The Taka 1917.38 billion proposed budget for the forthcoming fiscal, 2012-13, is sized at 18.1 per cent of the country's gross domestic product (GDP) that is projected to do grow at 7.2 per cent during the year. There are challenges and risks, both domestic and external, that do provide some strong reasons for being not much optimistic at this stage about achieving this growth performance. That does not mean that the growth target itself is overambitious. The actual performance of the Bangladesh economy has otherwise been impressive over the past several years in a row, given the comparative picture of other low-income developing countries and the odds and difficulties, both exogenous and endogenous. But even this performance has been considered below the potential of Bangladesh. This is what the economists, analysts, development practitioners and all others, within and outside, have been stating about Bangladesh over the years.

The growth rate, however, is not the sole indicator of 'socio-economic development' in its broad sense. But it unquestionably remains to be one of the important criteria for assessing the overall performance of an economy. The quality of growth -- its nature and dimension of inclusiveness, impact on social development indices concerning the state of education, health, nutrition and, thus, human resource development, income-distribution and employment-generation effects, poverty alleviation efforts etc. -- is also a pertinent point for consideration. The budget through its tax measures and expenditure allocation and use pattern, does have a relevance to both overall growth rate and its quality, though the outcome of efforts for improvements in both areas can be influenced better by a medium-term framework for public policy actions and interventions than the routine annual budgetary exercise.

So far so good. Looking at the overall size of the proposed budget for the fiscal year (FY), 2012-13, in its relation to the country's GDP, it is certainly not overbloated. In comparable countries in both regional and wider international contexts, governments' aggregate expenditures there, as are made through their respective national budgets, are higher than those in Bangladesh, in terms of size of their GDPs. In developed countries, public expenditures as the ratio of GDP are much higher. Total public expenditure in Bangladesh, according to figures available from Thursday's 'Budget Speech 2012-13' of Finance Minister AMA Muhith, will stand, under the revised budget for the outgoing fiscal, at 17.6 per cent of the country's GDP against an estimated 18.2 per cent under the original budget for the same year. The government had to lower its public expenditure in the outgoing fiscal because of its downsizing the original Annual Development Programme (ADP) -- that represents essentially pubic investment -- to the tune of Taka 23.76 billion under the revised budget. This decrease in revised ADP size has been attributed to the failure in utilising external project aid to the expected level during the outgoing fiscal.

In this context, one key challenge before the government in areas of implementation of the proposed budget of FY 2012-13, with an allocation of Taka 550 billion for the year's ADP against Taka 410.80 billion under the revised ADP for the outgoing fiscal, will be the management of its development expenditures. This is all the more so because the proposed budget for the next fiscal is predicated upon an estimated disbursement of external assistance at the level of Taka 264.42 billion -- Taka 203.98 billion in foreign loans (mostly on concessional terms) and Taka 60.44 billion in the form of foreign grants (that do not entail any repayment or debt servicing liability) -- for funding projects under the ADP and also for meeting other related resource requirements. Without strengthening the capacity of the government for implementing the externally-aided projects, improving overall budgetary management-related operations and forging better understanding with the development partners, it will be well-nigh impossible to ensure an increased flow of external assistance to the tune of Taka 79.46 billion -- Taka 63.62 billion in project aid and Taka 15.84 billion in the form of grant -- in the forthcoming fiscal over the aggregate level of foreign aid disbursement at the level of Taka 184.96 billion -- Taka 140.36 billion as project assistance and Taka 44.60 billion in the form of grants -- under the revised budget of the outgoing fiscal. The priority for the government here is all too obvious: concentration of its focus, attention and efforts on proper implementation of projects that are supported by low-cost external aid funds by avoiding inclusion of any new unapproved projects on political and other narrow considerations having no worthwhile links with the real development needs of the economy. Then the available domestic resources will not be thinned out on such unapproved new projects and also the matching taka resources will not fall short of the requirements to utilise effectively external assistance for the approved, aided projects. In the pen-ultimate year of an incumbent government under the periodic electoral cycle, this is extra-ordinarily important to keep this in mind if the stated goals, objectives and desired outcomes of the proposed budget, particularly in areas of fiscal management for meeting its growth target and taming inflation from the current near double-digit one to 7.5 per cent in fiscal 2012-13, are to be achieved as far as possible. Otherwise, wrong politics with electoral considerations only in view for inclusion of more short-sighted, unapproved projects for making claims on public resources, will run afoul of the overriding need to follow a sound economic rationale for efficient uses of budgetary resources.

The proposed budget for fiscal 2012-13 does otherwise provide no plausible ground to consider it to be any symptomatic fiscal profligacy -- a case that is not unusual in countries like Bangladesh when it is framed solely on electoral considerations. Its expenditure outlay, on both recurring (non-development) and development (ADP) sides, is more or less in line with what was witnessed in the recent past. In order of allocations of fund under overall public expenditures, first comes public administration (14.0%), followed by interest payments (12.2%), education & information technology (11%), subsidies (7.5%), local government & rural development (7.4%), transport & communication (6.8%), defence (6.0%), social security & welfare (5.3%), energy & power (5.0%), health (4.7%), agriculture (4.3%) and public order & security (4.2%). The rest of overall public expenditure outlay has been proposed for pension (2.3%), industrial & economy services (1.5%), recreation, culture & religious affairs (0.8%) and housing (0.7%), with the miscellaneous expenditure accounting for the remaining 6.3 per cent of such aggregate expenditure. The resource allocation pattern, in terms of share in the projected aggregate budgetary expenditure, is not largely inconsistent with the trends witnessed in previous fiscal years. Yet then there remains some cause for disconcert about the swelling expenditure bills, in absolute terms, in areas of interest payments (largely on account of domestic borrowings of the government), subsidies and public administration, transfer payments, pensions and retirement benefits (which are still managed on as-and-when-required and yet-unfunded basis). Quality of such expenditures, their targeting, links with efficiency and institutional strengthening, and creating enough space for meeting their expected growing burden in the future without putting strains on budgetary resources that may cause diversion of funds away from needs having greater priority, do merit attention of all concerned for sustainable fiscal management in the years ahead.

The overall budget deficit for the forthcoming fiscal has been projected at 5.0 per cent of GDP, despite the increase in the aggregate size of the proposed budget by about 19 per cent over the revised one of Tk. 1612.13 billion for the outgoing fiscal. If the year-end actual deficit can be maintained at the projected level in FY 2012-13, this will even then be marginally lower than that of 5.1 per cent under the revised budget for fiscal 2011-12. This, by itself, will be a challenging task, if the government is to limit its domestic borrowing from the banking system to Tk. 230 billion -- a level which is Tk. 61.15 billion lower than that of such borrowing (involving higher costs than those of foreign aid in the form of loans) at Tk. 291.15 billion under the revised budget of the outgoing fiscal. However, government's domestic borrowing form non-banking sources has been projected at Tk. 104.84 billion for FY 2012-13 which is Tk. 51.30 billion higher than the level of Tk. 53.54 billion under the revised budget for the outgoing fiscal. The projected level of overall budget deficit for the forthcoming fiscal is not a cause for any extra concern, provided the government can collect its projected level of tax and non-tax revenues at Tk 1396.70 billion -- which is over 20 per cent higher than that of Tk. 1168.24 billion under the revised budget for fiscal 2011-12 - and ensure disbursement of external grant at more than 13% over the level of the outgoing fiscal, without borrowing funds from the banking system exceeding its projected target.

The collection of both tax and non-tax revenues will largely depend on the level of performance of the economy. Export activities, import operations, remittance flows, volume of investments, actual level of production in real sectors etc., will be the major determinants of the pace at which the GDP will expand. Here the challenges in areas of deficit of both infrastructure-related services and good governance, high costs of doing businesses and the likely adversities under the present difficult times in the Eurozone and other developed economies, can under no circumstances be glossed over. For the government, hard and determined efforts will be needed to address the domestic constraints to accelerated growth performance of the Bangladesh economy, remaining, at the same time, alert about taking appropriate actions to create adequate space to absorb the external shock-effects in an uncertain and unpredictable situation. Things here are easier said than done.

The proposed budget for FY 2012-13 takes note of the challenges and risks facing the Bangladesh economy. It also reiterates the commitment of the government to implementing some critical economic reforms. All concerned would look forward to see actions coming in right time and at an appropriate sequence, amid doubts persisting about the government's political will and courage to undertake any hard reforms in the pen-ultimate year of its tenure under the periodic electoral cycle.

Budget Definition and its Purpose
An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money. A budget is a microeconomic concept that shows the tradeoff made when one good is exchanged for another.

Read more: http://www.investopedia.com/terms/b/budget.asp#ixzz21kirS6Bx

Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time.
Purposes of budgeting systems:
- Planning
- Facilitating Communication and Coordination
- Allocating Resources
- Controlling Profit and Operations
- Evaluating Performance and Providing Incentives
Using a budgeting system companies can:
- Improve cash flow;
- Optimize product portfolio;
- Minimize salary adjournment;
- Increase the operational level;
- Eliminate breaks in production process;
- Stabilize debts level;
- Precisely determine the real financing needs.
Types of Budgets
Long-Range Budgets – capital budgets dealing with the acquisition of building and equipment normally cover several years.
Continuous or Rolling Budget – this budget is usually a twelve-month budget that rolls forward one month as the current month is completed.
Operating Budget – the annual operating budget may be divided into quarterly or monthly budgets.
Budgeting comprises 3 obligatory financial statements:
- Income Statement
- Cash Flow Statement
- Balance Sheet
Budgeting comprises 2 components:
Operational Component
- Sales Budget
- Commercial Expenses Budget
- Production Budget
- Inventory Budget
- Materials Budget
- Labour Budget
- Production Indirect Expenses Budget
- Overheads Budget
- Income Statement
Financial Component
- Investment Budget
- Balance Sheet
- Cash Flow Statement
There are some principles to be taken into consideration when developing a Budget. Budgeting is reasonable when:
- There are realistic objectives
- There is a profitable business
- There is a financial diagnosis as base for determining trends
- There is an integrity with Management Informational System
- You can use what-if analysis
Normally it is figured monthly for the first year of activity, quarterly for the second year and annually for the rest of the years.

References: * CIMA, “Beyond Budgeting” http://www.cimaglobal.com/Documents/ImportedDocuments/cid_tg_beyond_budgeting_oct07.pdf * http://www.docshare.com/doc/172509/The-strengths-and-weaknesses-of-the-traditional budgeting * “Who needs Budgets” http://www.ncbi.nlm.nih.gov/pubmed/12577658 * “Who needs Budgets” http://hbr.org/2003/02/who-needs-budgets/ar/1, * “What’s wrong with Budgeting”, http://goliath.ecnext.com/coms2/gi_0199-3373026/What-s-wrong-with-budgeting.html * “Practical Developments in budgeting: an overview and research perspective”, http://www.accessmylibrary.com/article-1G1-112905012/practice-developments-budgeting-overview.html *