Development budget cuts to hoard Tk 19,000cr of foreign loans
The interim government has approved a revised Annual Development Programme (ADP) budget of Tk 2,16,000 crore for the current fiscal year (2024-25), marking a significant reduction from the initially proposed Tk 2,65,000 crore.
This revision includes cuts to both government funds and foreign loans, with an unprecedented Tk 19,000 crore in foreign loans remaining unutilised.
The total allocation from government funds has also been slashed by Tk 30,000 crore, dropping from Tk 1,65,000 crore to Tk 1,35,000 crore. Consequently, the combined shortfall amounts to Tk 49,000 crore.
Reasons behind the reduction
According to the Economic Relations Division (ERD), this substantial cut is attributed to several factors:
Fall of the Awami League government: Uncertainty following the change in administration has affected project funding and implementation.
Non-release of funds by development partners: International donors have delayed or withheld funds amid shifting political dynamics.
Austerity measures by the interim government: Efforts to curb unnecessary spending have led to stricter scrutiny of development projects.
Inefficiency in project implementation: Many projects have failed to meet timelines, resulting in stalled expenditures.
Persistence of old problems: Long-standing inefficiencies and bureaucratic hurdles continue to hamper progress.
Additional Secretary (Foreign Aid Budget and Accounts & ICT) at ERD, Nur Ahmed, explained the rationale behind eliminating certain projects: "We are going through a changed position. Some projects have been altered, while others need re-evaluation. During the previous political government, numerous unnecessary projects were initiated, which we are now phasing out. Our goal is to ensure that not a single taka of foreign debt is spent without proper justification."
Revised allocations
In the revised ADP, local government sector will get Tk 15,798 crore, education sector will get Tk 20,599 crore, health sector will get Tk 8,463 crore, power and energy sector will get Tk 32,387 crore, transport and communication sector will get Tk 48,113 crore, and rural development sector will get Tk 16,962 crore in allocation.
Notably, electricity and road infrastructure have gained prominence in the revised plan, reflecting the government's focus on addressing critical gaps in these areas.
Slow implementation of current ADP
The implementation of the current fiscal year's (2024-25) ADP remains sluggish. As of December, after six months into the fiscal year the Medical Education and Family Welfare Division, Internal Resources Division, and the Ministry of Foreign Affairs have spent less than 1 per cent of their allocated budgets.
Nineteen additional ministries and departments have implemented less than 10 per cent of their respective allocations.
The overall ADP implementation rate stands at 17.97 per cent, down from 22.48 per cent during the same period last fiscal year.
Historical data reveals a consistent decline in implementation rates. In FY 2022-23, 23.53 per cent of the ADP was implemented, it was 24.06 per cent in FY 2021-22, and 23.89 per cent in FY 2020-21.
This trend underscores systemic inefficiencies and challenges in executing large-scale development programmes.
Planning Commission’s stance
Planning Secretary Iqbal Abdullah Harun addressed concerns over reduced allocations, saying: "The demand for money in projects is low because funds have not been utilised effectively. We are revising all projects to eliminate wasteful spending. It is not about reducing or increasing our allocations; rather, it depends on the initiative taken by those responsible for implementing the projects. If projects remain unspent, there is no point in allocating more funds."
The Planning Commission will soon convene meetings to finalise sector-wise, ministry-wise, and project-wise allocations based on the revised ADP. These discussions aim to streamline resource distribution and prioritise high-impact initiatives.