Revised ADP budget: Local govt gets more at cost of health, education

The government has increased the allocation for the local government sector in the revised annual development programme (ADP) by diverting resources from the education and health sectors.

In the revised ADP for this fiscal year -- that was approved yesterday by the National Economic Council -- the overall allocation was trimmed by 12.5 percent to Tk 208,935 crore.

The health sector’s allocation was slashed by about 74 percent from the original allocation of Tk 18,148 crore. The education sector’s original allocation of Tk 28,557 crore was reduced by about 35 percent.

The local government sector’s allocation was increased by 12 percent from Tk 13,472 crore.

However, the local government division got the highest allocation of Tk 37,534 crore -- including the social safety facilities and other community aids through city corporations, pourashova and unions -- in the revised ADP.

Local government got priority, focusing on local poverty alleviation, roads and bridges, which were in very poor condition, Planning Adviser Wahiduddin Mahmud told reporters after the meeting. 

Hr blamed the political instability, absence of project directors, new government purchase method, high interest rate and low foreign investment for the low ADP implementation.

Several projects needed new project directors after the incumbents went missing in action or were removed over corruption allegations.

The government is implementing 100 percent of government procurement through the e-GP system. 

“This is largely an issue of experience. There was some hesitation, and that is why it is taking time.”

But the system has increased competition among contractors, he said.

On average, tenders elicit seven to eight bids, up from two or three previously.

Besides, the system improved project implementation as project directors have to submit progress and evaluation reports every six months and an independent evaluation of projects during implementation.

The policies adopted in the current ADP should be maintained by future governments to preserve the improved quality of development spending, Mahmud said.

“However, if improving quality leads to an overall contraction in development expenditure, that defeats the purpose. We want both better quality and a larger ADP size.”

He termed inflation as another reason behind the reduced ADP size.

To curb inflation, the Bangladesh Bank has kept the policy rate high, resulting in higher interest rates and lower investment.

Some projects have been deliberately slowed down to allow decisions by an elected government, he said, citing the Payra deep-sea port project as an example.

“We have adopted a cautious approach in some cases. We felt certain issues should be resolved by the next elected government.”

The adviser also referred to the metro rail projects, saying several new metro rail projects have attracted financing interest from the Asian Development Bank and the World Bank, but decisions on those have been left for the next government.

“If all lines are started at once, it would require extensive road excavation across Dhaka and create multiple complexities. We have documented our observations, and the next government will consider them.”

Political instability has also contributed to the situation. 

“But a smaller ADP does not necessarily mean an economic slowdown. The slowdown is happening because political uncertainty has discouraged investment. If investment were taking place, even a smaller ADP would not be a problem. Increased investment would have created more employment.” 

The only major positive development is a significant rise in remittance inflows compared to the past. 

“So even though ADP spending has fallen, remittances have increased.” 

He acknowledged that allocations for the education and health sectors have declined but said they are expected to increase from now on.

Explaining the background, he said that since the late 1990s, the education and health sectors largely depended on sector-wide programmes financed by foreign loans and grants. 

Donors jointly supported the sectors -- led by the WB in health and the ADB in education -- along with some domestic financing.

“Over time, foreign assistance declined, but adequate attention was not paid to the fact that projects could come to a halt once donor funding ended.” 

The ministries were not sufficiently prepared to transition from aid-dependent, sector-wide programmes to domestically financed and domestically planned projects.

As a result, funding for many health projects actually ran out as early as January last year, even though staff continued to work. 

“Projects such as family planning and rural health centres formally ended, but doctors, nurses, equipment and family planning materials remained in place.” 

The ministry failed to identify the issue in time, creating a severe funding gap. 

“We must move away from excessive dependence on foreign-funded projects. Full self-reliance may not be possible immediately, but this transition is necessary.”