Development spending dips amid dollar crisis, political turmoil

Development spending fell to an eight-year low in the first four months of the current fiscal year due to persisting dollar shortage and the government's belt-tightening, showing the signs of further decline in the lead-up to the general elections with political turmoil deepening. 

Ministries and divisions managed to spend only 11.54% of their allocated budget for the annual development programme (ADP) in the July-October period of FY24, according to the Implementation Monitoring and Evaluation Division (IMED).

ADP spending rate was 11.48% in the same period of FY16.  

The IMED fears the public expenditure might remain sluggish in the next few months as the general election nears and the foreign exchange crisis lingers.

Abul Kashem Md Mohiuddin, secretary of the IMED, told The Business Standard that ADP implementation has been hampered by a combination of factors.

"The government is spending less as part of its austerity measures. Spending from the block allocation has been suspended. Besides, foreign procurement is being hampered because of dollar shortages," the secretary said. Contractors have also slowed down their work, anticipating that their payments might be delayed due to elections and the government's belt-tightening, he added. 

Echoing similar concerns, Dr Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS), said the prevailing austerity measures within the government have fostered a sense of mistrust among contractors, leading to uncertainty regarding timely payments for project completion. This uncertainty has consequently slowed down project implementation.

Furthermore, the government's current preoccupation with the upcoming elections has diverted its attention from effectively overseeing development activities. Consequently, the ADP implementation rate declined, potentially leading to a slowdown in project execution over the coming months, the economist added.

According to IMED data, project expenditure from government funds in the current financial year stands at 11.13%, registering a decline from 11.88% in the previous year.

Out of the Tk1,69,000 crore allocated for the ADP in FY24 from government funds, Tk18,813 crore was expended from July to September.

Some 25 ministries and departments have managed to spend less than 10% of the allocation from government funds.

Ministries and departments are not using the allocation of foreign aid either. According to IMED data, implementing agencies managed to spend 12.62% of the foreign aid allocation in the first four months of the current fiscal year.

The government has set a foreign aid utilisation target of Tk94,000 crore in ADP for the current fiscal year. Of this, the expenditure in the first four months was Tk11,864 or 7.98%. In the last financial year, this rate was 8.54%