Local govt bodies need fiscal firepower

Local government institutions play a limited role in delivering services because of limited decision-making and financial authority, lack of resources and manpower, and weak capacity.

The recent efforts of the government to decentralise the authority are yet to bring any remarkable change, though further strengthening of the local government institutions (LGIs) is required.

The views came at the launching ceremony of a new World Bank report titled 'Local Government Public Financial Management Systems Assessment' at a city hotel.

The report noted the country must empower the local government institutions through administrative and fiscal decentralisation to achieve the upper-middle income status.

The Policy Research Institute of Bangladesh (PRI) and the World Bank jointly organised the launching ceremony.

PRI vice chairman Sadiq Ahmed moderated the programme, attended by top government officials, economists, experts, and the World Bank officials.

Speaking as the chief guest Comptroller and Auditor General of Bangladesh Mohammad Muslim Chowdhury said services delivery situation cannot be improved without fiscal decentralisation.

Noting Bangladesh's bureaucracy is hierarchical, he said if a deputy director cannot exercise power, he sends a file to the directors.

"There is no scope in the system so that directors and deputy directors can sit together and scrutinise the things, take the issue in hand, and decide professionally what should be there and what should not be there," he said.

Mr Chowdhury suggested that local government institutions should be governed by expert groups like local government commission where bureaucrats will not be part. This can help improve their performance and service delivery.

Speaking on the occasion, World Bank acting country director Dandan Chan said in Bangladesh, spending by LGIs accounts for 7.0 per cent of total government expenditure, whereas on average it is 19 per cent in developing countries and 28 per cent in industrial countries.

The relatively low share of LGI spending in government's total expenditure indicates limited fiscal decentralisation, she said.

"We have seen globally that the local government institutions with the participation of the communities are best placed for providing basic services such as education, healthcare, water supply and sanitation, and local law and order," Ms Chan said.

She said through projects, the World Bank has supported the government's decentralisation agenda.

"There are successes to build on: a predictable and transparent financial resource transfer system covering all the Union Parishads-the lowest tier of local government-has improved planning, participatory budgeting, and transparency."

While presenting the report, executive director of the PRI Dr Ahsan H Mansur said several factors like the lack of political, administrative, and financial autonomy, weak governance, and poor capacities constrain the effective functioning of the LGIs.

"The centralisation of resource mobilisation without constitutionally or legally mandated distribution of service responsibilities and revenues to local bodies has led to the centralisation of service delivery," he said.

Dr Mansur said the main weaknesses of public financial management (PFM) include: limitations in planning and executing budgets, inadequate book keeping and financial reporting, lack of internal controls over cash management, and weaknesses in audit management process.

He made several recommendations-further administrative and fiscal decentralisation, adequate staffing, stronger monitoring capacity, improved understanding of budget, multi-year budgets, timely release of budget transfers, expanded revenue collection efforts, and strengthened LGI audits, among other issues.

Senior adviser of IGC Bangladesh Dr Sultan Hafeez Rahman was a panellist, at the discussion.

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