by Finance Minister A H M Mustafa Kamal FCA, MP :
I am presenting the proposed budget for FY 2020-21.
Proposed Budget Structure of FY 2020-21
It has been forecasted that the world economy may plunge into a great depression due to the outbreak of the novel coronavirus pandemic. The budget for FY 2020-21 has been prepared bearing in mind the strategies required to be undertaken to meet the emergencies in the health sector of Bangladesh and recover from the damages caused in various sectors of the economy. Sufficient allocation has been made in the proposed budget to satisfy the needs of all Ministries and Divisions to address the impact of COVID-19 outbreak.
I will now present an outline of the proposed income and expenditure of the next fiscal year 2020-21, which has been presented in detail in Table-4 of Annex-A.
Bearing in mind the realities at hand and our planned reforms in revenue management, we have set the target of total revenue income in the fiscal year 2020-21 at Tk. 3,78,000 crore. Out of this, Tk. 3,30,000 crore will be collected through the NBR. Tax revenue from non-NBR sources has been estimated at Tk. 15,000 crore, while the non-tax revenue is estimated to be Tk. 33,000 crore.
In FY 2020-21, the size of the total expenditure has been estimated at Tk. 5,68,000 crore, which is 17.9 percent of GDP. Total allocation for operating and other expenditures is estimated at Tk. 3,62,855 crore, while the allocation for the annual development program (ADP) is Tk. 2,05,145 crore.
Health, agriculture and employment creation have given priority while allocating resources for the ADP. The sectoral allocation of the ADP for the next fiscal year is presented in Table 5 of Annex-
I propose to allocate, from the ADP of FY 2020-21, 28.5 percent for human resources sectors (education, health and related other), 22 percent percent for the overall agriculture sector (agriculture, rural development, water resources, and related others), 13 percent percent for the power and energy sector, 25.4 percent for communication (roads, rails, bridges, and related other communications), and 11.1 percent for other sectors.
The overall budget deficit will be Tk. 190,000 crore, which is 6.0 percent of GDP. It is to be noted that deficit stood at 5.0 percent in the last fiscal year. Out of the total deficit, Tk. 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk. 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources.
Allocation proposed for the social infrastructure sector in the proposed budget is Tk. 1,55,536 crore, which is 27.38 percent of total allocation, in which allocation for human resource sector (education, health and other related sectors) will be Tk. 1,40,222 crore. Allocation proposed for the physical infrastructure sector will be Tk. 1,67,011 crore or 29.40 percent, in which Tk. 69,553 crore will go to overall agricultural and rural development, Tk. 61,435 crore to overall communications, and Tk. 26,758 crore to power and energy. A total Tk. 1,40,265 crore has been proposed for general services, which is 24.69 percent of the total allocation. Tk. 36,610 crore is proposed for public-private partnerships (PPP), financial assistance to different industries, subsidies and equity investments in nationalized corporations, banks, and financial institutions, which is 6.45 percent of the total allocation. Tk. 63,801 crore for interest payment, which is 11.23 percent of total allocation. Tk. 4,777 crore for net lending and other expenses, which is 0.84 percent of the total allocation.
Medium-Term Policy Strategy
Our GDP grew consistently at an increasing rate in the last decade. We achieved a GDP growth of 8.15 percent in the FY 2018-19, the highest among the countries in Asia. Strong domestic demand has been the main driver of our growth. However, due to the fall in exports and lower than expected growth in remittances as a result of long and sustained worldwide lockdowns arising from the impact of COVID- 19, the GDP growth rate of the current fiscal year has been revised downward at 5.2 percent. However, in view of the post-Covid recovery, the growth rate is projected at 8.2 percent for FY 2020-21 in line with the long-term plans. We expect that inflation will be 5.4 percent during the period.
We have taken all out measures to improve the health sector. To combat the COVID-19 pandemic, we are implementing different progrms worth Tk. 5,500 crore under the Health Services Division. The government will do whatever is required to be done to address the pandemic. To fulfill emergency requirements, I propose to allocate Tk. 10,000 crore as lumpsum.
Ensuring Overall Health Services
To ensure quality health services for the citizens of the country, we increased the allocation for the health sector, including that of the Sector Programme and projects, by a considerable amount in the last ten years. In addition to ongoing sector programmes, we are also implementing various projects/activities to fulfill the government’s election pledges and improve infrastructure of the health sector.
I propose to form an ‘Integrated Health-Science Research and Development Fund’ of Tk. 100 crore to finance the activities for the development of research in health-education and science and technology. A high-powered committee consisting of experienced researchers in the health sector, nutritionists, public health experts, sociologists, economists, environmentalists, civil society and other suitable representatives will be formed to manage this Fund efficiently and effectively.
I propose to allocate Tk. 29,247 crore for the Health Services Division and the Health Education and Family Welfare Division in FY 2020-21, which was Tk. 25,732 crore in FY2019-20. This allocation is proposed for the health and family welfare sector giving a priority to activities undertaken to combat the Covid-19. It is worth mentioning that currently 13 ministries and divisions are implementing programs related to health and family welfare. The allocation for this purpose in FY 2020-21 is Tk. 41,027 crore, which is 1.3 percent of GDP and 7.2 percent of total budget allocations.
Primary and Mass Education
We have been implementing a range of key activities in primary education that includes nationalising primary schools, upgrading the physical infrastructure of newly nationalised schools, distributing free textbooks, improving the ICT and other education infrastructures, etc. The Cabinet has approved the National School Meal Policy 2019, and under this policy, we are going to roll out mid- day meals to all primary schools across the country. I propose to allocate a total of Tk. 24,940 crore for the next 2020-21 fiscal year for the primary education sector, which was Tk. 24,040 crore in the budget for current FY 2019-20.
Secondary and Higher Education
We introduced the Prime Minister’s Education Assistance Trust Fund to ensure education for the poor and meritorious students who are otherwise deprived of education. Tuition fees up to degree (pass) and equivalent students are now being provided from this trust. In FY 2020-21, stipend will be provided to 5 lakh 57 thousand male and 10 lakh 95 thousand female students at the secondary level, 1 lakh 16 thousand male and 4 lakh 62 thousand female students at the higher secondary level, and 50 thousand male and 1 lakh 50 thousand female students at the degree level. In addition, stipend has so far been given to 6 lakh student based upon their performance in public examinations, and a further 1 lakh 87 thousand students will get stipend in the next fiscal year.
I propose to allocate a total of Tk. 33,117 crore in the 2020-21 fiscal year for the secondary and higher education sector, which was Tk. 29,624 crore in the current fiscal year.
Technical, Vocational and Madrasa Education
You are aware that a large of the madrasas in Bangladesh are lagging behind than regular schools and colleges in terms of physical infrastructure. To address this issue, we have constructed new buildings in 1 thousand 8 hundred madrasas nationwide, and set up modern multimedia classrooms in 653 madrasas. I propose to allocate a total of Tk. 8,344 crore for the next 2020-21 fiscal year for technical and madrasa education, which was Tk. 7,450 crore in current FY 2019-20.
Agriculture Sector
The global coronavirus pandemic has affected the agriculture sector in Bangladesh too. The COVID-19 has disrupted imports, exports and supply chains across the globe. Hence, we will have to put the highest emphasis in addressing adverse effects on our domestic sectors. Our Aman production this year has been satisfactory.
To promote sustainable agriculture, activities for innovation of crop varieties tolerant to climate change effects are continuing. A total of 109 high yielding varieties of different climate-resilient crops have been developed since 2009. We have taken up a project of Tk. 3,198 crore to promote farm mechanization. An allocaction of Tk. 9,500 crore is made in the next fiscal year for agricultural subsidies. An allocation of Tk. 5,000 for the Agriculture Refincing Scheme will also be made through Bangladesh Bank in the next fiscal year.
Food Security
The outbreak of COVID-19 pandemic has created risks for the production, imports-exports and supply and distribution of food grains and cereals. The government is quite aware of the situation, and has taken all possible measures to ensure adequate food stock in the country. It has procured 7 lakh 98 thousand metric tonnes from this year’s Aman harvests. I propose to allocate Tk. 22,489 crore for the agriculture sector in the next fiscal year, which was Tk. 21,484 in FY 2019-20.
Employment Generation
As Bangladesh enjoys demographic dividend, a huge number of active population are entering into the labour market, but at the same time, there is a growing concern surrounding the demand for workers due to adoption of modern technology.
We have announced a large stimulus package of about Tk. 1,03,117 crore to fight the economic effects of the coronavirus, one of the main objectives of which is to remove temporary job losses by revitalising the economic activities.
Skill Development
The government has been implementing the ‘National Service Programme’ through the Department of Youth Development to generate employment for educated but unemployed youths. Under this programme, 2 lakh 29 thousand 737 youngsters were given training, and temporary employment is generated for 2 lakh 27 thousand 402 of them. Under the Prime Minister’s Office, the National Skills Development Authority (NSDA) has been established to coordinate various skills development activities of the government.
Overseas Employment
The government is making sincere efforts to ensure overall welfare and equality in opportunities for expatriate Bangladeshis, create new overseas labour markets through diplomatic efforts, develop, through training, skilled manpower suited to the demand of those markets, reduce unemployment by creating overseas employment, and increase remittance inflows. Currently, over 1 crore 2 lakh migrant workers are working in 174 countries across the world.
Increase in Foreign Remittance
In the budget of the last fiscal year, Hon’ble Prime Minister announced an incentive at the rate of 2 percent on money remitted by expatriate Bangladeshis. The objectives were- to mitigate the burden of increased expenses in sending foreign remittances, and to encourage bringing in foreign remittance through legal channels. As a result, inward remittances grew significantly during July-May of the FY 2019-20 as US$ 16.56 billion has been earned during the period, which is making a special contribution to the country’s economy.
Poverty Reduction and Social Safety Net Programmes
As the government enforced general holidays, lockdowns, closure of factories and businesses to prevent the spread of coronavirus infections, income of the common people has reduced, which now threatens our achievements in poverty alleviation and social security.
All poor senior citizens in 100 upazilas most prone to poverty due to the coronavirus outbreak will be brought under the old age allowance as per the existing policy. This will add 5 lakh new beneficiaries, and an additional allocation of Tk. 300 crore will be provided to this programme;
All widows and women deserted by their husbands in 100 upazilas most prone to poverty due to the coronavirus outbreak will be brought under the coverage of the allowance programme for widows and women deserted by their husbands as per the existing policy. This will add 3 lakh 50 thousand new beneficiaries, and an additional allocation of Tk. 210 crore will be provided to this programme;
The number of beneficiaries of the allowance for insolvent persons with disabilities will be increased to 18 lakh following the latest disability identification survey. This will add 2 lakh 55 thousand new beneficiaries, and an additional allocation of Tk. 229.50 crore will be required for this purpose.
The government has allocated Tk. 95,574 crore in the social security sector, which is 16.83 percent of total budget and 3.01 percent of GDP in FY2020-21. In the revised budget of FY2019-20, the allocation was Tk. 81,865 crore. We are also implementing various programmes for the welfare of the marginalised communities besides helping the people with disabilities.
Local Government and Rural Development
The commitment to increase rural road network coverage from 35 percent to 35.75 percent is being implemented fully. Mentionably, in the last eleven years from 2009 until February 2020, a total of 62 thousand 149 kilometers of rural roads has been built. This cover construction of 93.84 percent of upazila roads, 79.32 percent of union roads and 20 percent of rural roads. The expansion of this rural road network is contributing to the rapid expansion of rural economy. I propose to allocate Tk. 39,573 crore for the local government and rural development sector in FY 2020-21, which is Tk. 37,886 crore in the current fiscal year 2019-20.
Export Diversification and Devleopment of Quality of Export Products
The government remains committed to promote export product diversification and develop the quality of our export products with a view to infusing dynamism in export trade and consolidating Bangladesh’s position in the competitive global trade situation. To that end, it has identified a number of products with high export potentials, which includes ship building, pharmaceutical products, furniture, diversified jute products, electronics and home appliances, agro- processed products, paper, printed and packaging products, ICT, rubber, footwear, cut and polished diamond, etc. To develop the quality of our export products, the government has framed the Compliance Handbook of Bangladesh’s Plastic and Light Engineering Industry.
The government is offering export incentives to products with high export potentials so that these products can compete in the international market. A total of 37 products are receiving such incentives against their exports in FY2019-20, and a budget allocation of Tk. 6,825 crore has been made for the purpose. In FY2018-19, these incentives amounted to Tk. 4,000 crore.
Leather and Footwear Industries
You are aware that the leather and leathergoods sector provides employment directly to 6 lakh people and indirectly to another 3 lakh people, and that this sector is one of the principal sources of our export earnings. To achieve productive capacity of this sector and enhance its exports, a Guideline for Development of Leather and Leather goods Products 2019 has been framed. Further, an Export Guideline for the Leather Sector is in the process of formulation. Again, steps are being taken to facilitate the greater value chain integration of Bangladesh into the regional and global markets in the leather goods and footwear sector.
Hoping for Better Days for the Jute Sector
The government has been working to make the fullest use of the potential of its jute sector for the country’s industrialisation, employment generation and exports development. Use of jute bags in the packing of 19 products including food grains have been made mandatory in the domestic market to ensure the diversified use of jute products.
Readymade Garments Industry
The government has kept on providing all kinds of benefits, including cash incentives, to the readymade garments (RMG) industry as it is the principal export sector of the country. Again, an additional 1 percent export incentive is being provided to all categories of RMG exports from FY2019-20. However, due to the growing trade tensions and the recession in world economy, a downturn in global goods trade in 2019 and 2020 has been forecasted. Therefore, overall exports from Bangladesh, including that of RMG, have continuously been declining.
Development of the Tourism Industry
Following the directives of Hon’ble Prime Minister Sheikh Hasina, various steps have been taken to turn the tourism industry into a developed and modern economic sector. For example, plans have been made to establish exclusive tourism areas for foreign tourists in locations that have high tourism potentials, develop eco-tourism parks keeping the natural beauty intact, build island-based tourism parks and hotels, and establish international standard tourism centers with all facilities for incoming tourists. I propose an allocation of TK. 26,758 crore for the Power Division and the Energy and Mineral Resources Division in the budget for FY2020-21, which was Tk. 28,051 crore in FY2019-20.
Building a Modern Roads-Highways Network
To improve the national transport system and establish a standard infrastructure for road communication, the government is implementing a bunch of projects for upgrading 1 thousand 140 kilometers of the country’s important regional highways to appropriate standard and width, and upgrading district highways to appropriate standard. I propose to allocate Tk. 64,580 crore for the communication infrastructure sector in the next FY2020-21, which was Tk. 64,821 crore in the current FY2019-20.
Disaster Management and Relief
You are already aware that Bangladesh is a disaster-prone country. Due to global climate change, we are one of the countries most prone to natural disasters. In the last few years, we have been moving away from traditional disaster management and focusing more on reducing disaster risks and improving adaptability and resilience. But due to the recent COVID-19 pandemic, we have quickly expanded our humanitarian relief and support activities.
I propose to allocate a total of Tk. 9,836 crore for the next 2020-21 fiscal year for disaster management and reflief, which was Tk. 9,872 crore in current FY 2019-20.
I am presenting the proposed budget for FY 2020-21.
Proposed Budget Structure of FY 2020-21
It has been forecasted that the world economy may plunge into a great depression due to the outbreak of the novel coronavirus pandemic. The budget for FY 2020-21 has been prepared bearing in mind the strategies required to be undertaken to meet the emergencies in the health sector of Bangladesh and recover from the damages caused in various sectors of the economy. Sufficient allocation has been made in the proposed budget to satisfy the needs of all Ministries and Divisions to address the impact of COVID-19 outbreak.
I will now present an outline of the proposed income and expenditure of the next fiscal year 2020-21, which has been presented in detail in Table-4 of Annex-A.
Bearing in mind the realities at hand and our planned reforms in revenue management, we have set the target of total revenue income in the fiscal year 2020-21 at Tk. 3,78,000 crore. Out of this, Tk. 3,30,000 crore will be collected through the NBR. Tax revenue from non-NBR sources has been estimated at Tk. 15,000 crore, while the non-tax revenue is estimated to be Tk. 33,000 crore.
In FY 2020-21, the size of the total expenditure has been estimated at Tk. 5,68,000 crore, which is 17.9 percent of GDP. Total allocation for operating and other expenditures is estimated at Tk. 3,62,855 crore, while the allocation for the annual development program (ADP) is Tk. 2,05,145 crore.
Health, agriculture and employment creation have given priority while allocating resources for the ADP. The sectoral allocation of the ADP for the next fiscal year is presented in Table 5 of Annex-
I propose to allocate, from the ADP of FY 2020-21, 28.5 percent for human resources sectors (education, health and related other), 22 percent percent for the overall agriculture sector (agriculture, rural development, water resources, and related others), 13 percent percent for the power and energy sector, 25.4 percent for communication (roads, rails, bridges, and related other communications), and 11.1 percent for other sectors.
The overall budget deficit will be Tk. 190,000 crore, which is 6.0 percent of GDP. It is to be noted that deficit stood at 5.0 percent in the last fiscal year. Out of the total deficit, Tk. 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk. 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources.
Allocation proposed for the social infrastructure sector in the proposed budget is Tk. 1,55,536 crore, which is 27.38 percent of total allocation, in which allocation for human resource sector (education, health and other related sectors) will be Tk. 1,40,222 crore. Allocation proposed for the physical infrastructure sector will be Tk. 1,67,011 crore or 29.40 percent, in which Tk. 69,553 crore will go to overall agricultural and rural development, Tk. 61,435 crore to overall communications, and Tk. 26,758 crore to power and energy. A total Tk. 1,40,265 crore has been proposed for general services, which is 24.69 percent of the total allocation. Tk. 36,610 crore is proposed for public-private partnerships (PPP), financial assistance to different industries, subsidies and equity investments in nationalized corporations, banks, and financial institutions, which is 6.45 percent of the total allocation. Tk. 63,801 crore for interest payment, which is 11.23 percent of total allocation. Tk. 4,777 crore for net lending and other expenses, which is 0.84 percent of the total allocation.
Medium-Term Policy Strategy
Our GDP grew consistently at an increasing rate in the last decade. We achieved a GDP growth of 8.15 percent in the FY 2018-19, the highest among the countries in Asia. Strong domestic demand has been the main driver of our growth. However, due to the fall in exports and lower than expected growth in remittances as a result of long and sustained worldwide lockdowns arising from the impact of COVID- 19, the GDP growth rate of the current fiscal year has been revised downward at 5.2 percent. However, in view of the post-Covid recovery, the growth rate is projected at 8.2 percent for FY 2020-21 in line with the long-term plans. We expect that inflation will be 5.4 percent during the period.
We have taken all out measures to improve the health sector. To combat the COVID-19 pandemic, we are implementing different progrms worth Tk. 5,500 crore under the Health Services Division. The government will do whatever is required to be done to address the pandemic. To fulfill emergency requirements, I propose to allocate Tk. 10,000 crore as lumpsum.
Ensuring Overall Health Services
To ensure quality health services for the citizens of the country, we increased the allocation for the health sector, including that of the Sector Programme and projects, by a considerable amount in the last ten years. In addition to ongoing sector programmes, we are also implementing various projects/activities to fulfill the government’s election pledges and improve infrastructure of the health sector.
I propose to form an ‘Integrated Health-Science Research and Development Fund’ of Tk. 100 crore to finance the activities for the development of research in health-education and science and technology. A high-powered committee consisting of experienced researchers in the health sector, nutritionists, public health experts, sociologists, economists, environmentalists, civil society and other suitable representatives will be formed to manage this Fund efficiently and effectively.
I propose to allocate Tk. 29,247 crore for the Health Services Division and the Health Education and Family Welfare Division in FY 2020-21, which was Tk. 25,732 crore in FY2019-20. This allocation is proposed for the health and family welfare sector giving a priority to activities undertaken to combat the Covid-19. It is worth mentioning that currently 13 ministries and divisions are implementing programs related to health and family welfare. The allocation for this purpose in FY 2020-21 is Tk. 41,027 crore, which is 1.3 percent of GDP and 7.2 percent of total budget allocations.
Primary and Mass Education
We have been implementing a range of key activities in primary education that includes nationalising primary schools, upgrading the physical infrastructure of newly nationalised schools, distributing free textbooks, improving the ICT and other education infrastructures, etc. The Cabinet has approved the National School Meal Policy 2019, and under this policy, we are going to roll out mid- day meals to all primary schools across the country. I propose to allocate a total of Tk. 24,940 crore for the next 2020-21 fiscal year for the primary education sector, which was Tk. 24,040 crore in the budget for current FY 2019-20.
Secondary and Higher Education
We introduced the Prime Minister’s Education Assistance Trust Fund to ensure education for the poor and meritorious students who are otherwise deprived of education. Tuition fees up to degree (pass) and equivalent students are now being provided from this trust. In FY 2020-21, stipend will be provided to 5 lakh 57 thousand male and 10 lakh 95 thousand female students at the secondary level, 1 lakh 16 thousand male and 4 lakh 62 thousand female students at the higher secondary level, and 50 thousand male and 1 lakh 50 thousand female students at the degree level. In addition, stipend has so far been given to 6 lakh student based upon their performance in public examinations, and a further 1 lakh 87 thousand students will get stipend in the next fiscal year.
I propose to allocate a total of Tk. 33,117 crore in the 2020-21 fiscal year for the secondary and higher education sector, which was Tk. 29,624 crore in the current fiscal year.
Technical, Vocational and Madrasa Education
You are aware that a large of the madrasas in Bangladesh are lagging behind than regular schools and colleges in terms of physical infrastructure. To address this issue, we have constructed new buildings in 1 thousand 8 hundred madrasas nationwide, and set up modern multimedia classrooms in 653 madrasas. I propose to allocate a total of Tk. 8,344 crore for the next 2020-21 fiscal year for technical and madrasa education, which was Tk. 7,450 crore in current FY 2019-20.
Agriculture Sector
The global coronavirus pandemic has affected the agriculture sector in Bangladesh too. The COVID-19 has disrupted imports, exports and supply chains across the globe. Hence, we will have to put the highest emphasis in addressing adverse effects on our domestic sectors. Our Aman production this year has been satisfactory.
To promote sustainable agriculture, activities for innovation of crop varieties tolerant to climate change effects are continuing. A total of 109 high yielding varieties of different climate-resilient crops have been developed since 2009. We have taken up a project of Tk. 3,198 crore to promote farm mechanization. An allocaction of Tk. 9,500 crore is made in the next fiscal year for agricultural subsidies. An allocation of Tk. 5,000 for the Agriculture Refincing Scheme will also be made through Bangladesh Bank in the next fiscal year.
Food Security
The outbreak of COVID-19 pandemic has created risks for the production, imports-exports and supply and distribution of food grains and cereals. The government is quite aware of the situation, and has taken all possible measures to ensure adequate food stock in the country. It has procured 7 lakh 98 thousand metric tonnes from this year’s Aman harvests. I propose to allocate Tk. 22,489 crore for the agriculture sector in the next fiscal year, which was Tk. 21,484 in FY 2019-20.
Employment Generation
As Bangladesh enjoys demographic dividend, a huge number of active population are entering into the labour market, but at the same time, there is a growing concern surrounding the demand for workers due to adoption of modern technology.
We have announced a large stimulus package of about Tk. 1,03,117 crore to fight the economic effects of the coronavirus, one of the main objectives of which is to remove temporary job losses by revitalising the economic activities.
Skill Development
The government has been implementing the ‘National Service Programme’ through the Department of Youth Development to generate employment for educated but unemployed youths. Under this programme, 2 lakh 29 thousand 737 youngsters were given training, and temporary employment is generated for 2 lakh 27 thousand 402 of them. Under the Prime Minister’s Office, the National Skills Development Authority (NSDA) has been established to coordinate various skills development activities of the government.
Overseas Employment
The government is making sincere efforts to ensure overall welfare and equality in opportunities for expatriate Bangladeshis, create new overseas labour markets through diplomatic efforts, develop, through training, skilled manpower suited to the demand of those markets, reduce unemployment by creating overseas employment, and increase remittance inflows. Currently, over 1 crore 2 lakh migrant workers are working in 174 countries across the world.
Increase in Foreign Remittance
In the budget of the last fiscal year, Hon’ble Prime Minister announced an incentive at the rate of 2 percent on money remitted by expatriate Bangladeshis. The objectives were- to mitigate the burden of increased expenses in sending foreign remittances, and to encourage bringing in foreign remittance through legal channels. As a result, inward remittances grew significantly during July-May of the FY 2019-20 as US$ 16.56 billion has been earned during the period, which is making a special contribution to the country’s economy.
Poverty Reduction and Social Safety Net Programmes
As the government enforced general holidays, lockdowns, closure of factories and businesses to prevent the spread of coronavirus infections, income of the common people has reduced, which now threatens our achievements in poverty alleviation and social security.
All poor senior citizens in 100 upazilas most prone to poverty due to the coronavirus outbreak will be brought under the old age allowance as per the existing policy. This will add 5 lakh new beneficiaries, and an additional allocation of Tk. 300 crore will be provided to this programme;
All widows and women deserted by their husbands in 100 upazilas most prone to poverty due to the coronavirus outbreak will be brought under the coverage of the allowance programme for widows and women deserted by their husbands as per the existing policy. This will add 3 lakh 50 thousand new beneficiaries, and an additional allocation of Tk. 210 crore will be provided to this programme;
The number of beneficiaries of the allowance for insolvent persons with disabilities will be increased to 18 lakh following the latest disability identification survey. This will add 2 lakh 55 thousand new beneficiaries, and an additional allocation of Tk. 229.50 crore will be required for this purpose.
The government has allocated Tk. 95,574 crore in the social security sector, which is 16.83 percent of total budget and 3.01 percent of GDP in FY2020-21. In the revised budget of FY2019-20, the allocation was Tk. 81,865 crore. We are also implementing various programmes for the welfare of the marginalised communities besides helping the people with disabilities.
Local Government and Rural Development
The commitment to increase rural road network coverage from 35 percent to 35.75 percent is being implemented fully. Mentionably, in the last eleven years from 2009 until February 2020, a total of 62 thousand 149 kilometers of rural roads has been built. This cover construction of 93.84 percent of upazila roads, 79.32 percent of union roads and 20 percent of rural roads. The expansion of this rural road network is contributing to the rapid expansion of rural economy. I propose to allocate Tk. 39,573 crore for the local government and rural development sector in FY 2020-21, which is Tk. 37,886 crore in the current fiscal year 2019-20.
Export Diversification and Devleopment of Quality of Export Products
The government remains committed to promote export product diversification and develop the quality of our export products with a view to infusing dynamism in export trade and consolidating Bangladesh’s position in the competitive global trade situation. To that end, it has identified a number of products with high export potentials, which includes ship building, pharmaceutical products, furniture, diversified jute products, electronics and home appliances, agro- processed products, paper, printed and packaging products, ICT, rubber, footwear, cut and polished diamond, etc. To develop the quality of our export products, the government has framed the Compliance Handbook of Bangladesh’s Plastic and Light Engineering Industry.
The government is offering export incentives to products with high export potentials so that these products can compete in the international market. A total of 37 products are receiving such incentives against their exports in FY2019-20, and a budget allocation of Tk. 6,825 crore has been made for the purpose. In FY2018-19, these incentives amounted to Tk. 4,000 crore.
Leather and Footwear Industries
You are aware that the leather and leathergoods sector provides employment directly to 6 lakh people and indirectly to another 3 lakh people, and that this sector is one of the principal sources of our export earnings. To achieve productive capacity of this sector and enhance its exports, a Guideline for Development of Leather and Leather goods Products 2019 has been framed. Further, an Export Guideline for the Leather Sector is in the process of formulation. Again, steps are being taken to facilitate the greater value chain integration of Bangladesh into the regional and global markets in the leather goods and footwear sector.
Hoping for Better Days for the Jute Sector
The government has been working to make the fullest use of the potential of its jute sector for the country’s industrialisation, employment generation and exports development. Use of jute bags in the packing of 19 products including food grains have been made mandatory in the domestic market to ensure the diversified use of jute products.
Readymade Garments Industry
The government has kept on providing all kinds of benefits, including cash incentives, to the readymade garments (RMG) industry as it is the principal export sector of the country. Again, an additional 1 percent export incentive is being provided to all categories of RMG exports from FY2019-20. However, due to the growing trade tensions and the recession in world economy, a downturn in global goods trade in 2019 and 2020 has been forecasted. Therefore, overall exports from Bangladesh, including that of RMG, have continuously been declining.
Development of the Tourism Industry
Following the directives of Hon’ble Prime Minister Sheikh Hasina, various steps have been taken to turn the tourism industry into a developed and modern economic sector. For example, plans have been made to establish exclusive tourism areas for foreign tourists in locations that have high tourism potentials, develop eco-tourism parks keeping the natural beauty intact, build island-based tourism parks and hotels, and establish international standard tourism centers with all facilities for incoming tourists. I propose an allocation of TK. 26,758 crore for the Power Division and the Energy and Mineral Resources Division in the budget for FY2020-21, which was Tk. 28,051 crore in FY2019-20.
Building a Modern Roads-Highways Network
To improve the national transport system and establish a standard infrastructure for road communication, the government is implementing a bunch of projects for upgrading 1 thousand 140 kilometers of the country’s important regional highways to appropriate standard and width, and upgrading district highways to appropriate standard. I propose to allocate Tk. 64,580 crore for the communication infrastructure sector in the next FY2020-21, which was Tk. 64,821 crore in the current FY2019-20.
Disaster Management and Relief
You are already aware that Bangladesh is a disaster-prone country. Due to global climate change, we are one of the countries most prone to natural disasters. In the last few years, we have been moving away from traditional disaster management and focusing more on reducing disaster risks and improving adaptability and resilience. But due to the recent COVID-19 pandemic, we have quickly expanded our humanitarian relief and support activities.
I propose to allocate a total of Tk. 9,836 crore for the next 2020-21 fiscal year for disaster management and reflief, which was Tk. 9,872 crore in current FY 2019-20.
Women Empowerment
To consolidate equal rights and empowerment of women, the Father of the Nation Bangabandhu Sheikh Mujibur Rahman in the Constitution of the People’s Republic of Bangladesh, gave assurance to ensure participation of women in all walks of national life and equal status of men and women. Improving Investment Climate
To generate employment through increased investment, a program has been taken to establish 100 Economic Zones (EZs) that will create about one crore new jobs. Development work on 93 Economic Zones has already been approved. Among them, permission was given to 11 EZs in the private sector, of which 8 have already commenced operations. Development work of TK. 1,700 crore is underway in government sector Economic Zones. Among the government sector EZs, ‘Bangabandhu Sheikh Mujib Industrial City’ is one of the main ones, which is being built as the biggest planned and modern industrial zone. In the Economic Zones, investment proposals worth about US$ 20.25 billion, including US$ 17.00 billion in government EZs and US$ 3.25 billion in private EZs, have so far been received.
Advancement in Ease of Doing Business Index
If we can rationally reduce the cost of starting business, it will be possible for us to foster rapid Industrialisation and generate employment. Besides, gaining a good position in improving our business environment plays a positive role in attracting foreign investment. Our goal is to bring the position of Bangladesh in the Ease of Doing Business Index within two digits. To attain this objective, we have taken various reform initiatives to improve business environment.
Reforms in Financial Sector
The government has been implementing various activities to bring about reforms and development in banking, capital market, insurance and other financial sectors.
Considering the importance of financial inclusion, Bangladeh Bank is working to ensure that the formalised banking facility is available to the disadvantaged people in both urban and rural areas. Mobile Financial Services have become immensely popular among the marginalised sections of the people in the country.
Bringing Interest Rate into Single Digit
To make our industrial and business sectors more competitive, we have brought the interest rate on bank loans within the single digit. This new interest rate (in the case of loan, the highest rate is 9%) has been made effective from April 2020.
Rescheduling of Loans
By making a 2% down payment, borrowers were allowed to reschedule their classified loans for a period of 10 years with a grace period of 1 year. This step helped reduce classified loans, which has gone down to 9.32 percent of total loans in December 2019 from 11.69 percent in June 2019.
Liquidity Management in Post-COVID 19
To implement the stimulus package declared by the government to face the fallout of the outbreak of coronavirus in the country, the Repo Rate and the Cash Reserve Ratio (CRR) have recently been lowered by Bangladesh Bank to ensure effective liquidity management in the money market. For example, the Repo Rate has been cut in two steps from the previous rate of 6 percent to the new rate of 5.25 percent. Besides, special Repo has been introduced by increasing the Repo period to 360 days, while also maintaining the existing provisions of 1 day, 14 days and 28 days Repo. Similarly, the compulsory deposits provision for scheduled banks in the central bank or the Cash Reserve Ratio has been cut in two steps from the previous rate of 5.5 percent to the new rate of 4 percent. Besides, the Advance-Deposit (AD) Ratio has been increased from 85 percent to 87 percent.
Revitalising the Stock Market
The government has taken six short and long term measures to rejuvenate the stock market and bring dynamism into the sector. These include- enhancing participation of banks and non-bank financial institutions in the capital market, ensuring easy credit facility for merchant bankers and institutional investors, boosting investment capacity of state-owned Investment Corporation of Bangladesh, taking steps to bring confidence in the stock market, taking steps to increase institutional investment, and listing multinational companies and state- owned enterprises to enhance quality of IPOs in the stock market.
Public Financial Management (PFM)
A new piece of legislation named The Deposit of Surplus Funds of Autonomous, Semi-Autonomous, State-Owned, and Public Non-Financial Corporations into the Government Treasury Act 2020 has been enacted to bring all the idle and surplus money of the state owned enterprises to the national exchequer. Under this law, 10 state- owned enterprizes have deposited a total of Tk. 16,046 crore to the government treasurey in FY 2019-20.
To simplify the development project fund release process, Project Directors (PDs) have been given the full authority in the current fiscal year to utilise project fund without seeking approval from any authority. As a result, 1-2 months’ time is now saved in the fund release process of any project. This contributed to the process of accelerating the implementation of development projects.
Revenue Collection Activities
Revenue growth was 8.26 percent in FY 2018-19. Although revenue collection for FY 2019-20 is yet to finish, revenue growth is expected to slow down somewhat due to the COVID-19 outbreak. The COVID-19 outbreak will not be diminished easily and many voice doubt that the country’s economy will return to normalcy in the next fiscal year.
Various activities have been taken to modernise the Customs service. The Customs Modernisation Strategic Action Plan 2019-2022 has been adopted to facilitate trade and commerce in the country. Modern scanners are being set up at customs ports and customs stations. The National Single Window (NSW) project has been taken up to connect all stakeholders in a single platform. It will provide the facilities of One Stop Service for import and export. Full implementation of the modern and technology-based NSW project will speed up trade and reduce business operating costs. This will be an important step in the implementation of cross-border paperless trade. With the introduction of the Advance Ruling program, importers or new entrepreneurs can now be certain of the H.S. Codes and Rules of Origin of their products before importing them. The Authorized Economic Operator (AEO) system has been introduced to ensure faster delivery of goods, enabling traders to avail the Fast Track facility. In addition, IT-based risk management and post-clearance audit activities have been undertaken. This will speed up the delivery of goods for all but risky persons or organisations.
Income Tax, Value Added Tax and Import-Export Duty
Direct Tax: Income Tax
Direct tax or income tax is one of the major sources of internal revenue collection. Currently, income tax contributes nearly 35 percent of the total revenue collected by the NBR. Average growth in income tax collection has been above 15 percent in recent years. Analyses and review of data from different countries reveals a growing tendency towards income inequality among the citizens, which is a by-product of economic growth.
The tax-free threshold of income, tax rates and tax slabs for taxpayers other than companies and local authorities, especially individual taxpayers, have remained unchanged since FY 2015-16. The unchanged status of the tax-exempted income threshold on the one hand, and the loss of real income due to inflation on the other have created a feeling of discomfort among the genuine and valued taxpayers with regard to payment of taxes. Also, our valued taxpayers have been financially affected due to the global outbreak of the COVID-19 pandemic. Considering these factors, and also as a gift of the ‘Mujib Borsho’, I propose to increase the tax-free income threshold and reduce the tax rate applicable for the taxpayers other than companies and local authorities, especially the individual taxpayers. This reduction of tax burden will hopefully add some comfort to the lives of the individual taxpayers, and will also make them feel encouraged to pay taxes regularly. I, therefore, propose to increase the tax-free income threshold of male taxpayers from Tk. 2 lakh 50 thousand to Tk. 3 lakh and the tax-free income threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakh to Tk. 3 lakh and 50 thousand respectively. At the same time, I propose to reduce the minimum tax rate for individuals from 10 percent to 5 percent, and the maximum tax rate for individuals from 30 percent to 25 percent.
Exports of goods and services, including that of RMG, have faced a downturn due to the outbreak of the COVID-19 pandemic. I, therefore, propose to reduce the rate of withholding tax on export proceeds as a part of extending overall support to our export sector. The existing rate of collecting withholding tax on all sorts of export proceeds including that of RMG as stipulated in the Income Tax Ordinance is 1 percent that has further been reduced through an SRO, which continues to be in force till 30th June 2020. I propose to amend the Ordinance to fix the rate of withholding tax on all sorts of export proceeds including that of RMG at 0.5 percent instead of the existing rate of 1 percent.
Value Added Tax (VAT)
Value Added Tax (VAT) is a modern tax system. It is the largest contributor to the NBR tax revenue. In order to establish a taxpayer-, revenue- and development-friendly VAT system, Value Added Tax and Supplementary Duty Act 2012 has been implemented in July 2019 after a series of discussion with trade bodies. It has speeded up the process of growth in trade and commerce. Continuous digitalisation of VAT related administrative activities are going on through the VAT Online Project. After completion of automation, it will be possible to accrue the full benefits of the Value Added Tax and Supplementary Duty Act 2012. I will now place the following proposals on VAT before the august House.
I am proposing to continue the existing VAT exemption facility in the cases of government’s priority and fast track projects, such as Rooppur Nuclear Power plant Project, High Tech Parks, Economic Zones and the Public-Private Partnership (PPP) projects. In addition, for the growth and development of domestic industry and export sector, I also propose to continue existing VAT and supplementary duty exemptions provided to the industries like automobiles, refrigerators, freezers, air conditioners, mobile industries, etc.
To support activities related to detection and prevention of corona virus, I propose to exempt VAT on Test kits of Covid-19 on the import, manufacturing and trading stages. Alongside, exemption has also been proposed at the manufacturing and trading stages for locally manufactured Personal Protective Equipment (PPE) and Surgical Mask (including face mask) to protect health workers. Besides, I also propose to exempt VAT on COVID-19 medicines at the import, manufacturing and trading stages. I also propose to continue exemption on meditation service for one more year to keep mental health sound during the pandemic.
At present, there are 7.5 percent VAT at the factory stage and 5 percent VAT at the showroom stage of the furniture sector. To ensure similarity in both cases, I propose to increase VAT at the rate of 7.5 percent from the existing 5 percent on the showroom stage of furniture. I also propose to increase VAT at the rate of 10 percent from the existing 5 percent for air-conditioned launch services.
I propose to increase supplementary duty from 10 percent to 15 percent for all kinds of services rendered by BRTA for car and jeep registration and related services, from 25 percent to 30 percent for chartered aircrafts and helicopters, from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card, and from 5 percent to 10 percent on locally manufactured cosmetics. Imposition of Supplementary duty at the rate of 10 percent has been proposed on Ceramic Sink, Basin, etc. at the manufacturing stage.
To reduce the consumption of tobacco products and maximise revenue collection from this sector, I place the following proposals:-
Price Per 10-sticks lower slab cigarette to become Tk. 39/- and above and supplementary duty on it to be 57 percent; I propose to fix the price per 10-sticks middle slab cigarette at Tk. 63/- and above, that of high slab 10-sticks cigarette at Tk. 97/- and above and the price of premium slab 10-sticks cigarette at Tk. 128/- and above where supplementary duty will be 65 percent for all those three slabs.
I propose to raise the price of handmade non-filter 25-sticks Bidi at Tk. 18 from existing Tk. 14/-, that of 12-sticks at Tk. 9/- from existing Tk. 6.72 and the price of 8-sticks at Tk. 6/- from existing Tk. 4.48/- where supplementary duty of this product will be unchanged at 30 percent. I also propose to fix the price of 20-sticks filter bidi at Tk. 19/- from existing 17/- and that of 10-sticks filter bidi at Tk. 10/- from existing Tk. 8.50 where supplementary duty will remain unchanged at 40 percent.
I propose to fix the price of 10 gm of Jarda at Tk. 40/- and the price of 10 gm of Gul at Tk. 20/-. Supplementary duty of both the products is proposed to become 55%.
Excise duty is now collected on Bank Accounts and Airline tickets under the Excises and Salt Act, 1944. I propose to amend and insert certain sections to make this act easily implementable and time- befitting. Alongside, I propose to fix the excise duty rates on bank balance at the following rates: a) In cases where the balance exceeds Tk. 10 lakh but does not exceed Tk. 1 crore, Excise duty has been proposed to increase from Tk. 2,500/- to Tk. 3.000/-; b) In cases where the balance exceeds Tk. 1 crore but does not exceed Tk. 5 crore, Excise duty has been proposed to increase from Tk. 12,000/- to Tk. 15,000/-; and c)In cases where the balance exceeds Taka 5 crore, Excise duty has been proposed to increase from Tk. 25,000/- to Tk. 40,000/.
Import-Export Duty-Taxes
Measures have been taken to make the existing tariff structure more liberal and rational to foster the recovery of the domestic economy. Special attention has been given to ensure proper revenue collection with the aim of restructuring the economy affected by the outbreak of COVID-19. Taking into consideration of the proposals received from different stakeholders and agencies, I place the budget proposals on import duty and taxes for the fiscal year 2020-21 before this august House for the protection of local industry and trade and the interest of consumers.
Proposals regarding customs duty, regulatory duty, supplementary duty and Value Added Tax at the import stage have been placed by considering the following factors:
I propose existing 6 slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%), 3% Regulatory Duty on goods having highest import duty, and existing 12 slabs of Supplementary Duty (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350%, and 500%) on import stage to continue in FY 2020-21. Besides, existing 0 percent import duty will remain unchanged for importing essential commodities, fertilisers, seeds, lifesaving drugs and raw cotton along with raw materials for some industries.
Agriculture sector
Agriculture is a priority sector in Bangladesh. The zero rate is proposed to be unchanged for basic ingredients of the agriculture sector, especially fertilisers, seeds, insecticides, etc. I propose to continue and extend the tax incentives and exemptions on agricultural equipment and spare parts.
At present, farmers are cultivating plenty of onions in our country. But with the zero duty rate on imported onions, domestic onion farmers are weary of being deprived of fair market prices compared to production costs. This may discourage farmers from cultivating onions in future. Therefore, I propose a small rate of custom duty on onion import to ensure fair market price for onion farmers, encouraging onion cultivation and reducing dependency on imports.
Importation of edible salts (Sodium Chloride) has been restricted in our country for a long time. But, industrial salt (sodium sulphate/disodium sulfate) is importable. It has been noticed that there is a tendency to import edible salts by mis-declaring as industrial salts. Also, there are complaints of adulteration by mixing industrial salt with edible salt that is injurious to public health. Reason behind is that the price difference between industrial salt and edible salt is too high. As a result, marginal salt farmers and salt mills are being deprived of getting fair market price. Therefore, I propose to increase the existing duty rate on industrial salt (sodium sulfate/disodium sulfate) to protect the salt farmers by ensuring that they get fair market price, and to mitigate public health risks.
Industrial sector
Industrial sector will play a vital role in reconstructing the economy affected by the fallout of COVID-19. To boost industrial investment, ensure maximum utilization of production capacity of existing industries by rational protection, and make export-oriented industries more competitive through its diversified expansion, I propose following increases/decreases in the duty structure on different sub-sectors under the industrial sector (Table-2 of Annex-B):
Small and Medium Enterprises (SMEs): Considering the development of small and medium enterprises, Honorable Prime Minister has declared Light Engineering as the ‘Product of the Year’ for 2020. Considering its importance, special measures have been taken to protect SMEs. In light with the recommendations of SME Foundation, I have proposed to reduce tax rate on import of some of the raw materials used in the production of SME products. Duty and taxes on import of some products (e.g. nails, screws, small machinery parts, etc.) have been proposed to increase to protect SMEs. I also propose to increase the current duty rate on the import of honey in bulk to protect indigenous honey farmers.
Export Sector: Considering the justified proposals received from the RMG sector, I propose to reduce the existing duty rate on the import of certain products (such as RFID Tag, Industrial Racking System, Cutting Table, etc.) to promote export-oriented garments and textile industries. In addition, the existing provisions of bonded warehouse licensing rules will be rationalised to ensure proper utilisation of bond facilities.
Footwear Industry: To diversify export by tapping the potential of the footwear industry, I propose to reduce the duty rate of three raw materials imported by this industry.
Electronics Industry: To protect the domestic industry, I propose to expand the existing concessionary duty benefit on the import of raw materials by the refrigerator and air conditioner compressor manufacturing industry.
Shipbuilding Industry: To ensure expansion and protection of the domestic shipbuilding industry, I propose to withdraw the existing duty exemption on the importation of dredgers.
Detergent Industry: I propose to decrease the existing rate of customs duty of Linear Alkyl Benzene Sulphonic Acid (LABSA), one of the basic raw materials of the detergent industry.
Sanitary Napkin and Diaper Industry: I propose to expand the tax benefit on sanitary napkin and diaper industry by decreasing the rate of customs duty on the import of a raw material, Textile backed sheet/ Non-woven air through bonded (ADL).
Steel Industry: I propose to reduce the duty on the import of refractory cement to promote the steel industry. In addition, I propose to increase regulatory duty of three raw materials (Ferro- Manganese, Ferro-Silicon, Ferro-Silico-Manganese) to protect the steel raw materials manufacturing industry.
Plastic and Packaging Industry: I propose to reduce the duty on the import of photographic plates of plastic to promote the plastic and packaging industry.
Paper Manufacturing Industry: I propose to reduce the duty on import of washing and cleaning agent for the paper industry.
Lube-blending Industry: I propose to reduce the existing customs duty rate on the import of base oil, the main raw material of the lube-blending industry, to promote the said industry in Bangladesh. In addition, the minimum value for base oil, lubricating oil and liquid paraffin has been proposed to be rationalised.
C.R. Coil Industry: I propose to increase the existing regulatory duty on the import of finished products for the C.R. coil industry to protect this sector.
LPG Cylinder and Auto Tank Industry: To provide incentives to the emerging LPG cylinder and auto tank manufacturing industry, I propose to extend concessionary tax benefits on several new raw materials and rationalise existing tax benefits.
Health Sector
To combat the outbreak of the COVID-19, special notification has been issued as an interim mechanism before budget to exempt all import duties and taxes on coronavirus testing kits, masks and personal protective equipment (PPE) and on the raw materials required to locally produce hand sanitisers, masks and PPE. To further strengthen the health sector, I propose to reduce import duty on essential raw materials for locally producing Autoclave machines used for sterilising medical instruments.
ICT Sector
Cellular phone is one of the main elements of the ICT sector. Due to the concessionary duty benefits enjoyed by the cellular phone manufacturing industry on the import of raw materials, local manufacturing and assembling operations of cell phones have flourished in Bangladesh. To encourage cellular phone manufacturing and further strengthen the industry, I propose to rationalise the existing import tax concessions and make it more investment-friendly. In addition, to protect the local industry it has been proposed to set the minimum assessable value of cellular phones at the import stage to ensure proper valuation and just revenue.
Import of Gold
Despite the Gold Policy 2018, gold has not been imported legally into the country due to the existing high tax incidence. I propose to withdraw 15 percent VAT on the import of gold bar to discourage illegal import and encourage the import of gold on legal routes through authorised dealers.
To increase the electricity generation capacity the government encouraged the setting up of furnace oil-based power plants to generate electricity quickly on an emergency basis after taking the responsibility of government in 2009. In this regard, the import duty on furnace oil was waived at the import level in 2011 through a gazette notification to reduce the generation cost of electricity. Alternative fuel has already been available, and power plants have been built based on such fuel to generate electricity at an affordable price. As a result, the country is now generating more electricity than is required. Therefore, I propose to withdraw the exemption benefit on the import of furnace oil to discourage the installation of furnace oil-based power plants.
I propose to reduce the duty rate on the import of electrical signaling equipment, one of the main components of deep sea fishing, to encourage the fishing sector and tap the potential of the blue economy.
I propose necessary ammendments in the Customs Act, 1969, to establish the Bangladesh Single Window Commissionerate, implement the De Minimis Rules, expedite the clearance of imported goods to remove port congestion, reduce the discretionary adjudicating power of customs officers, and reconstitute the Appellate Tribunal for speedy disposal of litigations.
Amendments in the First Schedule of the Customs Act: We have observed that there are clerical errors and inconsistencies in the existing structure of tariff headings and H.S Codes. In order to simplify international trade process, I propose to rationalise the duty rates, create new H.S Codes where necessary, delete and correct H.S Codes and notifications (Table-4 of Annex- B).
To ensure that remittance earnings come through formal channels, cash incentive at the rate of 2 percent on remittance earnings by non-resident Bangladeshis has been given since 1st July 2019. As a result, a new record of US$ 16.56 billion in remittance inflows has been achieved in just 11 months of this fiscal year surpassing the previous record of US$ 16.42 billion in 12 months of the preceding fiscal year.
To boost exports of readymade garments, the government is providing 1 percent cash incentive to exports of readymade garments (RMG) in all sectors since 1st July 2019
To enhance competitiveness of our industrial and business sector, the interest rate on bank loans was reduced to a maximum rate of 9 percent from 1st April 2020.
To introduce new financial tools in the banking and financial sector: (a) the Venture Capital Guideline has been formulated; (b) the Bangladeshi Taka denominated ‘Bangla Bond’ was introduced for the first time at the London Stock Exchange; and (c) Stamp Duty on trust deeds in the bond market have been reduced.
To promote the capital market and encourage investment, the government has undertaken a number of steps, which include – (a) making tax-free the dividend income in the stock market of upto Tk. 50,000; (b) removal of double taxation in the income from the share market; and (c) making the mandatory provision of declaration of cash dividend instead of stock dividend on at least 50 percent of dividend earnings.
To bring 100 percent import and export consignments under scanning, two new scanners have been installed in this fiscal year, and procurement of another 14 scanners is currently in progress.
As part of ensuring minimal tax exemptions, compared to FY 2018-19, exemptions have been reduced by 41 percent in income tax, 21.34 percent at the import stage and 92 percent in value added tax respectively in the current fiscal year.
Two dedicated benches have been set up at the Hon’ble Supreme Court for speedy disposals of cases related to financial and revenue matters; As part of our budget commitment to reform the bank, financial and revenue sectors, we have taken up the task of amending 10 existing laws, and drafting 6 new laws.
We have digitised the sales, profit encashment, etc. of national savings certificates (NSCs) by introducing the ‘National Savings Scheme Online Management System’. Besides, the postal savings scheme and the postal banking system have also been automated.
Conclusion
At this criticial juncture in the wake of the outbreak of COVID-19 pandemic, our topmost priority is to save people from being infected by the virus. At the same time, it is incumbent on us to maintain the momentum of the economy to ensure the provision of food and clothing for the people. In this trying moment, our Hon’ble Prime Minister Sheikh Hasina herself is reaching out to all segments of the population to keep their trust and morale high and unwavered.
The Almighty Allah has decreed in Surah Al Baqarah, Verse 155 that – “And We will surely test you with something of fear and hunger and a loss of wealth and lives and fruits, but give good tidings to the patient”
[Surah Al Baqarah, Verse 155]
To consolidate equal rights and empowerment of women, the Father of the Nation Bangabandhu Sheikh Mujibur Rahman in the Constitution of the People’s Republic of Bangladesh, gave assurance to ensure participation of women in all walks of national life and equal status of men and women. Improving Investment Climate
To generate employment through increased investment, a program has been taken to establish 100 Economic Zones (EZs) that will create about one crore new jobs. Development work on 93 Economic Zones has already been approved. Among them, permission was given to 11 EZs in the private sector, of which 8 have already commenced operations. Development work of TK. 1,700 crore is underway in government sector Economic Zones. Among the government sector EZs, ‘Bangabandhu Sheikh Mujib Industrial City’ is one of the main ones, which is being built as the biggest planned and modern industrial zone. In the Economic Zones, investment proposals worth about US$ 20.25 billion, including US$ 17.00 billion in government EZs and US$ 3.25 billion in private EZs, have so far been received.
Advancement in Ease of Doing Business Index
If we can rationally reduce the cost of starting business, it will be possible for us to foster rapid Industrialisation and generate employment. Besides, gaining a good position in improving our business environment plays a positive role in attracting foreign investment. Our goal is to bring the position of Bangladesh in the Ease of Doing Business Index within two digits. To attain this objective, we have taken various reform initiatives to improve business environment.
Reforms in Financial Sector
The government has been implementing various activities to bring about reforms and development in banking, capital market, insurance and other financial sectors.
Considering the importance of financial inclusion, Bangladeh Bank is working to ensure that the formalised banking facility is available to the disadvantaged people in both urban and rural areas. Mobile Financial Services have become immensely popular among the marginalised sections of the people in the country.
Bringing Interest Rate into Single Digit
To make our industrial and business sectors more competitive, we have brought the interest rate on bank loans within the single digit. This new interest rate (in the case of loan, the highest rate is 9%) has been made effective from April 2020.
Rescheduling of Loans
By making a 2% down payment, borrowers were allowed to reschedule their classified loans for a period of 10 years with a grace period of 1 year. This step helped reduce classified loans, which has gone down to 9.32 percent of total loans in December 2019 from 11.69 percent in June 2019.
Liquidity Management in Post-COVID 19
To implement the stimulus package declared by the government to face the fallout of the outbreak of coronavirus in the country, the Repo Rate and the Cash Reserve Ratio (CRR) have recently been lowered by Bangladesh Bank to ensure effective liquidity management in the money market. For example, the Repo Rate has been cut in two steps from the previous rate of 6 percent to the new rate of 5.25 percent. Besides, special Repo has been introduced by increasing the Repo period to 360 days, while also maintaining the existing provisions of 1 day, 14 days and 28 days Repo. Similarly, the compulsory deposits provision for scheduled banks in the central bank or the Cash Reserve Ratio has been cut in two steps from the previous rate of 5.5 percent to the new rate of 4 percent. Besides, the Advance-Deposit (AD) Ratio has been increased from 85 percent to 87 percent.
Revitalising the Stock Market
The government has taken six short and long term measures to rejuvenate the stock market and bring dynamism into the sector. These include- enhancing participation of banks and non-bank financial institutions in the capital market, ensuring easy credit facility for merchant bankers and institutional investors, boosting investment capacity of state-owned Investment Corporation of Bangladesh, taking steps to bring confidence in the stock market, taking steps to increase institutional investment, and listing multinational companies and state- owned enterprises to enhance quality of IPOs in the stock market.
Public Financial Management (PFM)
A new piece of legislation named The Deposit of Surplus Funds of Autonomous, Semi-Autonomous, State-Owned, and Public Non-Financial Corporations into the Government Treasury Act 2020 has been enacted to bring all the idle and surplus money of the state owned enterprises to the national exchequer. Under this law, 10 state- owned enterprizes have deposited a total of Tk. 16,046 crore to the government treasurey in FY 2019-20.
To simplify the development project fund release process, Project Directors (PDs) have been given the full authority in the current fiscal year to utilise project fund without seeking approval from any authority. As a result, 1-2 months’ time is now saved in the fund release process of any project. This contributed to the process of accelerating the implementation of development projects.
Revenue Collection Activities
Revenue growth was 8.26 percent in FY 2018-19. Although revenue collection for FY 2019-20 is yet to finish, revenue growth is expected to slow down somewhat due to the COVID-19 outbreak. The COVID-19 outbreak will not be diminished easily and many voice doubt that the country’s economy will return to normalcy in the next fiscal year.
Various activities have been taken to modernise the Customs service. The Customs Modernisation Strategic Action Plan 2019-2022 has been adopted to facilitate trade and commerce in the country. Modern scanners are being set up at customs ports and customs stations. The National Single Window (NSW) project has been taken up to connect all stakeholders in a single platform. It will provide the facilities of One Stop Service for import and export. Full implementation of the modern and technology-based NSW project will speed up trade and reduce business operating costs. This will be an important step in the implementation of cross-border paperless trade. With the introduction of the Advance Ruling program, importers or new entrepreneurs can now be certain of the H.S. Codes and Rules of Origin of their products before importing them. The Authorized Economic Operator (AEO) system has been introduced to ensure faster delivery of goods, enabling traders to avail the Fast Track facility. In addition, IT-based risk management and post-clearance audit activities have been undertaken. This will speed up the delivery of goods for all but risky persons or organisations.
Income Tax, Value Added Tax and Import-Export Duty
Direct Tax: Income Tax
Direct tax or income tax is one of the major sources of internal revenue collection. Currently, income tax contributes nearly 35 percent of the total revenue collected by the NBR. Average growth in income tax collection has been above 15 percent in recent years. Analyses and review of data from different countries reveals a growing tendency towards income inequality among the citizens, which is a by-product of economic growth.
The tax-free threshold of income, tax rates and tax slabs for taxpayers other than companies and local authorities, especially individual taxpayers, have remained unchanged since FY 2015-16. The unchanged status of the tax-exempted income threshold on the one hand, and the loss of real income due to inflation on the other have created a feeling of discomfort among the genuine and valued taxpayers with regard to payment of taxes. Also, our valued taxpayers have been financially affected due to the global outbreak of the COVID-19 pandemic. Considering these factors, and also as a gift of the ‘Mujib Borsho’, I propose to increase the tax-free income threshold and reduce the tax rate applicable for the taxpayers other than companies and local authorities, especially the individual taxpayers. This reduction of tax burden will hopefully add some comfort to the lives of the individual taxpayers, and will also make them feel encouraged to pay taxes regularly. I, therefore, propose to increase the tax-free income threshold of male taxpayers from Tk. 2 lakh 50 thousand to Tk. 3 lakh and the tax-free income threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakh to Tk. 3 lakh and 50 thousand respectively. At the same time, I propose to reduce the minimum tax rate for individuals from 10 percent to 5 percent, and the maximum tax rate for individuals from 30 percent to 25 percent.
Exports of goods and services, including that of RMG, have faced a downturn due to the outbreak of the COVID-19 pandemic. I, therefore, propose to reduce the rate of withholding tax on export proceeds as a part of extending overall support to our export sector. The existing rate of collecting withholding tax on all sorts of export proceeds including that of RMG as stipulated in the Income Tax Ordinance is 1 percent that has further been reduced through an SRO, which continues to be in force till 30th June 2020. I propose to amend the Ordinance to fix the rate of withholding tax on all sorts of export proceeds including that of RMG at 0.5 percent instead of the existing rate of 1 percent.
Value Added Tax (VAT)
Value Added Tax (VAT) is a modern tax system. It is the largest contributor to the NBR tax revenue. In order to establish a taxpayer-, revenue- and development-friendly VAT system, Value Added Tax and Supplementary Duty Act 2012 has been implemented in July 2019 after a series of discussion with trade bodies. It has speeded up the process of growth in trade and commerce. Continuous digitalisation of VAT related administrative activities are going on through the VAT Online Project. After completion of automation, it will be possible to accrue the full benefits of the Value Added Tax and Supplementary Duty Act 2012. I will now place the following proposals on VAT before the august House.
I am proposing to continue the existing VAT exemption facility in the cases of government’s priority and fast track projects, such as Rooppur Nuclear Power plant Project, High Tech Parks, Economic Zones and the Public-Private Partnership (PPP) projects. In addition, for the growth and development of domestic industry and export sector, I also propose to continue existing VAT and supplementary duty exemptions provided to the industries like automobiles, refrigerators, freezers, air conditioners, mobile industries, etc.
To support activities related to detection and prevention of corona virus, I propose to exempt VAT on Test kits of Covid-19 on the import, manufacturing and trading stages. Alongside, exemption has also been proposed at the manufacturing and trading stages for locally manufactured Personal Protective Equipment (PPE) and Surgical Mask (including face mask) to protect health workers. Besides, I also propose to exempt VAT on COVID-19 medicines at the import, manufacturing and trading stages. I also propose to continue exemption on meditation service for one more year to keep mental health sound during the pandemic.
At present, there are 7.5 percent VAT at the factory stage and 5 percent VAT at the showroom stage of the furniture sector. To ensure similarity in both cases, I propose to increase VAT at the rate of 7.5 percent from the existing 5 percent on the showroom stage of furniture. I also propose to increase VAT at the rate of 10 percent from the existing 5 percent for air-conditioned launch services.
I propose to increase supplementary duty from 10 percent to 15 percent for all kinds of services rendered by BRTA for car and jeep registration and related services, from 25 percent to 30 percent for chartered aircrafts and helicopters, from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card, and from 5 percent to 10 percent on locally manufactured cosmetics. Imposition of Supplementary duty at the rate of 10 percent has been proposed on Ceramic Sink, Basin, etc. at the manufacturing stage.
To reduce the consumption of tobacco products and maximise revenue collection from this sector, I place the following proposals:-
Price Per 10-sticks lower slab cigarette to become Tk. 39/- and above and supplementary duty on it to be 57 percent; I propose to fix the price per 10-sticks middle slab cigarette at Tk. 63/- and above, that of high slab 10-sticks cigarette at Tk. 97/- and above and the price of premium slab 10-sticks cigarette at Tk. 128/- and above where supplementary duty will be 65 percent for all those three slabs.
I propose to raise the price of handmade non-filter 25-sticks Bidi at Tk. 18 from existing Tk. 14/-, that of 12-sticks at Tk. 9/- from existing Tk. 6.72 and the price of 8-sticks at Tk. 6/- from existing Tk. 4.48/- where supplementary duty of this product will be unchanged at 30 percent. I also propose to fix the price of 20-sticks filter bidi at Tk. 19/- from existing 17/- and that of 10-sticks filter bidi at Tk. 10/- from existing Tk. 8.50 where supplementary duty will remain unchanged at 40 percent.
I propose to fix the price of 10 gm of Jarda at Tk. 40/- and the price of 10 gm of Gul at Tk. 20/-. Supplementary duty of both the products is proposed to become 55%.
Excise duty is now collected on Bank Accounts and Airline tickets under the Excises and Salt Act, 1944. I propose to amend and insert certain sections to make this act easily implementable and time- befitting. Alongside, I propose to fix the excise duty rates on bank balance at the following rates: a) In cases where the balance exceeds Tk. 10 lakh but does not exceed Tk. 1 crore, Excise duty has been proposed to increase from Tk. 2,500/- to Tk. 3.000/-; b) In cases where the balance exceeds Tk. 1 crore but does not exceed Tk. 5 crore, Excise duty has been proposed to increase from Tk. 12,000/- to Tk. 15,000/-; and c)In cases where the balance exceeds Taka 5 crore, Excise duty has been proposed to increase from Tk. 25,000/- to Tk. 40,000/.
Import-Export Duty-Taxes
Measures have been taken to make the existing tariff structure more liberal and rational to foster the recovery of the domestic economy. Special attention has been given to ensure proper revenue collection with the aim of restructuring the economy affected by the outbreak of COVID-19. Taking into consideration of the proposals received from different stakeholders and agencies, I place the budget proposals on import duty and taxes for the fiscal year 2020-21 before this august House for the protection of local industry and trade and the interest of consumers.
Proposals regarding customs duty, regulatory duty, supplementary duty and Value Added Tax at the import stage have been placed by considering the following factors:
I propose existing 6 slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%), 3% Regulatory Duty on goods having highest import duty, and existing 12 slabs of Supplementary Duty (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350%, and 500%) on import stage to continue in FY 2020-21. Besides, existing 0 percent import duty will remain unchanged for importing essential commodities, fertilisers, seeds, lifesaving drugs and raw cotton along with raw materials for some industries.
Agriculture sector
Agriculture is a priority sector in Bangladesh. The zero rate is proposed to be unchanged for basic ingredients of the agriculture sector, especially fertilisers, seeds, insecticides, etc. I propose to continue and extend the tax incentives and exemptions on agricultural equipment and spare parts.
At present, farmers are cultivating plenty of onions in our country. But with the zero duty rate on imported onions, domestic onion farmers are weary of being deprived of fair market prices compared to production costs. This may discourage farmers from cultivating onions in future. Therefore, I propose a small rate of custom duty on onion import to ensure fair market price for onion farmers, encouraging onion cultivation and reducing dependency on imports.
Importation of edible salts (Sodium Chloride) has been restricted in our country for a long time. But, industrial salt (sodium sulphate/disodium sulfate) is importable. It has been noticed that there is a tendency to import edible salts by mis-declaring as industrial salts. Also, there are complaints of adulteration by mixing industrial salt with edible salt that is injurious to public health. Reason behind is that the price difference between industrial salt and edible salt is too high. As a result, marginal salt farmers and salt mills are being deprived of getting fair market price. Therefore, I propose to increase the existing duty rate on industrial salt (sodium sulfate/disodium sulfate) to protect the salt farmers by ensuring that they get fair market price, and to mitigate public health risks.
Industrial sector
Industrial sector will play a vital role in reconstructing the economy affected by the fallout of COVID-19. To boost industrial investment, ensure maximum utilization of production capacity of existing industries by rational protection, and make export-oriented industries more competitive through its diversified expansion, I propose following increases/decreases in the duty structure on different sub-sectors under the industrial sector (Table-2 of Annex-B):
Small and Medium Enterprises (SMEs): Considering the development of small and medium enterprises, Honorable Prime Minister has declared Light Engineering as the ‘Product of the Year’ for 2020. Considering its importance, special measures have been taken to protect SMEs. In light with the recommendations of SME Foundation, I have proposed to reduce tax rate on import of some of the raw materials used in the production of SME products. Duty and taxes on import of some products (e.g. nails, screws, small machinery parts, etc.) have been proposed to increase to protect SMEs. I also propose to increase the current duty rate on the import of honey in bulk to protect indigenous honey farmers.
Export Sector: Considering the justified proposals received from the RMG sector, I propose to reduce the existing duty rate on the import of certain products (such as RFID Tag, Industrial Racking System, Cutting Table, etc.) to promote export-oriented garments and textile industries. In addition, the existing provisions of bonded warehouse licensing rules will be rationalised to ensure proper utilisation of bond facilities.
Footwear Industry: To diversify export by tapping the potential of the footwear industry, I propose to reduce the duty rate of three raw materials imported by this industry.
Electronics Industry: To protect the domestic industry, I propose to expand the existing concessionary duty benefit on the import of raw materials by the refrigerator and air conditioner compressor manufacturing industry.
Shipbuilding Industry: To ensure expansion and protection of the domestic shipbuilding industry, I propose to withdraw the existing duty exemption on the importation of dredgers.
Detergent Industry: I propose to decrease the existing rate of customs duty of Linear Alkyl Benzene Sulphonic Acid (LABSA), one of the basic raw materials of the detergent industry.
Sanitary Napkin and Diaper Industry: I propose to expand the tax benefit on sanitary napkin and diaper industry by decreasing the rate of customs duty on the import of a raw material, Textile backed sheet/ Non-woven air through bonded (ADL).
Steel Industry: I propose to reduce the duty on the import of refractory cement to promote the steel industry. In addition, I propose to increase regulatory duty of three raw materials (Ferro- Manganese, Ferro-Silicon, Ferro-Silico-Manganese) to protect the steel raw materials manufacturing industry.
Plastic and Packaging Industry: I propose to reduce the duty on the import of photographic plates of plastic to promote the plastic and packaging industry.
Paper Manufacturing Industry: I propose to reduce the duty on import of washing and cleaning agent for the paper industry.
Lube-blending Industry: I propose to reduce the existing customs duty rate on the import of base oil, the main raw material of the lube-blending industry, to promote the said industry in Bangladesh. In addition, the minimum value for base oil, lubricating oil and liquid paraffin has been proposed to be rationalised.
C.R. Coil Industry: I propose to increase the existing regulatory duty on the import of finished products for the C.R. coil industry to protect this sector.
LPG Cylinder and Auto Tank Industry: To provide incentives to the emerging LPG cylinder and auto tank manufacturing industry, I propose to extend concessionary tax benefits on several new raw materials and rationalise existing tax benefits.
Health Sector
To combat the outbreak of the COVID-19, special notification has been issued as an interim mechanism before budget to exempt all import duties and taxes on coronavirus testing kits, masks and personal protective equipment (PPE) and on the raw materials required to locally produce hand sanitisers, masks and PPE. To further strengthen the health sector, I propose to reduce import duty on essential raw materials for locally producing Autoclave machines used for sterilising medical instruments.
ICT Sector
Cellular phone is one of the main elements of the ICT sector. Due to the concessionary duty benefits enjoyed by the cellular phone manufacturing industry on the import of raw materials, local manufacturing and assembling operations of cell phones have flourished in Bangladesh. To encourage cellular phone manufacturing and further strengthen the industry, I propose to rationalise the existing import tax concessions and make it more investment-friendly. In addition, to protect the local industry it has been proposed to set the minimum assessable value of cellular phones at the import stage to ensure proper valuation and just revenue.
Import of Gold
Despite the Gold Policy 2018, gold has not been imported legally into the country due to the existing high tax incidence. I propose to withdraw 15 percent VAT on the import of gold bar to discourage illegal import and encourage the import of gold on legal routes through authorised dealers.
To increase the electricity generation capacity the government encouraged the setting up of furnace oil-based power plants to generate electricity quickly on an emergency basis after taking the responsibility of government in 2009. In this regard, the import duty on furnace oil was waived at the import level in 2011 through a gazette notification to reduce the generation cost of electricity. Alternative fuel has already been available, and power plants have been built based on such fuel to generate electricity at an affordable price. As a result, the country is now generating more electricity than is required. Therefore, I propose to withdraw the exemption benefit on the import of furnace oil to discourage the installation of furnace oil-based power plants.
I propose to reduce the duty rate on the import of electrical signaling equipment, one of the main components of deep sea fishing, to encourage the fishing sector and tap the potential of the blue economy.
I propose necessary ammendments in the Customs Act, 1969, to establish the Bangladesh Single Window Commissionerate, implement the De Minimis Rules, expedite the clearance of imported goods to remove port congestion, reduce the discretionary adjudicating power of customs officers, and reconstitute the Appellate Tribunal for speedy disposal of litigations.
Amendments in the First Schedule of the Customs Act: We have observed that there are clerical errors and inconsistencies in the existing structure of tariff headings and H.S Codes. In order to simplify international trade process, I propose to rationalise the duty rates, create new H.S Codes where necessary, delete and correct H.S Codes and notifications (Table-4 of Annex- B).
To ensure that remittance earnings come through formal channels, cash incentive at the rate of 2 percent on remittance earnings by non-resident Bangladeshis has been given since 1st July 2019. As a result, a new record of US$ 16.56 billion in remittance inflows has been achieved in just 11 months of this fiscal year surpassing the previous record of US$ 16.42 billion in 12 months of the preceding fiscal year.
To boost exports of readymade garments, the government is providing 1 percent cash incentive to exports of readymade garments (RMG) in all sectors since 1st July 2019
To enhance competitiveness of our industrial and business sector, the interest rate on bank loans was reduced to a maximum rate of 9 percent from 1st April 2020.
To introduce new financial tools in the banking and financial sector: (a) the Venture Capital Guideline has been formulated; (b) the Bangladeshi Taka denominated ‘Bangla Bond’ was introduced for the first time at the London Stock Exchange; and (c) Stamp Duty on trust deeds in the bond market have been reduced.
To promote the capital market and encourage investment, the government has undertaken a number of steps, which include – (a) making tax-free the dividend income in the stock market of upto Tk. 50,000; (b) removal of double taxation in the income from the share market; and (c) making the mandatory provision of declaration of cash dividend instead of stock dividend on at least 50 percent of dividend earnings.
To bring 100 percent import and export consignments under scanning, two new scanners have been installed in this fiscal year, and procurement of another 14 scanners is currently in progress.
As part of ensuring minimal tax exemptions, compared to FY 2018-19, exemptions have been reduced by 41 percent in income tax, 21.34 percent at the import stage and 92 percent in value added tax respectively in the current fiscal year.
Two dedicated benches have been set up at the Hon’ble Supreme Court for speedy disposals of cases related to financial and revenue matters; As part of our budget commitment to reform the bank, financial and revenue sectors, we have taken up the task of amending 10 existing laws, and drafting 6 new laws.
We have digitised the sales, profit encashment, etc. of national savings certificates (NSCs) by introducing the ‘National Savings Scheme Online Management System’. Besides, the postal savings scheme and the postal banking system have also been automated.
Conclusion
At this criticial juncture in the wake of the outbreak of COVID-19 pandemic, our topmost priority is to save people from being infected by the virus. At the same time, it is incumbent on us to maintain the momentum of the economy to ensure the provision of food and clothing for the people. In this trying moment, our Hon’ble Prime Minister Sheikh Hasina herself is reaching out to all segments of the population to keep their trust and morale high and unwavered.
The Almighty Allah has decreed in Surah Al Baqarah, Verse 155 that – “And We will surely test you with something of fear and hunger and a loss of wealth and lives and fruits, but give good tidings to the patient”
[Surah Al Baqarah, Verse 155]
