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Shvoong Home>Business & Finance>Management & Leadership>The Importance of Reforms in Financial Management System of Bangladesh Review

The Importance of Reforms in Financial Management System of Bangladesh

Article Review   by:khatiar1955     Original Author: Kh. Atiar Rahman
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There is no denying the fact that Bangladesh Constitution endows with that all “currency receipt” that enforces a tax or that suitable receipt in the form of revenue from the Consolidated Fund needs to be commenced into Parliament. The budget and the reports of the Auditor- General are the basic monetary documents laid before Parliament. These credentials despite containing considerable detail do not afford adequate information for greater use to Parliament, ministries and departments. The increasing concern about the growth of public expenditure throughout the developing countries, in relation to prospective resources to finance such expenditure has drawn the attention of policy makers for budgeting and accounting reforms. Implementation of reforms involves wide range of action including improvement of the existing classification structure. Systematic presentation of fiscal data compiled from the hard numbers generated by accounts of the government provides a framework for economic analysis of government operations. The other key macroeconomic aggregates used in apprising overall performance of the economy: national income accounts, the sense of balance of payment, financial sector and flow of fund analysis. To meet the purposes of the policy makers for a having an important effect analysis it is necessary that all macroeconomic aggregates, as far as possible, is made mutually reliable, accurately compiled, simply presented and should follow basic bookkeeping principles. The new classification chart is introduced for achieving steadiness and totality of data to bring about a synthesis of macroeconomic accounts. To make the Bangladesh fiscal data comparable to other countries, the new classification, as far a practicable, followed the concept of General Financial Statistics (GFS) of International Monetary Fund.

Suffice it to say that in a trouble-free macroeconomic mock-up the economy is satirized into a private sector, a government sector, a monetary sector and a foreign sector. Government expenditure, revenue and borrowing have important effects on the level of output, income and employment in other sectors. Government sector covers all units performing government functions by implementing public policy; provides non market goods and services by imposing taxes and levies on other sectors of economy. Ancillary departments and establishment mainly engaged in supplying goods and services to other units of government, such as, printing press, central transport pool are included in the government sector. Non financial public enterprises, owned or controlled by the government including State Railways, Postal Department, Telephone Board , though considered outside government sector in the GFS are coded in the new classification chart for recording government lending, subsidies paid, capital transfers, operating surplus or deficit. Private non turnover institutions serving households are not mainly financed and controlled by central government but do receive grants in aid from the government for providing social and community services free of charge or at prices that do not fully cover their cost of productions are coded one by one. In compiling data for various purposes an element of judgement will always remain.
 
In view of the above it is evident that Significantly, Government transactions are classified by the kind of flows into and out of government. There are various ways in which government transactions can be classified: by organization, by function, by economic sector, by sector program, by object, by type or source of financing, by geographical locations. Methods differ according to the purposes for which the data will be used. No single system of classification will serve the purposes of setting up budgeting and parliamentary control. The new classification chart is quite flexible in organizing the data for the purposes for which the data will be used. A transaction identified by 13 digit code provides two basic information of government flow. All transactions are classified with reference to which particular transaction relates and kind of such transaction. The change in the existing structure relates to the refund of revenue. In the new classification the refunds are uniformly adjusted and applied to all the detail items by minus entries. There is deviation from the existing expenditure classification by functions, such as, organs of government, defense, health, education etc. The new classification has been designed to help the ministries to set and achieve their policy objectives thorough introduction of appropriate financial management techniques. One objective of the system is to ensure that ministries take greater responsibilities for the government policies and priorities. The preparation of longer term fiscal plan is not possible without coordinated and integrated approach of the line ministries with the Ministry of Finance.
Published: June 17, 2009   
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  1. 1. ZoetheAlpha

    great summary!

    you wrote that "no single system of classification will serve the purposes of setting up budgeting and parliamentary control" don't you think that is correct? i mean, don't you think that the methology should vary according to the purpose?

    0 Rating Thursday, June 18, 2009
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