The government has decided to put a hold on the implementation of low-priority development projects involving Tk 40,000 crore to free up funds for the productive sectors amid widening revenue shortfall.

The amount accounts for about 20 per cent of the Tk 205,145 crore annual development programme (ADP) for the current fiscal year.

Fund disbursement for the low-priority projects would be postponed for now, said the finance division in a circular last week.

The government is being forced to delay the execution of the low-priority projects amid the drastic fall in revenue collection caused by the coronavirus pandemic and as part of its belt-tightening measures.

The finance division has formulated criteria for the ministries to identify the low-priority projects.

The projects under the ADP have been categorised as high, medium and low-priority to ensure the best use of limited resources, the finance division circular said.

The implementation of the high-priority projects would continue as usual.

If the use of funds for a medium-priority project is deemed very necessary, the ministries and division would spend money under their consideration.

However, avoidable expenses must be ensured, it said.

The finance division has been working on the issue for long and has now identified projects involving Tk 65,040 crore that can be categorised as low-priority ones.

But there are some projects in the low-priority category that would be completed by the current fiscal year or are foreign-funded. This sub-group of projects would not be put on hold.

So, low-priority projects involving at least Tk 40,000 crore would be halted for the time being.

The projects under the health and agriculture sectors, the two most priority areas for the government in its fight against the pandemic, would be out of the purview of the latest move.

The revenue target for the National Board of Revenue was Tk 300,500 crore in the revised budget of last fiscal year. The final figure is not available yet but officials hinted that they might be able to earn Tk 220,000 crore to Tk 222,000 crore at the end.

Because of the lower-than-expected revenue growth, the government has set a higher bank borrowing target of Tk 84,980 crore for the new fiscal year.

In the revised budget for FY20, the bank borrowing goal was Tk 82,000 crore. However, the government took Tk 72,246 crore from the banking sector at the end, still 109 per cent higher than the original budget target of Tk 47,364 crore.

The government is likely to face a severe revenue crunch this fiscal year, as it did last year. This can’t all be made up by borrowing from the scheduled banks or the Bangladesh Bank without adverse consequences, said Zahid Hussain, a former lead economist of the World Bank office in Dhaka.

“It is good to know that the finance division has started to prioritise ADP projects to identify areas of expenditure savings. The timing is commendable because it will not be possible to get any mileage from these efforts without an early start.”

“I believe a fairly large amount can be saved without causing any major disruption to the development process. It is important to keep in mind that the development process may also be disrupted if the government does not have enough funds to finance their operating expenditures.”

Development expenditure fell to a 27-year low in the just-concluded fiscal year because of the coronavirus pandemic.

Development activities almost halted after the government was forced to implement a countrywide shutdown from March 26 to rein in the rising cases of coronavirus infections, causing ADP implementation to virtually collapse in the following two months, when spending typically heats up to show a flattering result for the full year.

Subsequently, the ministries and divisions ended up spending Tk 161,000 crore in fiscal 2019-20, which was 80.18 per cent of the total allocation, said a senior official of the Implementation Monitoring and Evaluation Division of the planning ministry.

This was the lowest ADP implementation rate since fiscal 1993-94 and the second-lowest since the 1980s, for which official statistics were available.