Revised ADP: Inclination is toward govt money over foreign funds

Infographic: TBS

When Bangladesh is struggling to manage depleting foreign currency reserves and exchange rate depreciation, accessing foreign funding in US dollars should be a priority. But the project implementing authorities seem to prefer spending from government funds.

Analysing the proposals for the revised annual development programmes (ADP), The Business Standard found that in some cases, authorities concerned have in fact slashed foreign fund allocation and demanded a hike in government funds instead.   

For example, the two ongoing Chattogram Port Authority (CPA) projects – Matarbari Port Development Project and Matarbari Port Road Construction Project – have ADP allocation of Tk60 crore from government funds and Tk1,500 crore from foreign aid for the current fiscal year.

The revised ADP for the two projects has sought an additional 16% allocation from government funds while the Ministry of Shipping has proposed slashing the allocation of foreign aid by 96%.

CPA officials said progress of the two projects is still behind the implementation plan for this fiscal year. Since the planned tender process, contractor appointment and work orders relating to the appointment were not completed as per action plan, the foreign loan money cannot be spent. As a result, reducing the allocation was proposed in the revised ADP.

Other than the Ministry of Shipping, the Ministry of Roads and Highways, Ministry of Railways, Ministry of Civil Aviation, which are among the ministries with the highest allocation, have proposed similar allocation cut in foreign funds.

Planning Commission officials said that the work of preparing the revised ADP has already begun for the current fiscal year.  The ministries and divisions have laid out their allocation demand according to the first call notice of the commission. As in other years, the implementing agencies have little interest in foreign funds while some ministries and divisions want additional allocation from government funds.

They also said that spending from government funds is less complicated while loans from development partners are subject to many conditions. In addition, the implementing agencies lack the capacity to utilise foreign funds. Other issues include approval requirement at several stages of the tender process that causes delay. Due to all these reasons, the ministries and divisions are less interested in the allocation of foreign aid in the revised ADP.

The Planning Commission officials further said that the allocation in the revised ADP will be based on project priorities, government's revenue collection, and the current economic conditions. 

Emphasis is also being placed on the use of foreign loans to implement foreign aided projects since if the disbursement on foreign loans increases, development activities will continue on the one hand and it will also help the reserve.

Officials at the Economic Relations Department (ERD) said on average 30% of foreign loans used in development projects are added to the reserve.

According to Planning Commission sources, the Ministry of Shipping sent a proposal to the commission to increase the allocation of government funds by 15% and reduce the allocation of foreign aid by 83.35% for their projects.

In addition to the Chittagong Port Authority, an organisation under the Ministry of Shipping, there has been a big change in the target of using foreign loans in the Mongla Port Authority project.

The Mongla Port Authority has proposed an increase in the allocation of government funds from Tk681 crore to Tk702 crore and foreign aid allocation from Tk500 crore to Tk46 crore for the five projects under it.

Of the five projects of the Mongla Port Authority, only one project is being implemented with foreign loans. The project is ''Upgradation of Mongla Port". This is the implementation of an Indian loan. The government's fund allocation for this project has been proposed to be increased from Tk 1 crore to Tk 17 crore. At the same time, it has been proposed to reduce foreign debt utilisation by Tk 500 crore to Tk 46 crore in the current fiscal year.

Mongla Port Authority Planning Head Md Zahirul Huq said, "Construction of this project was supposed to start in the current fiscal year. But due to a delay in hiring the consultant, the work did not begin and that is why the reduction of foreign loan allocation was proposed as the loan cannot be utilised as per target." 

Planning Commission sources said the railway sector, which had a similar allocation, has proposed that foreign loan allocation be reduced by more than Tk2,000 crore – Tk 1,075 crore from the Bangabandhu Railway Bridge over the Jamuna river, Tk 400 crore from the Padma Rail Link project and the rest from foreign aid allocations to some railway projects with loans from India.    

SM Salimullah Bahar, chief planning officer of the Bangladesh Railway, told The Business Standard that most of the railway project contractors are foreigners, who do not bring their machinery properly to the project site. The implementation speed of many railway projects is slow mainly due to the contractor.

"The bottom line is it will not be possible to spend according to the target and so it has been proposed to cut foreign aid allocation," he said. 

He also mentioned that in the mega railway project, a fund cut has been proposed as a domestic contractor has not been working properly.

An additional 8% increase in allocation from government funds and a reduction of 32.6% from foreign aid allocation are proposed for road transport and highways department projects, including the ongoing five Metro Rail projects of the Dhaka Mass Transit Company Limited (DMTCL). In these five projects foreign loan utilisation target has been revised down to almost half.

Md Abul Kashem Bhuiyan, project director of MRT-1, said, "We had a plan of awarding three contract packages to construct the main line from the airport to Rampura in the current fiscal year. We surrendered the allocation as we failed to implement the plan"

He blamed the pandemic for the delay in such preparatory work as basic design, detailed design and land acquisition. He also accused the Japan International Cooperation Agency (Jica), the foreign financier, of delays in making some key decisions.

The Roads and Highways Department projects sought a reduction of foreign funds by 4.9% and increase of public fund allocation by 18%.

Among other organisations, the Civil Aviation Authority, which is implementing seven projects for the development of various airports in the country, including the Dhaka airport expansion project, has sought a foreign aid cut of Tk1,549 crore with a little increase of public funds.

This organization has implemented seven projects for the development of various airports in the country, including the Hazrat Shahjalal Airport Expansion Project.

Overall, the foreign aid allocations in the revised ADP are set to be reduced by Tk18,500 crore to Tk74,500 crore. Earlier, the ERD, the ministries and the divisions proposed the foreign aid allocation of Tk78,000 crore in the Revised ADP. Recently, they proposed a cut of another Tk3500 crore.

Allocation of government funds may remain unchanged

A senior official of the Planning Commission said that the finance department has hinted that the allocation of government funds in the current fiscal year may remain unchanged, which is Tk1,53,066 crore.

Planning Commission official said that even if the ministries and departments allocate government funds according to their needs, they will not be able to use all of them. Considering the current economic situation, the government has prioritised projects in categories A, B, and C. The government has also decided to reorganize the categories in the revised ADP.

In the wake of the Covid situation and the Russia-Ukraine war, the government adopted austerity measures to control inflation, manage foreign exchange reserves, increase fuel prices and ensure food security. In this context, the government decided to stop the subsidy on less intensive projects. At the beginning of the current fiscal year, the list of A, B and C category projects was published on a priority basis through a circular issued by the Finance Division on 3 July. 

According to the circular, 100% allocation has been kept intact for the implementation of priority 'A' category projects.

From the 'B' category projects, 25% of public fund allocation is deducted while the 'C' category projects will not be able to spend any money in the current fiscal year. All foreign aided projects are listed in this category.