Development spending has marked its highest drop in absolute terms for the first time in 11 years largely due to the government pulling the brakes on implementation of low priority projects.
Behind the scenes, the intent is to contain expenditure in tune with sluggish revenue generation for the Covid-19-induced economic downturn.
The expenditure in the first half of fiscal 2020-21 declined 10 per cent year-on-year to Tk 51,266 crore from Tk 57,196 crore in the same period a year ago, reads data from the Implementation Monitoring and Evaluation Division.
Spending had dropped less than 1 per cent in absolute terms in the July-December period of fiscal 2015-16.
The latest data shows that a fall in expenditure under government-funded projects was one of the reasons behind the drop in overall spending for schemes under the Annual Development Programme (ADP).
“This may indeed have happened as indicated by the significant decline in fund release for government funded projects,” he said.
He said soon after the fiscal year ’21 budget, the government initiated a prioritisation exercise under which each ministry was asked to categorise their projects into high, medium and low priority.
The objective was to restrain fund release for the low priority projects in order to keep the budget deficit within target, given the tighter revenue situation, added Hussain.
“We hope the results from the effort to clamp down on wasteful development expenditure will stick for the rest of the year and not turn into mere postponement of the same expenditures from the first to the second half of the year,” he said.
“At the same time, the government will need to ensure unabated progress in the implementation of high priority, high quality projects,” he added.
The IMED data showed that the expenditure in December 2020 dropped 19 per cent year-on-year to Tk 12,793 crore.
The government has set aside Tk 214,611 crore to carry out development activities in 2020-21.
Towfiqul Islam Khan,senior research fellow of the Centre for Policy Dialogue (CPD), said the ADP planned did not take into consideration the impact of Covid-19 and constrained fiscal space.
“So, this implementation status is against an inflated target. Hence, the total ADP expenditure during the first half of the fiscal year is not very surprising,” he said.
He said the government was right to put restrictions on ADP related expenditures immediately after the budget was passed. It was critical for the ADP to be revised and since it was not carried out at that time, it should be done immediately, he said.
Khan said fiscal space would continue to be constrained.
“Overall ADP expenditure is expected to be subdued during the rest of the year. It is important that implementation of important projects which are closer to be completed is more closely monitored,” he added.
From policy perspective, the government must focus on ensuring good governance and efficient use of public money. Immediate steps are required to stop corruption and wastage of public money, Khan added.
