Introduction

A centre piece of the plan is the delineation of the country’s macroeconomic outlook during the SFYP. Based on the technical framework, background studies and related work, this paper provides three scenarios of macroeconomic outlook⁴. These have been supplemented by sectoral outlooks as well as employment and poverty implications.

Technical Framework for SFYP Scenario

The scenarios are generated using four linked models. These are:

• A macro-economic framework containing five accounts delineating the economy to generate consistent macro economic outlook over 2003 to 2015 period.

• A dynamic computable general equilibrium (DCGE) model based on an updated input-output table and a social accounting matrix for Bangladesh for FY07. The key outcomes of the macroeconomic framework are fed into the DCGE model to derive the sectoral implications.

• An Employment Satellite Matrix (ESM), constructed for FY07. The sectoral value additions and outputs are linked with the ESM to calculate sectoral employment impacts under alternative scenarios.

• The Distribution and Poverty Module has been developed using the information of Household Income and Expenditure Survey (HIES) 2005. Household income, consumption and sectoral price information generated in the DCGE are linked with this module to assess the poverty situation.

The rest of the note is organized as follows. In sections 3 and 4, key features the modeling system are discussed. The macroeconomic outlooks under three alternative scenarios are provided in section 5.

Modeling System and Its Interdependence

The interdependence of the modeling system is shown in Figure 1.

View Full Size

Interdependence of SFYP Modeling System

Citation: IMF Staff Country Reports 2013, 063; 10.5089/9781475521344.002.A021

• Download Figure
• Download figure as PowerPoint slide

Macroeconomic Framework

The Macroeconomic Framework (MEF) has been developed to assist the preparation of short and medium term macroeconomic outlook for the SFYP. The MEF architecture is best described as an extension of the ‘Finance Programming’ family of models.^5,6 The MEF extends the characteristics of the Finance Programming Model by incorporating an explicit specification of output generation that takes into account production and factor market behaviour, incorporation of response parameters for key behaviours. It accounts for the linkages of production with money-and-credit, the balance of payments, and the government budget. The system has an integrated distribution and poverty module for examining the linkage between growth and poverty, which further extends MEF analytical capability.

The main feautres of the MEF are:

1. The MEF consists of five accounts: (i) real side; (ii) fiscal; (iii) money and credit; (iv) balance of payments (BoP); and (v) poverty and distribution. In addition to these blocks, a debt block is appended to capture debt dynamics.

2. Behavioural specifications for some keys variables namely the production function; revenue functions; capital formation; private investment functions; private consumption, CPI etc are defined. Real income generation is specified by a Cobb-Douglas function. Real private consumption, real private investment, CPI, real exports and imports are specified using estimated response parameters.

3. There are three ways of estimating the parameters of individual equations of the specified model. The choices are: (i) econometric/statistical estimation, (ii) exact computation/calibration, (iii) a mixture of econometric and calibrated estimates. In MEF, paramters of the framework are specified using a a mixture of econometric and calibrated estimates.

4. All accounts are inter-linked. Inter-dependence between variables of different blocks namely between real side and government budget; government budget, money and BoP; money and real side are active. For instance, domestic revenue generation critically depends on two components: (i) revenue base and (ii) tax rate. The normal growth of revenue base depends on the growth of the economy i.e. the revenue base is linked to the estimated GDP and import values.

5. All key prices are endogenous. These include:

   • Consumer price index

   • Investment price

   • Export price

   • Import price

   • GDP deflator

   • Exchange rate

Data and Parameters

Data period considered in MEF is FY03 to FY10. The figures for FY10 are estimates. Almost all data used in the macroeconomic framework has been collected from secondary sources such as the Finance Division. Data sets (e.g. from mid-1980s to current years) for regression analyses were obtained from various officials documents such as Economic Review and Bangladesh Statistical Year Books. The deficit data have been provided by the Finance Division. Breakdown of value added (i.e. GDP) by labour and capital was obtained from the updated social accounting matrix (SAM) for Bangladesh for 2005. The World Economic Outlook forecasts were reviewed to get parameters for external sector (e.g. world prices of imports and exports, world inflation rate etc.).

As mentioned above, the time series data covering the period between the mid 1980s and the current years (in most cases thereby providing 20 to 25 year time series) were available to assess the regression coefficients (i.e. response parameters) of the explanatory variables. Regressions were conducted for real private investment; real private consumption; real exports; real imports; and consumer price index. The values of response parameters (i.e. estimated regression coefficients) are then linked to the relevant explanatory variables to first assess the generation of the series of explained variable in question.

Model Specification

Specification of the macroeconomic framework is discussed in this section. These are discussed in terms of five sub-sections such as (a) Production, Supply and Demand; (b) Government Income and Expenditure; (c) Balance of Payment; (d) Money and Credit; and (e) Government Debt.

Following notations are introduced for identification and references.

Symbol		Description
R	=	Real Variable
—1	=	Previous Year
G	=	Growth Rate
T	=	Tax Rate
Δ	=	Change over previous year
T	=	Time

View Table

Symbol		Description
R	=	Real Variable
—1	=	Previous Year
G	=	Growth Rate
T	=	Tax Rate
Δ	=	Change over previous year
T	=	Time

Production, Supply and Demand



Nominal Variables

1.	Nominal GDP	GDP = r_GDP * PGDP
		Derivations of r_GDP and GDP deflator are provided in equations (6) and (26) respectively.
2.	Private Consumption	Cpv =(Cpv-1 *(r_Cpv / r_Cpv-1)*(1+CPI))
		Derivations of real private consumption (r_Cpv) and CPI are provided in equations (12) and (18) respectively.
3.	Government Consumption	Cg = (Cg-1 * ((PAL + GDS)/(PAL-1 + GDS-1)) Allocations for Pay-allowances and good-services are found in current expenditure component of government budget (see equations 44 and 45)
4.	Private Investment	Ipv = (Ipv-1 *(r_Ipv / r_Ipv-1)*(1+PI))
		Derivations of real private investment (r_Ipv) and PI are provided in equations (9) and (25) respectively.
5.	Public Investment	Ipb = (Ipb-1 * ((ADP + Non-ADP)/(ADP-1 + Non-ADP-1))
		ADP and Non-ADP allocations are found in expenditure component of government budget (see equations 51 and 52)

View Table

1.	Nominal GDP	GDP = r_GDP * PGDP
		Derivations of r_GDP and GDP deflator are provided in equations (6) and (26) respectively.
2.	Private Consumption	Cpv =(Cpv-1 *(r_Cpv / r_Cpv-1)*(1+CPI))
		Derivations of real private consumption (r_Cpv) and CPI are provided in equations (12) and (18) respectively.
3.	Government Consumption	Cg = (Cg-1 * ((PAL + GDS)/(PAL-1 + GDS-1)) Allocations for Pay-allowances and good-services are found in current expenditure component of government budget (see equations 44 and 45)
4.	Private Investment	Ipv = (Ipv-1 *(r_Ipv / r_Ipv-1)*(1+PI))
		Derivations of real private investment (r_Ipv) and PI are provided in equations (9) and (25) respectively.
5.	Public Investment	Ipb = (Ipb-1 * ((ADP + Non-ADP)/(ADP-1 + Non-ADP-1))
		ADP and Non-ADP allocations are found in expenditure component of government budget (see equations 51 and 52)

Real Variables

Two alternative specifications are employed to specify the real production of good and services. In the first specification, labour and capital factors are organized in a Cobb-Douglas production function to generate real value addition (i.e. r_GDP). The specification is shown below.

6.		Real GDP	r _ GDP = ALαKβ
			Where, α and β denote labour and capital shares respectively. Separation of real value addition between labour and capital factors is not readily available for all years of the data period. As an alternative data on the distribution of real value added between labour and capital factors found in the input-output table (IOT) of Bangladesh for 2007 has been used to separate the real value added between labour and capital7.
			Once the values of α and β parameters are known, the only unknown parameter (i.e. A— shift parameter or intercept term) is calculated using the following specification.
			$A=\frac{r_{-}GDP}{L^{\alpha }{K}^{\beta }}$
	6.1	Real GDP	r_GDP = r_GDP-1*(1+g r_GDP)
			Alternatively real GDP or real value addition can be specified to grow at assumed rates or rates based on observed (reported) ICOR. A ‘switch’ function (i.e. logical option attribute available in Excel) is used to switch between the endogenous specification (equation 6) and exogenous specification (equation 6.1).
7.		Capital Stock	K = Ks *(1—κ)
			Gross Capital is depleted annually by the depreciation and obsolescence to provide net capital stock available for production. Here κ refers to the rate of depreciation and obsolescence.
			Gross capital stock is specified as: Ks = K0 + r_I-1. The specification envisages one year lag between planned and realized investment (given the experience of Bangladesh this appears a reasonable assumption).
8.		Labour Demand	$L=\frac{\alpha }{\beta }\frac{r}{w}K$
			Labour demand is usually derived from the solution of the first order cost minimization condition involving the production function and the cost function (i.e. C = wL + rK). Here w and r denote returns to labour and capital respectively. The demand function suggests that, given the ratios of factor share and factor return, increase in capital led to a proportionate rise in labour demand. For instance, doubling of capital will double the labour demand.
			Such a strong proportionate relationship can be modified by imposing labour absorption elasticity with respect to capital. Such a modification may allow us to invoke feature the observed condition of jobless growth or growth with less than proportionate employment. The modified labour demand function may take the following form8.
			$L=\frac{\alpha }{\beta }\frac{r}{w}{K}^{1/\rho }$
			Alternatively, constant elasticity substitution (CES) function or generalized Leontief function may also be adopted to specify the production behaviour.
9.		Real Private Investment	r_Ipv = ψ0 + ψ1* Δ GDP + ψ2* r_GDP-1 Although a number of explanatory variables may explain the real private investment, a review of estimated equations (please Annex 4) suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
10.		Real Public Investment	r_Ipb = (r_Ipb-1 * (Ipb / Ipb-1) / (1+PI)) Derivations of public investment (Ipb) and investment price (PI) are provided in equations (5) and (25) respectively.
11.		Real Investment	r_I = r_Ipv + r_Ipb
12.		Real Private Consumption	r_Cpv =λ0 + λ1* r_GDP + λ2 * Δ GDP – λ3 * ATD Rate Although a number of explanatory variables may explain the real private consumption in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
13.		Real Government Consumption	r_Cpb = (r_Cpb-1 * (Cpb / Cpb-1) / (1+CPI)) Derivations of public consumption (Cpb) and CPI are provided in equations (3) and (18) respectively.
14.		Potential real GDP	r_TGDP =γ0 + γ1* T Where, γ0 and γ1 denote intercept and slope parameters.
15.		Excess Demand	Excess Demand (GAP) = r_TGDP – r_GDP
16.		Real Imports	r_M = μ0 + μ1* r_GDP + μ2 *GAP+ μ3 * r_Remit Although a number of explanatory variables may explain the real private imports in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
17.		Real Exports	r_E = ή0 + ή1* r_GDP + ή2*GAP Although a number of explanatory variables may explain the real private exports, a review of estimated equations (please Annex 4) suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.

View Table

6.		Real GDP	r _ GDP = ALαKβ
			Where, α and β denote labour and capital shares respectively. Separation of real value addition between labour and capital factors is not readily available for all years of the data period. As an alternative data on the distribution of real value added between labour and capital factors found in the input-output table (IOT) of Bangladesh for 2007 has been used to separate the real value added between labour and capital7.
			Once the values of α and β parameters are known, the only unknown parameter (i.e. A— shift parameter or intercept term) is calculated using the following specification.
			$A=\frac{r_{-}GDP}{L^{\alpha }{K}^{\beta }}$
	6.1	Real GDP	r_GDP = r_GDP-1*(1+g r_GDP)
			Alternatively real GDP or real value addition can be specified to grow at assumed rates or rates based on observed (reported) ICOR. A ‘switch’ function (i.e. logical option attribute available in Excel) is used to switch between the endogenous specification (equation 6) and exogenous specification (equation 6.1).
7.		Capital Stock	K = Ks *(1—κ)
			Gross Capital is depleted annually by the depreciation and obsolescence to provide net capital stock available for production. Here κ refers to the rate of depreciation and obsolescence.
			Gross capital stock is specified as: Ks = K0 + r_I-1. The specification envisages one year lag between planned and realized investment (given the experience of Bangladesh this appears a reasonable assumption).
8.		Labour Demand	$L=\frac{\alpha }{\beta }\frac{r}{w}K$
			Labour demand is usually derived from the solution of the first order cost minimization condition involving the production function and the cost function (i.e. C = wL + rK). Here w and r denote returns to labour and capital respectively. The demand function suggests that, given the ratios of factor share and factor return, increase in capital led to a proportionate rise in labour demand. For instance, doubling of capital will double the labour demand.
			Such a strong proportionate relationship can be modified by imposing labour absorption elasticity with respect to capital. Such a modification may allow us to invoke feature the observed condition of jobless growth or growth with less than proportionate employment. The modified labour demand function may take the following form8.
			$L=\frac{\alpha }{\beta }\frac{r}{w}{K}^{1/\rho }$
			Alternatively, constant elasticity substitution (CES) function or generalized Leontief function may also be adopted to specify the production behaviour.
9.		Real Private Investment	r_Ipv = ψ0 + ψ1* Δ GDP + ψ2* r_GDP-1 Although a number of explanatory variables may explain the real private investment, a review of estimated equations (please Annex 4) suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
10.		Real Public Investment	r_Ipb = (r_Ipb-1 * (Ipb / Ipb-1) / (1+PI)) Derivations of public investment (Ipb) and investment price (PI) are provided in equations (5) and (25) respectively.
11.		Real Investment	r_I = r_Ipv + r_Ipb
12.		Real Private Consumption	r_Cpv =λ0 + λ1* r_GDP + λ2 * Δ GDP – λ3 * ATD Rate Although a number of explanatory variables may explain the real private consumption in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
13.		Real Government Consumption	r_Cpb = (r_Cpb-1 * (Cpb / Cpb-1) / (1+CPI)) Derivations of public consumption (Cpb) and CPI are provided in equations (3) and (18) respectively.
14.		Potential real GDP	r_TGDP =γ0 + γ1* T Where, γ0 and γ1 denote intercept and slope parameters.
15.		Excess Demand	Excess Demand (GAP) = r_TGDP – r_GDP
16.		Real Imports	r_M = μ0 + μ1* r_GDP + μ2 *GAP+ μ3 * r_Remit Although a number of explanatory variables may explain the real private imports in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
17.		Real Exports	r_E = ή0 + ή1* r_GDP + ή2*GAP Although a number of explanatory variables may explain the real private exports, a review of estimated equations (please Annex 4) suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.

Prices

18.	Consumer Price Index	CPI = φ0 + φ1* M2 + φ2 * Deficit — φ3 * (Subsidy + Food Allocations)
		Although a number of explanatory variables may explain the consumer price index in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
19.	Import Price	PM = MPI*(1+ AER + Tm)
20.	Import Price Index	MPI = MPI-1 * (1+ gM_Deflator) Following small country assumption, Bangladesh is a price taker and thus import and export indices are exogenous. Lagged import price index is adjusted by growth of import deflator (gM_Deflator). Growth of import deflator is based on the estimates of the ‘World Economic Outlook’. Variation in world price import will thus transmit to the domestic economy via these two prices (i.e. PM and MPI).
21.	Export Price	PE = EPI * (1+ AER)
22.	Export Price Index	EPI = EPI-1 * (1+ gE_Deflator) Lagged export price index is augmented by growth of export deflator (gE_Deflator) which is based on the estimates of the ‘World Economic Outlook’.
23.	Average Exchange Rate	$AER={AER}_{-1}\left(\frac{1+gCPI}{1+gFPI}\right)\cdot \left(\frac{\mathrm{Re}R}{\mathrm{Re}{R}_{-1}}\right)$
		Where, gCPI= domestic inflation; gFPI = foreign inflation which is exogenous and based on world economic outlook; ReR = Real effective exchange rate. Values of real effective exchange rate are exogenous.
24.	Exchange Rate End Period	ERP =(AER ⋅ 2) – ERP–1 Where, FRP-1 = lagged value of end period exchange rate.
25.	Investment Price Index	PI = ζm* PM + ζd * CPI
		Where, ζm = share capital goods import; ζd = share domestic capital goods.
26.	GDP Deflator	$\begin{array}{cc}\hfill \mathrm{P}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{=}& \hfill \mathrm{C}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{C}\mathrm{p}\mathrm{v}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\mathrm{C}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{C}\mathrm{g}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\hfill \\ & \hfill \mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{I}\mathrm{p}\mathrm{v}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{I}\mathrm{p}\mathrm{b}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\hfill \\ & \hfill \mathrm{P}\mathrm{E}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{E}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{-}\mathrm{P}\mathrm{M}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{M}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\hfill \end{array}$
		Accounting identity states GDP = Cpv + Cpb + Ipv + Ipb + E — M.
		Dividing both sides by r_GDP gives:
		$\begin{array}{c}\frac{GDP}{r_{-}GDP}=\frac{Cpv}{r_{-}GDP}+\frac{Cpb}{r_{-}GDP}+\\ \frac{Ipv}{r_{-}GDP}\frac{Ipv}{r_{-}GDP}+\frac{E}{r_{-}GDP}-\frac{M}{r_{-}GDP}\\ <\end{array}$
		The terms on the right-hand side may be decomposed into two factors as follows:
		$\begin{array}{c}\frac{GDP}{r_{-}GDP}=\frac{Cpv}{r_{-}Cpv}\frac{r_{-}Cpv}{r_{-}GDP}+\frac{Cpb}{r_{-}Cpb}\frac{r_{-}Cpb}{r_{-}GDP}+\frac{Ipv}{r_{-}Ipv}\frac{r_{-}Ipv}{r_{-}GDP}+\\ \frac{Ipb}{r_{-}Ipb}\frac{r_{-}Ipb}{r_{-}GDP}+\frac{E}{r_{-}E}\frac{r_{-}E}{r_{-}GDP}-\frac{M}{r_{-}M}\frac{r_{-}M}{r_{-}GDP}\end{array}$
		This gives us the specification for GDP deflator as follows.
		$\begin{array}{c}PGDP=CPI\frac{r_{-}Cpv}{r_{-}GDP}+CPI\frac{r_{-}Cpb}{r_{-}GDP}+PI\frac{r_{-}Ipv}{r_{-}GDP}+\\ PI\frac{r_{-}Ipb}{r_{-}GDP}+PE\frac{r_{-}E}{r_{-}GDP}-PM\frac{r_{-}M}{r_{-}GDP}\end{array}$

View Table

18.	Consumer Price Index	CPI = φ0 + φ1* M2 + φ2 * Deficit — φ3 * (Subsidy + Food Allocations)
		Although a number of explanatory variables may explain the consumer price index in Bangladesh, a review of estimated equations suggests above specification to be the appropriate one given data constraints, statistical significance and relevance (or linkages) to other variables used in this framework.
19.	Import Price	PM = MPI*(1+ AER + Tm)
20.	Import Price Index	MPI = MPI-1 * (1+ gM_Deflator) Following small country assumption, Bangladesh is a price taker and thus import and export indices are exogenous. Lagged import price index is adjusted by growth of import deflator (gM_Deflator). Growth of import deflator is based on the estimates of the ‘World Economic Outlook’. Variation in world price import will thus transmit to the domestic economy via these two prices (i.e. PM and MPI).
21.	Export Price	PE = EPI * (1+ AER)
22.	Export Price Index	EPI = EPI-1 * (1+ gE_Deflator) Lagged export price index is augmented by growth of export deflator (gE_Deflator) which is based on the estimates of the ‘World Economic Outlook’.
23.	Average Exchange Rate	$AER={AER}_{-1}\left(\frac{1+gCPI}{1+gFPI}\right)\cdot \left(\frac{\mathrm{Re}R}{\mathrm{Re}{R}_{-1}}\right)$
		Where, gCPI= domestic inflation; gFPI = foreign inflation which is exogenous and based on world economic outlook; ReR = Real effective exchange rate. Values of real effective exchange rate are exogenous.
24.	Exchange Rate End Period	ERP =(AER ⋅ 2) – ERP–1 Where, FRP-1 = lagged value of end period exchange rate.
25.	Investment Price Index	PI = ζm* PM + ζd * CPI
		Where, ζm = share capital goods import; ζd = share domestic capital goods.
26.	GDP Deflator	$\begin{array}{cc}\hfill \mathrm{P}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{=}& \hfill \mathrm{C}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{C}\mathrm{p}\mathrm{v}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\mathrm{C}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{C}\mathrm{g}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\hfill \\ & \hfill \mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{I}\mathrm{p}\mathrm{v}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\mathrm{P}\mathrm{I}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{I}\mathrm{p}\mathrm{b}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{+}\hfill \\ & \hfill \mathrm{P}\mathrm{E}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{E}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\mathrm{-}\mathrm{P}\mathrm{M}\mathrm{\text{*}}\mathrm{(}{\mathrm{r}}_{\mathrm{-}}\mathrm{M}\mathrm{/}{\mathrm{r}}_{\mathrm{-}}\mathrm{G}\mathrm{D}\mathrm{P}\mathrm{)}\hfill \end{array}$
		Accounting identity states GDP = Cpv + Cpb + Ipv + Ipb + E — M.
		Dividing both sides by r_GDP gives:
		$\begin{array}{c}\frac{GDP}{r_{-}GDP}=\frac{Cpv}{r_{-}GDP}+\frac{Cpb}{r_{-}GDP}+\\ \frac{Ipv}{r_{-}GDP}\frac{Ipv}{r_{-}GDP}+\frac{E}{r_{-}GDP}-\frac{M}{r_{-}GDP}\\ <\end{array}$
		The terms on the right-hand side may be decomposed into two factors as follows:
		$\begin{array}{c}\frac{GDP}{r_{-}GDP}=\frac{Cpv}{r_{-}Cpv}\frac{r_{-}Cpv}{r_{-}GDP}+\frac{Cpb}{r_{-}Cpb}\frac{r_{-}Cpb}{r_{-}GDP}+\frac{Ipv}{r_{-}Ipv}\frac{r_{-}Ipv}{r_{-}GDP}+\\ \frac{Ipb}{r_{-}Ipb}\frac{r_{-}Ipb}{r_{-}GDP}+\frac{E}{r_{-}E}\frac{r_{-}E}{r_{-}GDP}-\frac{M}{r_{-}M}\frac{r_{-}M}{r_{-}GDP}\end{array}$
		This gives us the specification for GDP deflator as follows.
		$\begin{array}{c}PGDP=CPI\frac{r_{-}Cpv}{r_{-}GDP}+CPI\frac{r_{-}Cpb}{r_{-}GDP}+PI\frac{r_{-}Ipv}{r_{-}GDP}+\\ PI\frac{r_{-}Ipb}{r_{-}GDP}+PE\frac{r_{-}E}{r_{-}GDP}-PM\frac{r_{-}M}{r_{-}GDP}\end{array}$

Fiscal Side: Government Income and Expenditure Revenue

Revenue mobilization is usually classified under three heads in Bangladesh-NBR tax; Non-NBR tax and Non-tax revenue. Almost all major tax sources are covered under the NBR tax head and thus constitute the major revenue source. All types direct and indirect taxes are covered under this head. In order to provide scopes to assess implication of tax base change as well as tax rate change on revenue, revenue specifications are defined in terms of estimated legal tax bases and effective tax rates. Legal bases of a particular tax system constitute a smaller segment of the corresponding economy-wide bases (i.e. GDP for domestic taxes, imports for trade taxes, etc.), which are considered as the tax bases for levying tax rates. Legal bases (for instance the base of domestic VAT) are usually significantly smaller than the economy-wide bases (the economy-wide base for domestic VAT is GDP or consumption) due to exemptions, exclusions and deductions. Following example describes the relationship between economy-wide base and the legal base.

The advantages of this specification are briefly discussed.

• It allows endogenous adjustment of the legal bases due to variations in the corresponding economy-wide bases.

• It thus shows, with fixed tax rates, revenue changes due mainly to the endogenous legal base change.

• The size of legal bases can be altered by introducing new measures to change coverage.

• It thus captures, with fixed tax rates, revenue changes due to the endogenous legal base change and new measures led coverage change.

• It also captures, with varying legal bases (either due to endogenous change or due to new coverage measures), revenue changes due to the imposition of new tax rates.

The major problem with the above specification is the non availability of legal base data by various tax systems. However, this information can be obtained from the records of the National Board of Revenue (NBR)⁹.

As mentioned above, according to the adopted classification, total revenue is composed of tax revenue and non tax revenue. Tax revenue is generated from two broad heads: NBR taxes and Non-NBR tax. NBR tax accounts for about 95 percent of tax revenue collection. It includes revenue mobilization from income bases; domestic production/consumption bases and international trade bases. The revenue generations are defined below.

27.	Total Revenue	Total Revenue = Tax Revenue + Non Tax Revenue
28.	Tax Revenue	Tax Revenue = NBR Tax + Non NBR Tax
29.	NBR Tax	NBR Tax = YTax + DoMTax + Trade Tax
30.	Income Tax	YTax = YhTAX + YcorTAX Specifications of personal income tax (YhTAX) and corporate income tax (YcorTAX) are discussed below.
31.	Personal Income Tax	YhTAX = b_YhTAX x tyh Where, b_YhTAX =[υ1 x Yh]; υ1 = current coverage; tyh = average income tax rate. Household income is defined as Yh = GDP + Remittance. Household income generation is endogenous.
32.	Corporate Income Tax	YcorTAX = b_YcorTAX x tycor
		Where, b_YcorTAX = [υ2 x GDP]; υ2 = current coverage; tycor = average corporate income tax rate. Appropriate base for the corporate income tax is corporate profit. Since data on the corporate profit is not readily available, as a proximate base GDP is used.
33.	Taxes on Domestic Production	DoMTax = DoMVAT + DoMSUP + ExciseDuty + OtherTax
		Specifications of these taxes are discussed below.
34.	Domestic VAT Revenue	DoMVAT = b_DoMVAT x tvat
		Where, b_DoMVAT = [α1 x GDP]; α1 = current coverage; tvat = vat rate. The economy wide base GDP is derived endogenously in the real side.
35.	Domestic Supplementary Duty	DoMSUP = DoMVAT x tsd
		Where, tsd = supplementary duty rate
36.	Excise Duty	ExciseDuty= b_ExcDuty x texcise
		Where, b_ExcDuty = [α2 x GDP]; α2 = current coverage; texcise = excise duty
37.	Other Tax Revenue	OtherTax= b_OthTax x tothtax
		Where, b_OthTax = [α3 x GDP]; α3 = current coverage; texcise = other tax rate
38.	Taxes on International Trade	Trade Tax = CustomDuty + MVAT + MSUP Specifications of these taxes are discussed below.
39.	Custom Duty	CustomDuty= b_CuSDuty x tcd
		Where, b_CuSDuty = [σ1 x M]; σ1 = current coverage;
		tcd = Custom Duty. The economy wide base import (M) is derived endogenously in the real side and BoP side.
40.	Import VAT	MVAT= b_MVAT x tvat
		Where, b_MVAT = [(σ2 x M) + (CustomDuty) ];
		σ2 = current coverage; tvat = vat rate
41.	Supplementary Duty	MSUP = MVAT x tsd
		Where, tsd = supplementary duty rate
42.	Non NBR Tax Revenue	Non NBR Tax = NonNBRTax-1 * (1+gNonNBRTax)
		Where, gNonNBRTax = Non NBR tax growth. Non NBR tax growth adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
43.	Non Tax Revenue	Non Tax = NonTax-1 * (1+gNonTax)
		Where, gNonTax = Non tax growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

27.	Total Revenue	Total Revenue = Tax Revenue + Non Tax Revenue
28.	Tax Revenue	Tax Revenue = NBR Tax + Non NBR Tax
29.	NBR Tax	NBR Tax = YTax + DoMTax + Trade Tax
30.	Income Tax	YTax = YhTAX + YcorTAX Specifications of personal income tax (YhTAX) and corporate income tax (YcorTAX) are discussed below.
31.	Personal Income Tax	YhTAX = b_YhTAX x tyh Where, b_YhTAX =[υ1 x Yh]; υ1 = current coverage; tyh = average income tax rate. Household income is defined as Yh = GDP + Remittance. Household income generation is endogenous.
32.	Corporate Income Tax	YcorTAX = b_YcorTAX x tycor
		Where, b_YcorTAX = [υ2 x GDP]; υ2 = current coverage; tycor = average corporate income tax rate. Appropriate base for the corporate income tax is corporate profit. Since data on the corporate profit is not readily available, as a proximate base GDP is used.
33.	Taxes on Domestic Production	DoMTax = DoMVAT + DoMSUP + ExciseDuty + OtherTax
		Specifications of these taxes are discussed below.
34.	Domestic VAT Revenue	DoMVAT = b_DoMVAT x tvat
		Where, b_DoMVAT = [α1 x GDP]; α1 = current coverage; tvat = vat rate. The economy wide base GDP is derived endogenously in the real side.
35.	Domestic Supplementary Duty	DoMSUP = DoMVAT x tsd
		Where, tsd = supplementary duty rate
36.	Excise Duty	ExciseDuty= b_ExcDuty x texcise
		Where, b_ExcDuty = [α2 x GDP]; α2 = current coverage; texcise = excise duty
37.	Other Tax Revenue	OtherTax= b_OthTax x tothtax
		Where, b_OthTax = [α3 x GDP]; α3 = current coverage; texcise = other tax rate
38.	Taxes on International Trade	Trade Tax = CustomDuty + MVAT + MSUP Specifications of these taxes are discussed below.
39.	Custom Duty	CustomDuty= b_CuSDuty x tcd
		Where, b_CuSDuty = [σ1 x M]; σ1 = current coverage;
		tcd = Custom Duty. The economy wide base import (M) is derived endogenously in the real side and BoP side.
40.	Import VAT	MVAT= b_MVAT x tvat
		Where, b_MVAT = [(σ2 x M) + (CustomDuty) ];
		σ2 = current coverage; tvat = vat rate
41.	Supplementary Duty	MSUP = MVAT x tsd
		Where, tsd = supplementary duty rate
42.	Non NBR Tax Revenue	Non NBR Tax = NonNBRTax-1 * (1+gNonNBRTax)
		Where, gNonNBRTax = Non NBR tax growth. Non NBR tax growth adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
43.	Non Tax Revenue	Non Tax = NonTax-1 * (1+gNonTax)
		Where, gNonTax = Non tax growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Expenditure

Government expenditure is classified into four different categories. These are (i) pay-allowances and purchases of goods and services; (ii) interest payment on domestic and external debt; (iii) subsidies and transfers; and (iv) Capital and development expenditure.

Specifications for pay and allowances and purchases of goods and services are provided below.

44.	Pay and Allowances	PAL = PAL-1 * [1+ (gPAL+ ΔgCPI)] Where, gPAL = pay and allowance growth; ΔgCPI = inflation indexing subject to the value of Δ. The value of Δ ranges between 0 and 1. Condition Δ = 0 implies no inflation indexing whereas condition Δ = 1 delineates full inflation indexing. CPI is derived endogenously. Value of gPAL captures rise in pay and allowances due to new employment and measures.
45.	Goods and Services	GDS = GDS-1 * [1+ (gGDS+ ΔgPGDP)] Where, gGDS = good and services growth; ΔgPGDP = general price indexing subject to the value of Δ. The value of Δ ranges between 0 and 1. Condition Δ = 0 implies no indexing whereas condition Δ = 1 delineates full inflation indexing. GDP deflator is derived endogenously. Value of gGDS captures increased allocation for new purchases.

View Table

44.	Pay and Allowances	PAL = PAL-1 * [1+ (gPAL+ ΔgCPI)] Where, gPAL = pay and allowance growth; ΔgCPI = inflation indexing subject to the value of Δ. The value of Δ ranges between 0 and 1. Condition Δ = 0 implies no inflation indexing whereas condition Δ = 1 delineates full inflation indexing. CPI is derived endogenously. Value of gPAL captures rise in pay and allowances due to new employment and measures.
45.	Goods and Services	GDS = GDS-1 * [1+ (gGDS+ ΔgPGDP)] Where, gGDS = good and services growth; ΔgPGDP = general price indexing subject to the value of Δ. The value of Δ ranges between 0 and 1. Condition Δ = 0 implies no indexing whereas condition Δ = 1 delineates full inflation indexing. GDP deflator is derived endogenously. Value of gGDS captures increased allocation for new purchases.

A significant part of resources is spent to pay for interest accrued to domestic and external debt. The size of interest payment depends on debt dynamics. Interest payment projections are derived in the debt block and hence are obtained directly from the debt block.

46.	Domestic Interest	DoMInTPay Derived in the debt block. See equation 69.
47.	External Interest	ExTInTPay Derived in the debt block. See equation 70.

View Table

46.	Domestic Interest	DoMInTPay Derived in the debt block. See equation 69.
47.	External Interest	ExTInTPay Derived in the debt block. See equation 70.

Allocations for subsidies and various transfer programme have been increasing in recent years to mitigate real income loss of various vulnerable groups as; income loss of public enterprises and to restrict full incidence of world prices of key importable on the domestic economy¹⁰. The specifications for transfers and subsidies are provided below.

48.	Subsidy and Transfers	SAT = SAT-1 * [1+ (gSAT+ Χ1PM)]
		Where, gSAT = subsidy and transfer growth; x1PM = indexing to rise in import prices of other than food items (i.e. fuel and fertilizer) subject to the value of Χ1. The value of Χ1 ranges between 0 and 1. Condition Χ1 = 0 implies no indexing whereas condition Χ1 = 1 delineates full indexing. Value of gSAT envisages trend rise as well as rise due to new measures.
49.	Block Allocation	BAC = BAC-1 * (1+gBAC)
		Where, gBAC = block allocation growth.
50.	Food Account	FAC = FAC-1 * [1+ (gFAC+ Χ2PM)]
		Where, gSAT = subsidy and transfer growth; Χ2PM = indexing to rise in food import prices subject to the value of Χ2. The value of Χ2 ranges between 0 and 1. Condition Χ2 = 0 implies no indexing whereas condition Χ2 = 1 delineates full indexing. Value of gFAC envisages trend rise as well as rise due to new measures.

View Table

48.	Subsidy and Transfers	SAT = SAT-1 * [1+ (gSAT+ Χ1PM)]
		Where, gSAT = subsidy and transfer growth; x1PM = indexing to rise in import prices of other than food items (i.e. fuel and fertilizer) subject to the value of Χ1. The value of Χ1 ranges between 0 and 1. Condition Χ1 = 0 implies no indexing whereas condition Χ1 = 1 delineates full indexing. Value of gSAT envisages trend rise as well as rise due to new measures.
49.	Block Allocation	BAC = BAC-1 * (1+gBAC)
		Where, gBAC = block allocation growth.
50.	Food Account	FAC = FAC-1 * [1+ (gFAC+ Χ2PM)]
		Where, gSAT = subsidy and transfer growth; Χ2PM = indexing to rise in food import prices subject to the value of Χ2. The value of Χ2 ranges between 0 and 1. Condition Χ2 = 0 implies no indexing whereas condition Χ2 = 1 delineates full indexing. Value of gFAC envisages trend rise as well as rise due to new measures.

The main objectives of development and capital expenditures are to create opportunities for economic growth in line with the overall development perspective. Thus allocations may vary in accordance to the development goals. Such decisions although consistent with the development goals and other key parameters, they are usually exogenous to the system. The specifications of the development and capital expenditures are shown below.

51.	Annual	ADP = ADP-1 * (1+gADP)
	Development Programme	Where, gADP = ADP growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
52.	Non ADP Capital Expenditure	NonADPCAP = NonADPCAP -1 * (1+gNonADP_CAP)
		Where, gNonADP_CAP = Non ADP capital expenditure growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
53.	Net Lending	NeTLend = NeTLend -1 * (1+gNeTLend) Where, gNeTLend = Net lending growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
54.	Extra ordinary	ExOrd = ExOrd -1 * (1+gExOrd)
		Where, gExOrd = Extra ordinary expenditure growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

51.	Annual	ADP = ADP-1 * (1+gADP)
	Development Programme	Where, gADP = ADP growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
52.	Non ADP Capital Expenditure	NonADPCAP = NonADPCAP -1 * (1+gNonADP_CAP)
		Where, gNonADP_CAP = Non ADP capital expenditure growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
53.	Net Lending	NeTLend = NeTLend -1 * (1+gNeTLend) Where, gNeTLend = Net lending growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
54.	Extra ordinary	ExOrd = ExOrd -1 * (1+gExOrd)
		Where, gExOrd = Extra ordinary expenditure growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

The difference between government income (i.e. total revenue) and total government expenditure (i.e. total expenditure) shows the balance of the government budget. This is defined as:

55.

Budget Balance

Deficit = Total Revenue — Total Expenditure

View Table

55.

Budget Balance

Deficit = Total Revenue — Total Expenditure

The financing dynamics are captured below.

56.	Deficit Financing	DeficitFinance = NetLoan + Non Bank + Bank
		Where, Netloan amounts are taken from BOP and are exogenous. Derivation of domestic borrowings is shown below.
57.	Non Bank Borrowing	Non Bank = ωYh
		Where, Yh is household income and defined as Yh = GDP + Remit. Parameters ω denote propensity of household to allocated money for non bank savings instruments. This is derived from the data of non bank borrowing amounts (d non Bank) and estimated household income data (dYh). More specifically, ω = dNon Bank / dYh. Propensity observed for the data period is maintained for the projection period in the trend case.
58.	Bank Borrowing	Bank =Deficit — (NetLoan + Non Bank)
		Bank borrowing act as the balancing item and established the link with monetary system. Given the constancy of monetary variables, the higher the bank borrowing requirements the higher could be the pressure on money supply.

View Table

56.	Deficit Financing	DeficitFinance = NetLoan + Non Bank + Bank
		Where, Netloan amounts are taken from BOP and are exogenous. Derivation of domestic borrowings is shown below.
57.	Non Bank Borrowing	Non Bank = ωYh
		Where, Yh is household income and defined as Yh = GDP + Remit. Parameters ω denote propensity of household to allocated money for non bank savings instruments. This is derived from the data of non bank borrowing amounts (d non Bank) and estimated household income data (dYh). More specifically, ω = dNon Bank / dYh. Propensity observed for the data period is maintained for the projection period in the trend case.
58.	Bank Borrowing	Bank =Deficit — (NetLoan + Non Bank)
		Bank borrowing act as the balancing item and established the link with monetary system. Given the constancy of monetary variables, the higher the bank borrowing requirements the higher could be the pressure on money supply.

Money Side: Money Supply and Domestic Credit

The money stock (or supply) is an important policy instrument. Authorities influence the macroeconomic dynamic by changing the size of the money supply. Changes in money supply lead to changes in liquidity, which may affect expenditure, production, employment, as well as the balance of payments. The liquidity position also affects factors such as real incomes, prices and interest rates, which usually influences the behaviour of how money is held. Furthermore, in a resource scarce economy under conditions of declining external inflows, governments usually turn to the banking sector for funds to bridge budget and resource gaps. Thus, the size of the money supply and the behaviour of other related monetary variables determine the size of government borrowing.

Furnished by its member countries, the International Monetary Fund (IMF) presents monetary and financial data on three levels. The balance sheets of the monetary authority (MA), usually central banks and deposit money banks (DMB) are included in this first level. In the second level, the balance sheets of MA and DBM are consolidated into a Monetary Survey. A monetary survey provides a statistical measure of money and credit. Finally, the third level data consolidates the balance sheets of a monetary survey and non-bank financial institutions (NBFIs) into a Financial Survey. In creating the macroeconomic framework described in this paper, the focus is on the monetary survey or banking system¹¹ since it provides sufficient information concerning money and credit.

Money supply (M2) is determined by the combined sizes of the net domestic assets and net foreign assets. The money supply function is specified as:

59.

Money Supply

M2 = NDA + NFA As mentioned above, NDA is based on public and private credit. Public credit requirement is generated in the fiscal side as a result of endogenous revenue generation and policy driven as well as endogenous expenditures. It thus established linkages with fiscal side. Moreover, since generations of revenue, expenditure and deficit are influenced by movements of real variables and prices, money supply is endogenous, consistent and interdependent.

View Table

59.

Money Supply

M2 = NDA + NFA As mentioned above, NDA is based on public and private credit. Public credit requirement is generated in the fiscal side as a result of endogenous revenue generation and policy driven as well as endogenous expenditures. It thus established linkages with fiscal side. Moreover, since generations of revenue, expenditure and deficit are influenced by movements of real variables and prices, money supply is endogenous, consistent and interdependent.

Net foreign asset is a policy variable determined with respect to the overall money and credit situation. This is defined as:

60.

Net Foreign Asset

NFA = NFA -1 x (1 + g NFA) Where, g NFA = NFA growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

60.

Net Foreign Asset

NFA = NFA -1 x (1 + g NFA) Where, g NFA = NFA growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

The stock of net domestic asset (NDA) is defined by the combined sizes of the domestic credit (DCR) and nets other asset (NOA).

61.

Net Domestic Asset

NDA = DCR + NOA

View Table

61.

Net Domestic Asset

NDA = DCR + NOA

In this exercise, the required level of money supply is contingent on the size of domestic credit in particular the required size of public credit (CRg) from the baking system. The required size of public credit is equal to the gap between the budget deficit amount and combined resources expected from foreign loan and non bank borrowing. Credits to the private (CRpv) and non financial sector (CRnonfin) are policy variables determined with respect to the investment planning. Domestic credit flow at a particular time is composed of flows of all types of credit. This is defined as:

62.	Domestic Credit	DCR = CRpb + CRpv + CRnonfin
		Where, public credit is determined in the fiscal side and is defined as CRpb = Budget Deficit — (Loan + Non Bank).

View Table

62.	Domestic Credit	DCR = CRpb + CRpv + CRnonfin
		Where, public credit is determined in the fiscal side and is defined as CRpb = Budget Deficit — (Loan + Non Bank).

As mentioned, the required size of public credit is equal to the gap between the budget deficit amount and combined resources expected from foreign loan and non bank borrowings. Variations in public credit requirement based on the size of budget deficit, foreign loan and non-borrowing may likely to influence the size of money supply¹². The association between fiscal and money sectors is depicted in Figure 2:

View Full Size

Linkage between Fiscal side and Money side

Citation: IMF Staff Country Reports 2013, 063; 10.5089/9781475521344.002.A021

• Download Figure
• Download figure as PowerPoint slide

Credit to private sector (CRpv) and non financial (CRnonfin) is a policy variable determined with respect to the investment planning. Domestic credit flow at a particular time is composed of flows of public and private credit. This is defined as:

63.	Private Credit	CRpv = CRpv-1 x (1 + gCRpv)
		Where, gCRpv = private credit growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
64.	Credit Non Financial	CRnonfin = CRnonfin -1 x (1 + g CRnonfin)
		Where, CRnonfin = credit growth of the non financial sector. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

63.	Private Credit	CRpv = CRpv-1 x (1 + gCRpv)
		Where, gCRpv = private credit growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
64.	Credit Non Financial	CRnonfin = CRnonfin -1 x (1 + g CRnonfin)
		Where, CRnonfin = credit growth of the non financial sector. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Net other asset is a policy variable determined with respect to the overall money and credit situation. This is defined as:

65.	Net Other Asset	NOA = NOA -1 x (1 + g NOA)
		Where, g NOA = private credit growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

65.	Net Other Asset	NOA = NOA -1 x (1 + g NOA)
		Where, g NOA = private credit growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Stock of Debt and Interest Payment

Allocation for interest payment essentially depends on the size of debt stock and effective rate of interest. Although a detail debt stock model is usually used to estimates stock of outstanding debt, here a simplified framework is adopted to capture debt dynamics and corresponding interest payment liabilities. Current levels of borrowings are added to their outstanding debt to estimate stock of debt. Effective interest rates are then applied to the debt stock to calculate interest payment liabilities of the current year¹³. The estimated interest payment liabilities are directly linked to expenditure component of the government budget to capture allocation for interest payment. Debt and interest payment specifications are shown below.

66.	Domestic Debt:	Debt_Bank = Debt_Bank0 + Bank (Fiscal)
	Bank Borrowing	Where, Debt_Bank0 = initial outstanding domestic debt from the bank sector. In this case debt at year 2002 (i.e. the initial year); Bank = borrowing from the banking system (observed for years 2002 to 2010; estimates for projection years) to cover the budget deficit. These estimates (i.e. bank borrowings) are found in the expenditure component of the government budget. It thus establishes links to fiscal side. Variations in bank borrowing will implicate the debt dynamics and interest payment liabilities.
67.	Domestic Debt: Non Bank Borrowing	Debt_NonBank = Debt_NonBank0 + NonBank (Fiscal)
		Where, Debt_Bank0 = initial outstanding domestic debt from the private sector; NonBank = borrowing from the private sector (observed for years 2002 to 2010; estimates for projection years) to cover the budget deficit. These estimates (i.e. non bank borrowings) are found in the expenditure component of the government budget. It thus establishes links to fiscal side as well as with the real side. Variations in non bank borrowing will implicate the debt dynamics and interest payment liabilities.
68.	External Debt: Foreign Loan	Debt_Loan = Debt_Loan0 + NetLoan (Fiscal/BoP)
		Where, Debt_Loan0 = initial outstanding foreign debt. NetLoan = net borrowing from the external which is calculated by deducting ‘amortization’ from ‘loan disbursement’. The figures for years 2002 to 2010 are observed and for projection years they are estimated. These estimates (i.e. net loan) are found in the BoP as well as in the expenditure component of the government budget. It thus establishes links to fiscal side as well as with BoP. Variations in net loan will affect the debt dynamics and foreign interest payment liabilities.

View Table

66.	Domestic Debt:	Debt_Bank = Debt_Bank0 + Bank (Fiscal)
	Bank Borrowing	Where, Debt_Bank0 = initial outstanding domestic debt from the bank sector. In this case debt at year 2002 (i.e. the initial year); Bank = borrowing from the banking system (observed for years 2002 to 2010; estimates for projection years) to cover the budget deficit. These estimates (i.e. bank borrowings) are found in the expenditure component of the government budget. It thus establishes links to fiscal side. Variations in bank borrowing will implicate the debt dynamics and interest payment liabilities.
67.	Domestic Debt: Non Bank Borrowing	Debt_NonBank = Debt_NonBank0 + NonBank (Fiscal)
		Where, Debt_Bank0 = initial outstanding domestic debt from the private sector; NonBank = borrowing from the private sector (observed for years 2002 to 2010; estimates for projection years) to cover the budget deficit. These estimates (i.e. non bank borrowings) are found in the expenditure component of the government budget. It thus establishes links to fiscal side as well as with the real side. Variations in non bank borrowing will implicate the debt dynamics and interest payment liabilities.
68.	External Debt: Foreign Loan	Debt_Loan = Debt_Loan0 + NetLoan (Fiscal/BoP)
		Where, Debt_Loan0 = initial outstanding foreign debt. NetLoan = net borrowing from the external which is calculated by deducting ‘amortization’ from ‘loan disbursement’. The figures for years 2002 to 2010 are observed and for projection years they are estimated. These estimates (i.e. net loan) are found in the BoP as well as in the expenditure component of the government budget. It thus establishes links to fiscal side as well as with BoP. Variations in net loan will affect the debt dynamics and foreign interest payment liabilities.

Interest payment liabilities reported for the data periods are divided by their respective outstanding debts to derive the average effective interest rates for the domestic and external loan. The estimated average effective rates are also adopted in the projection years to estimate the interest payment liabilities.

69.	Domestic Interest Payment Liabilities	DoM_IntPay = (Debt_Bank + Debt_NonBank) x dom_rate
		Where, DoM_IntPay = domestic interest payment liabilities; dom_rate = average effective domestic interest rate. The average effective domestic interest rates may be varied for the projection periods capturing outlook changes.
70.	External Interest Payment Liabilities	FoR_IntPay = Debt_Loan x for_rate Where, FoR_IntPay = external interest payment liabilities; for_rate = average effective foreign interest rate. The average effective foreign interest rates may be varied for the projection periods capturing outlook changes.

View Table

69.	Domestic Interest Payment Liabilities	DoM_IntPay = (Debt_Bank + Debt_NonBank) x dom_rate
		Where, DoM_IntPay = domestic interest payment liabilities; dom_rate = average effective domestic interest rate. The average effective domestic interest rates may be varied for the projection periods capturing outlook changes.
70.	External Interest Payment Liabilities	FoR_IntPay = Debt_Loan x for_rate Where, FoR_IntPay = external interest payment liabilities; for_rate = average effective foreign interest rate. The average effective foreign interest rates may be varied for the projection periods capturing outlook changes.

Balance of Payment: External Account

Trade balance is defined as the difference between the exports and imports. The specification is shown below.

71.	Trade Balance	TradeBal = E—M
		Derivations of E and M are shown below.

View Table

71.	Trade Balance	TradeBal = E—M
		Derivations of E and M are shown below.

Lagged Exports is augmented by growth rate to derive the exports of goods and services. The growth is specified as a product of the growth of real exports and export price index (EPI). The specification is shown below.

72.	Exports	E = (E-1 *(r_E / r_E-1)*(1+EPI))
		Derivations of real exports (r_E) and EPI are shown above. Variations in real side as well as prices will effect exports and hence balance of trade.

View Table

72.	Exports	E = (E-1 *(r_E / r_E-1)*(1+EPI))
		Derivations of real exports (r_E) and EPI are shown above. Variations in real side as well as prices will effect exports and hence balance of trade.

Lagged Imports is augmented by growth rate to derive the imports of goods and services. The growth is specified as a product of the growth of real imports and import price index (MPI). The specification is shown below.

73.	Imports	M =(E-1 *(r_M / r_M-1)*(1+MPI))
		Derivations of real exports (r_M) and MPI are provided above. Variations in real side as well as prices will effect imports and hence balance of trade.

View Table

73.	Imports	M =(E-1 *(r_M / r_M-1)*(1+MPI))
		Derivations of real exports (r_M) and MPI are provided above. Variations in real side as well as prices will effect imports and hence balance of trade.

Service balance is defined as the difference between the receipts and payments. This is specified as:

74.	Service Net	SrvNet = SrvReceipts — SrvPayments
		Derivations of receipts and payments are shown below.
75.	Service Receipts	SrvReceipts = SrvReceipts-1 x (1 + g SrvReceipts)
		Where, g SrvReceipts = receipts growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
76.	Service Payments	SrvPayments = SrvPayments-1 x (1 + gPayments)
		Where, gPayments = payment growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

74.	Service Net	SrvNet = SrvReceipts — SrvPayments
		Derivations of receipts and payments are shown below.
75.	Service Receipts	SrvReceipts = SrvReceipts-1 x (1 + g SrvReceipts)
		Where, g SrvReceipts = receipts growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
76.	Service Payments	SrvPayments = SrvPayments-1 x (1 + gPayments)
		Where, gPayments = payment growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Balance of income component is defined as the difference between the receipts and payments. This is specified as:

77.	Income Net	YNet = YReceipts — YPayments
		Derivations of receipts and payments are shown below.
78.	Income Receipts	YReceipts = YReceipts-1 x (1 + gYReceipts)
		Where, gYReceipts = receipts growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
79.	Income Payments	YPayments = YPayments-1 x (1 + gPayments)
		Where, gPayments = payment growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

77.	Income Net	YNet = YReceipts — YPayments
		Derivations of receipts and payments are shown below.
78.	Income Receipts	YReceipts = YReceipts-1 x (1 + gYReceipts)
		Where, gYReceipts = receipts growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
79.	Income Payments	YPayments = YPayments-1 x (1 + gPayments)
		Where, gPayments = payment growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Current transfer is composed of official and private transfers. Inflow of remittance is included in the private transfer flows. Their specifications are shown below:

80.	Current Transfer	CuRTransfer = PbTransfer + PvTransfer
81.	Public Transfer	PbTransfer = PbTransfer -1 x (1 + gPbTransfer)
		Where, g Public Transfer = public transfer growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
82.	Private Transfer	PvTransfer = PvTransfer -1 x (1 + gPvTransfer)
		Where, g PvTransfer = private transfer growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
	Remittance	Remit = Remit-1 x (1 + gRemit)
		Where, gRemit = remittance growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

View Table

80.	Current Transfer	CuRTransfer = PbTransfer + PvTransfer
81.	Public Transfer	PbTransfer = PbTransfer -1 x (1 + gPbTransfer)
		Where, g Public Transfer = public transfer growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
82.	Private Transfer	PvTransfer = PvTransfer -1 x (1 + gPvTransfer)
		Where, g PvTransfer = private transfer growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.
	Remittance	Remit = Remit-1 x (1 + gRemit)
		Where, gRemit = remittance growth. Growth rates adopted for the projection period in the trend case may be varied under scenario simulation indicating changed policy outlook.

Balance of current account composes of balances of trade, service, income and current transfers. This is defined as:

83.

Current Account Balance

CAB = TradeBal + SrvNet +YNet + CuRTransfer

View Table

83.

Current Account Balance

CAB = TradeBal + SrvNet +YNet + CuRTransfer

Capital account is defined to move in line with the observed growth rate. The growth rate may be varied to capture changes in the account with consequent impacts on the overall balance of the BoP account. The specification of the capital account is shown below.

84.

Capital Account Balance

CpAB = CpAB-1 x (1 + gCpAB) Where, g CpAB = growth.

View Table

84.

Capital Account Balance

CpAB = CpAB-1 x (1 + gCpAB) Where, g CpAB = growth.

Financial account consists of a number of elements. They include foreign direct investment; foreign portfolio investment; net foreign loan; other long and short term loans; other assets; trade credit; net of commercial bank activities. In the trend case, these elements are defined to move in line with their observed growth rates. Each of growth rates may be varied to capture changes in the respective component with consequent impacts on financial balance and the overall balance of the BoP account. Specifications of all components of financial accounts are shown below.

85.	Financial Account Balance	FAB = FDI + FPI + NetLoan + NetLongLoan + NetShortLoan + OthAsset + TrdCredit + ComBank
86.	Foreign Direct Investment	FDI = FDI-1 x (1 + gFDI) Where, gFDI = growth.
87.	Foreign Portfolio Investment	FPI = FPI-1 x (1 + gFPI) Where, gFPI = growth.
88. 89.	Net Loan Disbursement	NetLoan = Disbursement — Amortization. Disbursement = Disbursement -1 x (1 + gDisbursement)
		Where, gDisbursement = growth.
90.	Amortization	Amortization = Amortization -1 x (1 + gAmortization)
		Where, gAmortization = growth.
91.	Net Long Term Loan	NetLongLoan = NetLongLoan -1 x (1 + g NetLongLoan)
		Where, g NetLongLoan = growth.
92.	Net Short Term Loan	NetShortLoan = NetShortLoan -1 x (1 + g NetShortLoan)
93.	Other Assets	Where, gNetShortLoan = growth. OthAsset = OthAsset -1 x (1 + gOthAsset)
		Where, gOthAsset = growth.
94.	Trade Credit	TrdCredit = TrdCredit -1 x (1 + gTrdCredit)
		Where, gTrdCredit = growth.
95.	Net Commercial Bank	CoMBank = CoMBank-1 x (1 + gCoMBank) Where, gCoMBank = growth.
	Balance of the BOP is captured in the overall balance. It is derived from the sum of all the three balances discussed above.
96.	Overall Balance	OVB = CAB + CpAB + FAB

View Table

85.	Financial Account Balance	FAB = FDI + FPI + NetLoan + NetLongLoan + NetShortLoan + OthAsset + TrdCredit + ComBank
86.	Foreign Direct Investment	FDI = FDI-1 x (1 + gFDI) Where, gFDI = growth.
87.	Foreign Portfolio Investment	FPI = FPI-1 x (1 + gFPI) Where, gFPI = growth.
88. 89.	Net Loan Disbursement	NetLoan = Disbursement — Amortization. Disbursement = Disbursement -1 x (1 + gDisbursement)
		Where, gDisbursement = growth.
90.	Amortization	Amortization = Amortization -1 x (1 + gAmortization)
		Where, gAmortization = growth.
91.	Net Long Term Loan	NetLongLoan = NetLongLoan -1 x (1 + g NetLongLoan)
		Where, g NetLongLoan = growth.
92.	Net Short Term Loan	NetShortLoan = NetShortLoan -1 x (1 + g NetShortLoan)
93.	Other Assets	Where, gNetShortLoan = growth. OthAsset = OthAsset -1 x (1 + gOthAsset)
		Where, gOthAsset = growth.
94.	Trade Credit	TrdCredit = TrdCredit -1 x (1 + gTrdCredit)
		Where, gTrdCredit = growth.
95.	Net Commercial Bank	CoMBank = CoMBank-1 x (1 + gCoMBank) Where, gCoMBank = growth.
	Balance of the BOP is captured in the overall balance. It is derived from the sum of all the three balances discussed above.
96.	Overall Balance	OVB = CAB + CpAB + FAB

The overall balance is covered by resource from the central bank. Any further discrepancies between the balance and the central bank resource are put into the error and omissions head.

97.	Financing	BoPFinance = BBank + Errors and Omissions
98.	Bangladesh Bank	BBank = BbAssets + BbLiabilities
	Bangladesh Bank Assets	BbAssets = BbAssets-1 * (1+gBbAsset)
	Bangladesh Bank Liability	BbLibility = BbLibility-1 * (1+gBbLibility)
99.	Errors and Omissions	Errors and Omissions = OvBalance — BBank

View Table

97.	Financing	BoPFinance = BBank + Errors and Omissions
98.	Bangladesh Bank	BBank = BbAssets + BbLiabilities
	Bangladesh Bank Assets	BbAssets = BbAssets-1 * (1+gBbAsset)
	Bangladesh Bank Liability	BbLibility = BbLibility-1 * (1+gBbLibility)
99.	Errors and Omissions	Errors and Omissions = OvBalance — BBank

SFYP Scenario



Key Assumptions for Setting the Scenarios

• 1. The main source of growth envisaged during the SFYP is the accumulation of factor especially capital. Factor accumulation is supplemented by technological shift for some activities such as agriculture. Moderate improvement in capital accumulation is expected under the baseline scenario whereas substantially large improvements in investment and capital accumulation are required under the high and the medium policy shift scenarios. It is also assumed that agriculture activities will experience significant improvement in production technology which may allow more than 4.5 percent growth in agriculture under the high policy shift scenario.

• 2. In line with the past experience, the private sector would play the prime role in mobilizing resources for the SFYP. It is assumed that investment environment as well as the confidence of investors (i.e. local and external) will enhance with discernible improvements in following key areas:

  • Infrastructure-road, railways, dykes and bridges

  • Energy security-electricity and gas

  • Telecommunication

  • Ports

  • Economic administration including legal framework

  • Project implementation capacity

  • Overall socioeconomic environment including law and order situation

• 3. The public sector will assume the pivotal role for creating conducive environment for investment by bringing visible improvements in the above mentioned areas. Historically, the government has relied on the Annual Development Program (ADP) to implement public projects including those in infrastructure. Although, the ADP model has worked in the past when the domestic resource base was small and the country was highly dependent on foreign assistance to carry out public sector investment programs, it is now apparent that it is no longer an adequate mechanism and this will be more evident during the SFYP. Experiences in many countries suggest that Public Private Partnership (PPP) model is an effective alternative arrangement for implementing large scale infrastructure projects.¹⁴ Thus, in addition to existing project implementation mechanism through ADP, a strengthened PPP framework especially for implementing infrastructure and energy projects would be critical for the SFYP. It is likely that PPP investment as a share of GDP would need to rise to at least 3 percent in FY15.

• 4. Large inflow of foreign direct investment (FDI) has been assumed especially under the high/medium policy shift scenarios. Financial intermediation process must improve substantially to tap domestically available resources (e.g. foreign remittances) for investment as well.

• 5. Considering the important role of remittances, appropriate policies will be needed to promote remittances as a tool of promoting both welfare of recipient households and raising productive investments. Along with institutional support to maximize remittance inflows through formal channels, better investment opportunities would be created for sustainable and productive use of remittance incomes via investment opportunity development, microenterprise development and enterprise development support.

• 6. Tax effort is very low in Bangladesh. ‘Bangladesh collects only 9 percent of GDP as taxes whereas tax potential is likely to be in the range of 14-15 percent. The gap between this potential and actual collection is an indication of poor tax administration in Bangladesh which needs to be addressed during SFYP. For widening of tax base, SFYP would need measures to phase-out tax incentives, improve structural tax characteristics, administration and compliance. It is assumed that current initiatives to reform the VAT and income tax system within FY11 will help raise the tax effort.

Under the medium and high policy shift scenarios, the ready-made garment sector will continue to experience high rate of growth. Also, exports from the non-RMG sector will rise substantially. The current concentrated export basket will be diversified which will reduce vulnerability of the economy to any negative external shocks. The skill of the manpower will be enhanced with a view to fulfilling the need of the expanding sectors.

Regional integration effort through SAFTA, BIMSTEC and bilateral FTAs would be promoted with a view to enhancing Bangladesh’s access to markets of neighboring countries.

The Padma Bridge will be completed by 2013 invoking salutary effects on income generation, trade facilitation and poverty reduction. The Padma Bridge would boost the country’s GDP by 1.2 percent, revive the fortune of Mongla Port and cut poverty in the poorest south-west region of the country. The government needs to take advantage of the Padma Bridge to embark on development plan for the southwestern region covering a number of areas e.g. development of multi-modal transport system; revival of Mongla port and establishment of export zones; rail link with other regions; and exploiting farm and non-farm growth potentials.

Table 1:

SFYP Scenario for Key Economic Indicators, FY10 to FY15

Table 1:

SFYP Scenario for Key Economic Indicators, FY10 to FY15

					FY10	FY11	FY12	FY13	FY14	FY15	Average (FY11-15)
Components:					(Actual)	(Projection)
Real GDP Growth					6.1	6.7	7.0	7.2	7.6	8.0	7.3
Nominal GDP Growth					12.9	13.4	14.3	13.8	14.1	14.3	14.0
CPI Inflation (average)					7.3	8.0	7.5	7.0	6.5	6.0	7.0
Gross investment					24.4	24.7	26.8	29.6	31.0	32.5	29.3
		Private			19.4	19.5	22.2	22.7	23.8	25.0	22.6
		Public			5.0	5.3	6.6	6.9	7.2	7.5	6.7
National Savings					30.0	28.4	28.7	29.4	30.7	32.1	29.9
Total Revenue and Grants (% of GDP)
	Total Revenue				10.9	12.1	13.2	13.4	14.0	14.6	13.4
			Tax		9.0	10.0	10.6	11.2	11.8	12.4	11.2
				Non Tax	1.9	2.0	2.5	2.2	2.2	2.2	2.2
	Grants				0.6	0.5	0.5	0.6	0.5	0.5	0.5
Total Expenditures					14.6	16.5	18.2	18.4	19.0	19.6	18.3
	Current Expenditures				9.6	9.8	9.8	10.3	10.5	10.8	10.3
	ADP (PPP + Public entities)				3.7	4.5	5.1	5.3	5.7	6.1	5.3
	Others Expenditures				1.4	2.2	3.3	2.8	2.8	2.7	2.7
Overall balance (including grants)					−3.1	−3.9	−4.5	−4.4	−4.5	−4.5	4.4
Overall balance (Excluding grants)					−3.7	−4.4	−5.0	−5.0	−5.0	−5.0	−4.9
Primary balance					−1.6	−2.6	−3.1	−3.1	−3.0	−3.0	2.9
Financing (net)					3.7	4.4	5.0	5.0	5.0	5.0	4.9
	External				1.4	1.3	2.0	2.0	2.0	2.0	1.8
	Domestic				2.3	3.1	3.0	3.0	3.0	3.0	3.0
Total debt					40.0	39.9	40.0	39.5	39.2	38.8	39.9
	External				20.3	19.4	19.0	18.1	17.4	16.8	18.6
	Domestic				19.7	20.5	21.0	21.4	21.8	22.1	21.3
Money and Credit (End of fiscal year in billion TK), percentage change)
Net foreign assets					671	655	722	822	950	1085	846.9
	(% Change)				39.9	−2.3	10.2	13.7	15.6	14.2	10.3
Credit to private sector					2708	3439	4126	4869	5746	6780	4991.9
	(% Change)				24.2	27.0	20.0	18.0	18.0	18.0	20.2
Broad money(M2)					3630	4357	5054	5862	6800	7888	5992.0
	(% Change)				22.4	20.0	16.0	16.0	16.0	16.0	16.8
Balance of payments
		Exports (In billions US$)			16.2	22.4	25.7	29.4	33.8	38.8	30.0
				(annual percentage change)	4.2	38.0	14.5	14.5	14.5	15.0	19.4
			Import (In billions US$)		21.4	31.0	35.4	40.3	46.1	52.8	41.1
				(annual percentage change)	5.4	45.0	14.0	14.0	14.5	14.5	20.4
			Current Account Balance(in billions US$)		3.7	−0.3	−0.2	−0.2	−0.5	−0.7	−0.4
				(percent of GDP)	3.7	−0.3	−0.2	−0.2	−0.3	−0.4	−0.3
			Capital Account Balance(In billions US$)		−0.9	0.2	1.1	1.5	2.1	2.3	1.4
Overall balance					2.9	−0.2	0.9	1.3	1.6	1.6	1.0
Gross official reserves in billion US$)					10.7	10.7	11.6	12.9	14.5	16.1	13.2
		In months of imports			5.1	3.6	3.4	3.4	3.4	3.3	3.5
Memorandum:
Nominal GDP (In billions taka)					6943	7875	8999	10245	11685	13351	10430.8
Gross investments(in billion taka)					1694	1945	2592	3032	3622	4339	3106.1
Gross national savings(In billion Taka)					1953	1918	2577	3015	3587	4286	3076.7

View Table

Table 1:

SFYP Scenario for Key Economic Indicators, FY10 to FY15

					FY10	FY11	FY12	FY13	FY14	FY15	Average (FY11-15)
Components:					(Actual)	(Projection)
Real GDP Growth					6.1	6.7	7.0	7.2	7.6	8.0	7.3
Nominal GDP Growth					12.9	13.4	14.3	13.8	14.1	14.3	14.0
CPI Inflation (average)					7.3	8.0	7.5	7.0	6.5	6.0	7.0
Gross investment					24.4	24.7	26.8	29.6	31.0	32.5	29.3
		Private			19.4	19.5	22.2	22.7	23.8	25.0	22.6
		Public			5.0	5.3	6.6	6.9	7.2	7.5	6.7
National Savings					30.0	28.4	28.7	29.4	30.7	32.1	29.9
Total Revenue and Grants (% of GDP)
	Total Revenue				10.9	12.1	13.2	13.4	14.0	14.6	13.4
			Tax		9.0	10.0	10.6	11.2	11.8	12.4	11.2
				Non Tax	1.9	2.0	2.5	2.2	2.2	2.2	2.2
	Grants				0.6	0.5	0.5	0.6	0.5	0.5	0.5
Total Expenditures					14.6	16.5	18.2	18.4	19.0	19.6	18.3
	Current Expenditures				9.6	9.8	9.8	10.3	10.5	10.8	10.3
	ADP (PPP + Public entities)				3.7	4.5	5.1	5.3	5.7	6.1	5.3
	Others Expenditures				1.4	2.2	3.3	2.8	2.8	2.7	2.7
Overall balance (including grants)					−3.1	−3.9	−4.5	−4.4	−4.5	−4.5	4.4
Overall balance (Excluding grants)					−3.7	−4.4	−5.0	−5.0	−5.0	−5.0	−4.9
Primary balance					−1.6	−2.6	−3.1	−3.1	−3.0	−3.0	2.9
Financing (net)					3.7	4.4	5.0	5.0	5.0	5.0	4.9
	External				1.4	1.3	2.0	2.0	2.0	2.0	1.8
	Domestic				2.3	3.1	3.0	3.0	3.0	3.0	3.0
Total debt					40.0	39.9	40.0	39.5	39.2	38.8	39.9
	External				20.3	19.4	19.0	18.1	17.4	16.8	18.6
	Domestic				19.7	20.5	21.0	21.4	21.8	22.1	21.3
Money and Credit (End of fiscal year in billion TK), percentage change)
Net foreign assets					671	655	722	822	950	1085	846.9
	(% Change)				39.9	−2.3	10.2	13.7	15.6	14.2	10.3
Credit to private sector					2708	3439	4126	4869	5746	6780	4991.9
	(% Change)				24.2	27.0	20.0	18.0	18.0	18.0	20.2
Broad money(M2)					3630	4357	5054	5862	6800	7888	5992.0
	(% Change)				22.4	20.0	16.0	16.0	16.0	16.0	16.8
Balance of payments
		Exports (In billions US$)			16.2	22.4	25.7	29.4	33.8	38.8	30.0
				(annual percentage change)	4.2	38.0	14.5	14.5	14.5	15.0	19.4
			Import (In billions US$)		21.4	31.0	35.4	40.3	46.1	52.8	41.1
				(annual percentage change)	5.4	45.0	14.0	14.0	14.5	14.5	20.4
			Current Account Balance(in billions US$)		3.7	−0.3	−0.2	−0.2	−0.5	−0.7	−0.4
				(percent of GDP)	3.7	−0.3	−0.2	−0.2	−0.3	−0.4	−0.3
			Capital Account Balance(In billions US$)		−0.9	0.2	1.1	1.5	2.1	2.3	1.4
Overall balance					2.9	−0.2	0.9	1.3	1.6	1.6	1.0
Gross official reserves in billion US$)					10.7	10.7	11.6	12.9	14.5	16.1	13.2
		In months of imports			5.1	3.6	3.4	3.4	3.4	3.3	3.5
Memorandum:
Nominal GDP (In billions taka)					6943	7875	8999	10245	11685	13351	10430.8
Gross investments(in billion taka)					1694	1945	2592	3032	3622	4339	3106.1
Gross national savings(In billion Taka)					1953	1918	2577	3015	3587	4286	3076.7