European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.9, No.35, 2017 76 An Investigation of Trend and Compositions of the Government Expenditure in Bangladesh Mahmuda Akhter Khanam 1 Dr. Firoja Akter Khanam 2 1.Lecturer, Chittagong University of Engineering and Technology (CUET) 2.Associate Professor, Department of Finance, Chittagong University (CU) Abstract In Bangladesh, the government spending policies of the national budgets have been assigned a key role in the economic development and growth process. However, they could have detrimental ramifications if obscurely managed. Thus, the nature and degree of this expenditure and revenue patterns determine the overall quality of the government finances in Bangladesh. The main aim of the present study is to evaluate the changing patterns of the heads of expenditures, their trends and compositions over the period of 1975-2015. This paper is mainly based on tabular representations. However, some statistical tools also have been used when necessary. It is revealed from the study that although government spending increases steadily, but the composition and patterns of government spending has changed dramatically. The sharp increase in the total government spending is mainly because of continuous increase in revenue expenditure which created serious imbalances in the fiscal sector of the economy. Thus, it is evident from the study that although total public expenditure is rising in Bangladesh, development expenditure actually squeezed in the country to maintain rising revenue expenditures. In addition, sector-wise allocations to public resources have been reduced for some key sectors that are directly productive in nature like agriculture and manufacturing industry. At the same time, increased proportional allocations of resources to sectors like education and health have been realized. Keywords: Government expenditure, Revenue Expenditure, Development Expenditure. 1. Introduction Bangladesh reached a lower middle economy status in FY15 by attaining per capita income of USD $1,314. Article 15 of the Constitution of the People’s Republic of Bangladesh requires that the country should follow the path of a planned economic growth for realizing its development objectives. In Bangladesh, the main objectives of public expenditures are to improve the living standard of the people, develop human resources and physical infrastructure and reduce poverty. Thus, rapid economic development is possible only through government expenditure. An increase in government expenditure puts a ripple effect in the economy by raising aggregate demand and productivity, which eventually leads to a higher level of employment and wages and thus reduces poverty by accumulating wealth with a favor to the poor people (Hassan, 2007). Bangladesh is currently undergoing substantial structural and macroeconomic changes. How the size and composition of government spending influences these changes are not particularly clear. Thus, it is important to monitor the composition of government spending and to assess the causes of change over time. Examining the composition of total spending will reflect the government priorities and policies. Therefore, the study will try to find out the changing composition, pattern and trends of government expenditure using annual budget data of 38 years. 2. Literature Review There have been numerous studies on the role of government spending in the long- term growth of national economies. Barro (1987) uses the British data from the start of the eighteenth century through World War I to study some of the economic effects of government purchases. After developing a theoretical model, he explores the effect of temporary military spending on long-term interest rates. Thereafter, he investigates the effects of military spending on the price level and the quantity of money. He concludes that an increase in resources devoted to non-productive (but possibly utility enhancing) government services is associated with lower per capita growth. Tanzi and Zee (1997) finds no relationship between government size and economic growth. Afonso, et .al. (2008) analyze the impact of public spending, education and institutions on income distribution in advanced economies. They also assess the efficiency of public spending in redistributing income by using a DEA (Data Envelop Analysis) non-parametric approach. They find that public policies significantly affect income distribution, notably via social spending and indirectly via sound economic institutions. They also explain public social spending inefficiencies for the OECD countries within a two-step approach called non-discretionary factors. Rajkumar and Swaroop (2008) measure the links between public spending, governance, and outcomes. They examine the role of governance–measured by the level of corruption and the quality of bureaucracy–in determining the efficacy of public spending in improving human development outcomes. It is empirically found that the differences in the efficacy of public spending can be largely explained by the quality of governance. Public health spending lowers child mortality rates more in countries with good governance. Similarly, public spending on primary education becomes more effective in increasing primary education attainment in countries with good