The long term fate of election year promises
Increase in government expenditure ahead of the polls is a common phenomenon. However, what is the long term impact of such short-sighted decisions?
At ECNEC's (Economic Council Executive Committee) last meeting, 37 new projects totaling Tk 526.12 billion crore were approved. This is the second highest number of projects ever approved in one single ECNEC meeting.
The size of the Annual Development Programme (ADP) for FY24 totaled Tk 2.63 trillion, which is 6.91% higher than Tk2.46 of last fiscal year.
Such increase in government expenditure is a common scenario ahead of the polls. The Election Commission will soon announce the schedule for the next parliamentary elections of the country.
Despite the uncertainties and political instabilities surrounding the election, government policies are definitely influenced by it, and often it may seem like the election year budget is one way to please the soon-to-be voters. But what is the long term impact of such behaviour?
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Moreover, this is not the first time ADP allocation rose dramatically before elections; it has been the trend for the last four governments. According to prominent macroeconomist and Distinguished Fellow of Centre for Policy Dialogue, Dr Debapriya Bhattacharya, the trend has persisted for a while.
"This is not a new phenomenon that before the election the outgoing government tries to put as many projects in the pipeline as possible and get them approved in order to message the constituencies," he said.
"Specific members of parliament have specific commitments, and they would like to show that those have been approved. And also, there are commitments in the Awami League election manifesto. So, even if they couldn't realise them, they want to signal that they are on it. This is how they are sending off signals to their voters," he added.
However, the problem lies elsewhere. Tk 1.69 trillion will come from the government's own resources and the remaining Tk 940 billion funds from the external sources as project aid; and Bangladesh is going through an economic crisis at this moment.
The country is already cash-strapped and about a trillion taka ADP deficit does not bode well. Dr Debapriya is also of the same opinion. "The problem with this is that there is no money for it. Particularly, given the current circumstances, we have neither taka nor dollar. So, this happens to be just a show-piece, nothing more than that."
He is also rather skeptical about the ADP outline, saying, "essentially, I don't see any reason to take these decisions very seriously at this moment given the political and economic circumstances."
Furthermore, such large ADP plans also undermine the government's austerity measures. To combat the economic crisis, the government has taken several austerity measures and approving such large ADPs does not go well with those.
Also, the government has approved some expenses for the administration and civil service, which do not reflect the current austerity measures.
"When the economy was feeling fiscal pressure, and there was also pressure in the external account in terms of foreign exchange availability, it went for austerity measures," said Dr Debapriya. "It included sorting the ADP into A, B, C categories, and ruling out some less essential expenditures within the revenue budget."
"However, the current move created indiscipline and started violating the austerity measures in a peculiar way with peculiar interests. That is how the logic and the justification for having the austerity measures has now been put under question, and in many ways, somehow made defunct," he went on.
Jyoti Rahman, a macroeconomist with Sydney Policy Analysis Centre, has an interesting take on the historical trend of increased ADP in election years.
"Back in 2005-06 and 2012-13, the governments had the intention to implement the ADP projects to woo the voters. Not all projects were implemented, mostly due to the lack of revenue and domestic financing, but the intention was there. Understandably, the elections were a big factor behind the governments' efforts. But come 2018-19, it seems even the intention was not there," he said.
Indicating the increased current spending on government officers' salary and other incentives towards the administration, he pointed out that the gradual declining importance of elections and voters had an impact on the rate of ADP implementation.
"The pledges were less, and lesser was the implementation rate."
Echoing the concerns of Dr Debapriya Bhattacharya, he also expressed concerns about the current ADP implementation. He said, "Given the state of fiscal issues afflicting the government, I am not sure whether they even want to implement any of the projects sanctioned in the ADP. They just do not have enough money."
Not a new phenomenon
One of the ways to explore the phenomenon of increased public expenditure is the number of last minute additions to the ECNEC list. Before the 2014 elections, due to the long and violent protests from opposition parties, such lavish projects were not announced right ahead of election.
However, during Awami League's first term, several high-profile mega-projects were announced such as Padma Bridge, Metro Rail, Rooppur Nuclear Power Plant, Deep Sea Port, and Elevated Expressway; and the government reminded people that if they are not re-elected, such megaprojects would be shelved.
Even the main opposition party Bangladesh Nationalist Party (BNP) promised to continue development projects, urbanisation and industrialisation plans in their Vision 2030 which was unveiled in 2016 by Khaleda Zia.
This reflects the importance of such projects in our political dynamics. Countrywide integrated industry infrastructure was promised to be developed on the basis of three basic variables popularly called 3 I's – Incentive, infrastructure, and institution.
The issue again surged before the 2018 national elections, when around 40 projects were approved without proper vetting in each meeting and these projects had to be amended repeatedly. The ongoing megaprojects were showcased as the primary justification for bringing Awami League to power again.
The same rallying chant can be heard now, right before the 2024 national elections. And most of the projects presented at the ECNEC meeting will have clear signals for the voters. On 11 October, Awami League General Secretary Obaidul Quader said, "If BNP comes to power, they will stop work on all development projects."
Another way to look at the issue is by looking at the Annual Development Plan, allotted in the last year of the running government. Whether there is a sudden spike in ADP allocation in that particular year may tell a story about how election years influence government policies.
Now, let us get back to 2001, the first election where an incumbent government peacefully handed power over to another government. In FY 96, Tk10,447 crore was allotted for ADP.
It increased to Tk11,700 crore in the next fiscal year. It was followed by Tk12,200 crore and Tk14,000 crore respectively.
In FY 00, the ADP budget was Tk16,500 crore. In the next fiscal year, the election year budget had Tk18,200 crore for ADP. The ADP budget did not see a notable spike during the 1996-2001 Awami League government.
But the BNP government was the exception. In FY 06, Tk 24,500 crore ADP was approved, showing a 20 percent hike from the previous revised ADP. A total of 1,440 development projects including 516 new and unapproved ones were planned to be implemented next fiscal year, with 1,372 under the ADP and 68 under the revenue budget. The number was much higher than that of the previous years.
The next regime continued the trend. In FY 13, the ADP was Tk52,366 crore. And it had only 33 new projects.
But, the next year, which was the election year, FY 14, the ADP spiked to Tk65,870 crore - an increase of Tk13,504 crore, which is about 25.78% more than the previous ADP.
And the number of new projects increased to 94 as well. From this time, ADP allocations began hovering around 6-7% of the GDP.
In FY 19, the size of the ADP was staggering. A total of 14,521 projects were included in the new ADP. Tk 173,000 crore main ADP for FY 19 was allocated, which was Tk 24,619 crore or 16.59% higher than the previous fiscal's revised ADP of Tk 148,381 crore.
Remember the recent ECNEC meeting that had the second highest number of projects approved? The highest number of projects were approved at the last meeting before the 2018 elections as well. The election year ADP increase has been widely used by both major parties to entice voters into re-electing the incumbent government.
Shadique Mahbub Islam is a contributor at The Business Standard.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
