of the Budget, and getting the approval from Parliament.
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 5.4 Operation of budgetary process

See next slides

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 Legal & Institutional of Budget
framework of Bangladesh

See next slides

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 Stages of Budget preparation

See next slides

 Stages of Budget preparation
 Core Budget Documents

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5.8 Public Procurement Act in Bangladesh

 Public Procurement Rules 2008

 PPR Amendment PPR-2008 (Gazette August 12,
2009)
 PPR-2008 Amendment (Gazette June 10, 2018)
 Outsourcing Policy,2018 (by Ministry of Finance)
 PPA 2006, PPR 2008 with all Amendments up to
January, 2019
 PPR-2008 Amendment (Gazette February 22,2021)
See details in web page about PPA 2019,2021
( 2008, amended in 2019)
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 Contd
Budget System in Bangladesh
See - Following docs:
2023-2024 budget pdf docs
Text book of Taxation Law

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 Some basic Issues of Budget
• Budgeting Concepts
Revenue = Tax + Non-tax
Expenditure = Revenue +Development
Expenditure – receipts = Deficit
Deficit Financing requires Borrowing
-From
 External Sources:
Loans, Grants, project Aid
 Domestic Sources:
Loans From Banks
Loans From Non Banking sources
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Core Budget Documents Placed before the
parliament
• Budget Speech of the Finance Minister
• Budget in Brief
• Annual Financial Statement
• Supplementary Budget (Additional demand for grants for the
ongoing year)
• Combined Demand for Grants
• Consolidated Fund Receipt
• Medium Term Budget Framework
• Detailed Budget
• Annual Development Program(ADP)
• Gender Budget
• Bangladesh Economic Review
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 Financial Oversight
Parliament is the custodian of public fund according the
constitution
Budget discussed and approved in the Parliament
Cannot be placed before a committee
Parliament performs oversight functions on the execution
and implementation through
• Public Accounts Committee
• Public Undertakings Committee
• Estimates committee
• Committee on ministry of finance
• Standing Committees on different Ministries
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 Summary of Budget

• Budget is a complex issue dealt by the Finance people and always

kept away from general mass
• Bangladesh has undergone Series of reforms in PFM
• Discarded old incremental budget making process having no
connection to plan and performance
• Introduced MTBF or MTEF system connecting policy priorities to
resource allocations and resource allocations to performance
• Ministries/Divisions have more control over resource allocation
and determining priorities
• Defining key performance indicators prior to budget helps to
measure performance of the budget and redefine priorities
• It is not the whole picture; we tried to get an overview

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 Review Questions
 Define budget and Govt budget ;
 State in brief various nature of budget;
 List out and explain the stages of budget preparation of BD
Government.
 Discuss the legal and constitutional frame work of budget.
 List out the necessary documents for budget preparation and
finalization.
 As per your review on latest budget (2023-2024),
Comment on the budget system of Bangladesh

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