Originally posted in The Daily Star on 18 January, 2021
The first six months of the fiscal year 2020-21 saw very slow implementation of the Annual Development Programme (ADP) of Bangladesh. Data of the Monitoring and Evaluation Division (IMED) of the Ministry of Planning reveals that during the first six months of the current fiscal year, that is from July to December of 2020, only 23.9 percent has been implemented. This implies that in order to spend the allocated ADP, the speed of ADP implementation will have to be expedited by almost 3.2 times that of the past six months in the next six months. It is also observed that ADP implementation is lowest in the last five fiscal years. This year, spending by 22 ministries is less than 20 percent of their allocation, according to the IMED. Moreover, seven ministries and divisions could spend less than 10 percent of their allocations over a period of six months.
Perpetual problem
Slow ADP implementation during the first half or even first three quarters of the fiscal year is not new in Bangladesh. The cycle follows almost similar pattern every year. ADP implementation is slow during the first half of the fiscal year, the size is then readjusted downward and finally, the implementation process gets expedited towards the end of the fiscal year to fulfil the target. This process lowers the efficiency of project implementation.
Lack of institutional capacity and other bureaucratic complexities make the full and timely implementation of development programmes difficult. In Bangladesh, attempts have been made to improve ADP performance through a number of initiatives. These include regular meetings with the project directors and mid-term review of implementation status. The concerned ministry is aware of challenges of ADP implementation and has the willingness to remove associated bottlenecks. It was emphasised by the policymakers that project directors would be appointed through interviews and proper training would be imparted so that they can do their tasks efficiently. In the past it was also declared that projects which got extended once, would not be extended for the second time, and a project director cannot be the project director of more than one project. Besides, there was discussion on setting implementation targets for every three months. These initiatives are yet to see any result.
Addressing the core issues
The success of any initiative towards improving ADP performance will require addressing the inherent problems of structural issues and implementation of reform measures. Time and again, the issue of improving institutional capacity of the line ministries to implement ADP and of the IMED to monitor and evaluate effectively has been pointed out. Implementation of projects is linked to the initiation of projects. The timeline of project implementation is affected by its delayed take-off. At the very early stage, problems related to completion of project proposal, setting expenditure targets and preparing a good feasibility study take away a lot of time before the approval of projects. Tendering, appointment of project staff, land acquisition and procurement are always the difficult part for timely launching of projects. Because of this delay, the absorption capacity of projects reduces significantly.
As there is an urge to fulfil the quantitative targets in a short period of time, qualitative aspects of ADP get less attention. This results in poor project outcome. Delay also escalates the cost of projects. So, the cost of services received by the people goes up and the intended benefits are minimised.
Public expenditures on development programmes also create avenues for private investment which is essential for job creation. If ADP is not fully implemented and quality is not ensured, private investment suffers.
Understandably, when implementation of the bulk of the development programmes are to be completed during the last few months of the fiscal year within the same administrative structure and with the same level of capacity, one cannot guarantee the quality. Development projects, particularly the mega ones involve huge investment. Efficient utilisation of such large amount of money in a resource constraint country such as Bangladesh is critical. But it is not about spending the money and making structures only. Implementation of development projects is also about achieving medium and long-term development objectives. The immediate objective of infrastructures may be achieving higher growth, but the ultimate objective is to fulfil the need of the citizens and create long term welfare for them. Effective delivery mechanism of ADP is thus very important.
Critical role of public expenditure during crisis
Low public investment on development programmes in the time of pandemic is not encouraging. During the past global recessions, higher public investment played a key role in reviving the economy. At present, the ramifications of depressed economic activities due to Covid-19 have been felt in multiple ways. Shut down of the economy and limited activities have led to lower production and loss of income by businesses and individuals. Lower production, increased unemployment, and higher poverty have been observed in all economies including Bangladesh.
Depressed individual and business incomes have also had an impact on the revenue mobilisation effort of the government which is perennially low in Bangladesh. But dealing with the pandemic requires a large amount of resources. So, with limited fiscal space, the government has to restrain expenditure and prioritise its investments. Except for the high priority projects, spending on other projects under the ADP had to be reduced during the current fiscal year. This has decreased government expenditures significantly. But this is not an ideal situation during economic crisis characterised by both demand and supply shocks.
Despite low private investment, Bangladesh has seen high economic growth during the last few years. The major impetus for this growth came from higher government expenditures. Private investment has declined further during the ongoing pandemic. Therefore, slow pace of ADP implementation will have negative impact on the economy. This will also slow down the recovery of the pandemic affected economy.
In view of the damages caused by the pandemic the immediate need is to control the pandemic and boost economic activities and production. Enhanced aggregate demand and consumption will help in bringing vibrancy to the economy. However, in the absence of income, demand cannot be increased. Hence the government has to spend more on development programmes and create employment for those who lost jobs and who are waiting to enter the labour market.
The government will also have to provide cash support to the poor and scale up social safety programmes for the survival of the poor. These initiatives could increase budget deficit. However, this is a crisis when maintaining budget deficit should not be the objective—but to increase people’s purchasing power so that their spending can in turn boost production and the economy. This, of course does not undermine the importance of higher and efficient public expenditure during the pandemic.
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.