JBS Vol 13. Num 1. 2011 - A High Reward High Risk Budget

The Bangladesh FY2012 Budget is a bold budget that seeks to support the higher growth rate target of the Sixth Five Year Plan by substantially increasing public investment spending. To finance this higher public investment rate, the budget seeks to enhance the tax effort and contain budgetary subsidies. Overall fiscal deficit target will increase but this is consistent with maintaining the public debt at a sustainable level. The budget emphasizes spending on infrastructure, agriculture and human development, which is consistent with the priorities of the Sixth Plan. The budget however has a number of serious downside policy risks that, unless well managed, could undermine its implementation and jeopardize the achievement of the underlying objectives. These include domestic price adjustments to contain the energy subsidy, improving tax structure and tax administration , strengthening public expenditure management, mobilizing foreign financing, and developing a proper domestic debt management strategy.