Published in The Financial Express on Friday, 11 March 2016
Slow execution forces trimming of development budget
Donor-funded projects likely to suffer most
Jasim Uddin Haroon
The allocation for public sector development works in the current fiscal has been cut down by over 9.0 per cent for what is seen as deficiency in efficiency of the project-executing agencies.
Officials said the revised annual development programme (RADP) prepared by the finance division would come to Tk 880 billion, down by 9.28 per cent from the original projection of Tk 970 billion.
The cutbacks on spending are both from government funded and foreign-aided projects.
However, the downward revised figure is higher just by Tk 30 billion from the size of the RADP that was in the last financial year.
This revised yearly development plan is drawn in concurrence with the Planning Commission under the Ministry of Planning.
But there is scope for further upward or down revision at the decision-making meeting of the national economic council (NEC) headed by the Prime Minister. The meeting usually takes place in April.
People familiar with the revised programme at the finance division told the FE that the aided projects would suffer most as they have seen little progress.
The cost of donor-funded projects was estimated at Tk 345 billion initially but it would now come down to around Tk 291 billion, sources having firsthand knowledge of the exercise told the FE Thursday.
They said the execution level regarding project aid was much lower than that in the case of government-funded projects.
“We’ve seen the PA execution much low. For this reason we revised the budget to Tk 880 billion,” said a source close to the finance division.
Slow execution forces trimming of development budget
The implementation of the ADP over the first six months to December 2015 cost Tk 237.77 billion, representing only 24 per cent of the total allocation.
The ADP execution slumped to an eight-year low in the first seven months since July until January with the rate showing only 28 per cent.
Planning Minister AHM Mustafa Kamal, responding to a written query from a treasury-bench member in parliament about the progress recently, said Tk 15.8 billion or 25 per cent was spent in the GoB sector, Tk 69.69 billion or 20 per cent in project aid (PA) and Tk 10.0 billion or 25 per cent in respect of self-financing.
In the budget for FY 2015-16 there are self-funding projects worth Tk 39.97 billion.
The current ADP consists of 1,215 projects, including own-funded ones, under 53 ministries and divisions.
People at the finance division hinted that mega-projects like the Padma Multipurpose Bridge might also not be able to spend the allocated resources. The allocation for the PMB is Tk 71 billion for the current fiscal year.
Most projects remained intact in the RADP but the cut came mostly with regard to the PAs.
Transport sector has the highest allocation — more than 20 per cent of the ADP or Tk 74 billion — followed by the Padma Bridge project.
The planning commission has prepared an ‘ADP Policy’ for proper distribution and spending of the money allocated against the ADP in all areas of the country.
But critics were sceptical over its gains. The policy is expected to be implemented from next July.
Former caretaker government adviser for finance Mirza Azizul Islam said the tradition is that the original allocation is bigger than the revised one and the actual remains much lower.
“There are too many projects that lead to time-overrun and cost- overrun,” said Mr Islam, now a professor at Brac University.
He raised question about quality of the projects, especially those linked to the construction-related infrastructure.
Prof Islam, also a renowned development economist, said there is need for close monitoring of the projects to expedite the execution.
A research official, Mr Towfiqul Islam Khan, said CPD has identified 25 projects which may attain faster growth in case of quick execution.
“It is surprising that those also remained in slow progress,” said Mr Khan, a senior research fellow at the CPD (Centre for Policy Dialogue), a private think tank.
He said there is need for the formation of a body to supervise the projects, including the Dhaka-Chittagong four-lane one, as it will help attain economic growth. Multilateral donor agency World Bank in its reports lamented such slow pace of ADP progress. It said a significant portion of investment in the ADP would take more than five years at the current level of allocation.
“For example, during Financial Year 2015, out of 1034 projects, 725 would take 1.0-5.0 years to be fully implemented with current level of allocation and around 154 projects (15 per cent) would be completed in 6-10 years,” reads its Bangladesh public expenditure review update released in 2015.
The review also notes there are around 106 projects which would take 11-100 years to be implemented while 32 projects (3.1 per cent) would take more than 100 years.
In the report, the WB also said allocation in the RADP tends to be lower than in the ADP of the same year, suggesting that the capacity to implement projects is over-estimated.
The practice of adding significant numbers of small projects with lower allocations just few months after the budget through a revised ADP is not in line with best budgetary practices and may suggest weak planning for the ADP, the review noted
There are many projects being unusually delayed, causing public suffering and hike in allocations.
The Dhaka-Chittagong Highway four-lane project is yet to be completed, forcing the government to raise its cost significantly. Initially the rise was Tk 38.16 billion from Tk 31.90 billion.
At least three extensions of deadlines for the completion of the Maghbazar-Mouchak flyover since 2014 resulted in project-cost escalation by 57 per cent to Tk 12.18 billion from Tk 7.72 billion.
The delays escalated the estimated cost of the tannery-shifting project to Tk 10.79 billon from Tk 5.45 billion.