Allocation trimmed for most mega projects as they near final stage

The allocation for most mega projects in the upcoming fiscal year's Annual Development Programme (ADP) has been reduced due to lower expenditure demands resulting from their advanced stage of implementation.

Project officials said implementing agencies were careful in determining the demand for allocation across all mega projects, requesting only the necessary funds.

Besides, if additional funds are needed, a strategy is in place to increase the allocation in the revised ADP of the upcoming fiscal year 2024-25, they said.

A review of the new ADP shows increased allocations for major projects such as MRT-6, MRT-1, the Elenga-Hatikamrul-Rangpur highway, the Jamuna rail bridge, the Padma Bridge rail link, and Dhaka airport expansion.

In contrast, funding for the Rooppur Nuclear Power Plant and the Dhaka-Sylhet four-lane road has been increased.

Economists have welcomed the move, noting that refraining from redirecting excess funds to mega projects and avoiding expenditure pressure is a logical approach to controlling inflation.

M Masrur Reaz, chairman and CEO at Policy Exchange Bangladesh (PEB), said development expenditure should be reined in at this juncture of macroeconomic challenges.

He said cutting funds for projects where immediate spending is not necessary makes sense. Excessive spending on such projects will impede efforts to control high inflation in the upcoming financial year.

"As a result, prioritising the implementation of mega projects is necessary," said the economist.

Echoing a similar view, Sayema Haque Bidisha, research director at South Asian Network on Economic Modeling (Sanem), said the government has taken a timely decision as the county's deficit has to be capped. 

The economist suggested prioritising existing urgent projects while postponing new ones for the time being. However, she advised maintaining funding for critical sectors like education and health.

Foreign loan to be revised if needed

Planning commission officials said the Economic Relations Division decides how much foreign debt is used for projects. If needed, they can increase foreign aid in the revised ADP.

However, to allocate foreign funds, a matching amount is required in public funds. If too much foreign debt is used, the government will have to put more money into the fund.

Therefore, unnecessary allocations were avoided for mega projects in the next financial year, said the officials. 

Mamun-Al-Rashid, former secretary of the Planning Division, noted that nearly all mega projects rely on foreign loans and the government prioritised these projects based on demand. 

For example, he said the Rooppur Power project saw increased funding while projects with lower demand might receive reduced allocations as expected.

Regarding loans for mega projects, economist Sayema Haque Bidisha, said the government must be careful with borrowing from both domestic and foreign sources. 

"If we do take foreign loans, it's best to avoid high-interest lenders like China and opt for countries or institutions offering lower interest rates," she added.

Allocation down

According to the approved ADP, funding for the Mass Rapid Transit Line-6 (MRT-6) project from Motijheel to Kamalapur has decreased for the next financial year. 

With the project nearly complete, an allocation of Tk1,975 crore has been allocated for the upcoming fiscal year. This is a 42% decrease from the outgoing year's ADP and Tk18 crore less than the revised ADP. 

For the MRT-1 project, Tk3,594 crore has been allocated for the upcoming fiscal year. This rail link, connecting Dhaka airport to Kamalapur (underground) and Natun Bazar to Purbachal, saw an 8% decrease in allocation compared to the current year. 

The Elenga-Hatikumrul-Rangpur highway four-lane project has been allocated Tk1,501 crore, marking a 12% decrease from the current ADP and a 35% reduction compared to the revised ADP. 

Officials involved with the project said that about 75% of the implementation work is already completed, leading to a gradual decrease in demand each year. As demand for the next fiscal year is lower than the current one, subsequent fiscal years will require less allocation. 

The allocation for the construction of the Bangabandhu Sheikh Mujib Railway Bridge on the Jamuna River has decreased. A total of Tk2560 crore has been allocated for the project — 32.24% lower than the current ADP and 5.80% less than the revised one. 

Al Fattah Md Masudur Rahman, project director, said the decrease in demand is due to the project being in its final stages of implementation. 

"Therefore, only the necessary amount for the next financial year has been allocated to avoid complications from unspent funds. However, if needed, there is room to increase the allocation in the revised ADP," added Rahman. 

The Padma rail link project, also nearing completion, is getting less funding for the next fiscal year, with Tk3,544 crore allocated. This is 26% less than the revised ADP 35.55% from the initial ADP of the current fiscal. 

The Hazrat Shahjalal International Airport expansion project has been allocated Tk3,535.68 crore in the upcoming financial year. This allocation is 36% less than the current fiscal year's ADP and 31% less than the revised ADP. The aim is to complete the implementation of the project within the next financial year. 

The Matarbari Ultra Super Critical Coal-Fired Power project received Tk6,105 crore for the next fiscal. This amount is 34% lower than FY24's initial and revised ADP. The Dhaka Ashulia Expressway project also saw allocation drop by 14% compared to the last financial year's ADP.

Allocation up 

Contrary to most other mega projects, the Rooppur Nuclear Power Plant (RNPP) project received the highest expenditure allocation. It has been allotted Tk10,502.90 crore for the next fiscal, marking an 8.20% increase from the ongoing ADP and revised ADP. 

Besides, the allocation for the MRT-5 Northern Route project for the next financial year has increased slightly, with Tk968 crore allocated. This allocation is 10% higher than the current fiscal's ADP and 24% higher than the revised ADP. 

Among major road projects, the Dhaka-Sylhet Corridor Road Development project has been allocated Tk500 crore more than the current fiscal year's ADP. 

The government is also expected to approve a new metro rail project, MRT-5 Southern Route, in the next financial year. This route will span 13.10km underground from Gabtoli to Aftabnagar and 4.10km elevated from Aftabnagar to Desherkandi. The total cost of the project is estimated at Tk54,618 crore, with Tk39,138 crore coming from foreign loans.