A policy-paradigm shift from deposed regime's propensity for fund-guzzling megaprojects squeezes spending as the interim government may slash project-aid allocations in the development budget by 19 per cent, the deepest cut in years.
Officials said Thursday the post-uprising government envisaged such fund reduction in the upcoming revised annual development programme (RADP) in a bid to alleviate strains on public spending.
The fund cut is also prompted by economic slowdown stemming from the recent political upheavals and financial delinquencies during the past regime, according to them.
Some other factors include slow aid disbursement for the Indian Line of Credit (LoC)-supported ongoing projects and poor implementation performances by many executing agencies, Ministry of Finance (MoF) and Planning Commission (PC) officials said.
"This government has already taken an approach of trimming the public spending. It is not approving fresh projects indiscriminately. On the other hand, it is reviewing the ongoing projects and cutting allocations too," says a senior MoF official.
As per the initiatives of the government, the project-aid allocations in the development budget are likely to be slashed by Tk 190 billion to Tk 810 billion.
The current ADP outlay, approved by the past Sheikh Hasina administration, allocated Tk 1.0 trillion as project aid (PC), financed by different bilateral and multilateral development partners (DPs).
"Although the foreign aid is available in the pipeline, but the government has taken steps to cut the PA from its development budget due to its cautious approach to public spending amid the country's sluggish economy," an Economic Relations Division (ERD) official told the FE.
"Not only the project-aid part of the budget, the allocations from government's internal resources for the current fiscal year (FY) 2024-25 may also see a reduction," says a PC official, ahead of the budget revision.
Meanwhile, PC officials say they are likely to slash the overall ADP as the government spending will have to be cut.
"We already consulted all the ministries and project-implementing agencies last month for drafting the PA allocations in the upcoming RADP. Many big ministries have surrendered their funds from the original ADP of the current FY2025," the ERD official adds.
The government has already started work to revise the national budget that consists of development and operational budgets.
The ADP is the main part of the development budget where the government provides a partial fund allocation from its internal resources while another part from the external resources, that is, PA.
Another ERD official says the Indian LoC-based projects are struggling for implementation delays as some Indian contractors have still not joined work after the July-August uprising in Bangladesh.
"The Indian lender, EXIM Bank, had also disbursed lower amount of funds in the first five months of the current FY2025. These factors, too, have affected the project implementation under the ADP," he says.
Earlier, the government cut the ADP by Tk 105 billion to Tk 835 billion from PA for the RADP in the last FY2024.
In the previous FY2023, the government had trimmed down the PA to Tk 745 billion from the original ADP allocation of Tk 930 billion.
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