Addressing the root causes of poor ADP implementation
Sunday, 15 November 2009
Shahiduzzaman Khan
AGAINST the backdrop of poor project implementation, the planning minister held a special meeting last week with secretaries and representatives of different government agencies in a bid to streamline implementation of the development projects. The minister asked the top officials of the government to take action against fund misappropriation and fraud in the development projects and implement recommendations of the Implementation Monitoring and Evaluation Division (IMED) on the project evaluation reports.
The IMED monitors all the projects under Annual Development Programme (ADP) and submits their evaluation report after completion of the works to all the ministries for taking action. But the ministries usually overlook the report and do not take any steps to punish the corrupt persons.
The government agencies have implemented only 10 per cent of Tk 305 billion ADP budget during July-September this fiscal. The 10 largest fund spending ministries and divisions, which received nearly 80 per cent of the Tk 305 billion development budget, have utilised only 12 per cent of their respective allocations. Earlier in the national budget, the government had fixed an 'ambitious' ADP target for the current fiscal to implement 886 projects in order to build up the country's poor infrastructures and improve social security for adding an impetus to the national economy.
Indeed, the government was left just baffled as the project implementing agencies were still off the track despite some strict measures taken in July to enhance their capacity. They failed miserably in timely procurement, a major part of development project implementation. The planning ministry issued some guidelines for the development budget spenders taking their monthly action and procurement plans into account to spur project implementation. Yet the major spenders have failed to utilise enough fund, which gives a dismal picture of the first quarter project implementation, though they have received about 80 per cent of the total outlay in the development budget.
Reports say the largest fund holder, Local Government Division (LGD), spent only 15 per cent of its total allocation of Tk 65.14 billion, the second spender, Communications Ministry, spent only 7.0 per cent of Tk 37 billion. Similarly, the third largest fund receiver -- Power Division -- utilised only 11 per cent of the Tk 31.33 billion allocated and the fourth largest spender, Health and Family Welfare Ministry, spent only 7.0 per cent of Tk 30.64 billion.
The government undertook the biggest ADP this fiscal year to boost the economy from the sluggish momentum created during the tenure of the last caretaker government and the global economic meltdown. Yet the poor implementation rate did not match up with the expansionary public investment plans envisaged in the 2009-10 budget to give enough stimuli to the domestic economy to ward off global recession impacts and chase a growth target of 6.0 per cent or beyond. No big breakthrough in implementing the ADP was achieved in the first three months of the current fiscal year. As has been said, only 10 percent of the total ADP outlay was implemented which is 1.0 percentage point and 3.0 percentage points more than the first quarter of the previous two financial years while 1.0 percent point lower than 2006-07. During the time both revenue collection and investment were poor. The revenue growth was only 9.0 percent.
Financial analysts said a higher growth is essential for reducing poverty, which is the prime target of most of the announced development goals of the Awami League-led alliance government. To achieve that target, more public spending is needed to boost domestic production, demand and employment. If such a trend of slow project implementation continues in the coming months, the goals of increasing domestic demands will be jeopardised. Moreover, economic growth might slow down further, they said.
The country's gross domestic product grew only 5.8 per cent in the last fiscal year, lowest in past five years. The latest International Monetary Fund (IMF) mission forecast that Bangladesh's economic growth would slow down to 5.0 per cent because of global recession impacts while continued problems in ADP implementation would hold back the overall investment activities. Finance minister AMA Muhith, however, contested the forecast, saying the growth would not be less than 6.0 per cent, if not more. Huge idle money lying with commercial banks indicates that the private sector investment has also been stymied. Commercial banks have been wallowing in idle money worth Tk 350 billion as of June this year compared with Tk 130 billion in June 2008 due to slowing demand for credit from the private sector.
Meanwhile, the Ministry of Finance, Bangladesh Bank and the National Board of Revenue (NBR) have identified poor implementation of Annual Development Programme (ADP) as the prime cause of the country's present economic slowdown. The finance ministry has already prepared a position paper. Slow progress in implementing the programmes taken in the current fiscal year and challenges in the country's economy against the backdrop of world recession have been highlighted in the said paper. Bangladesh Bank and the National Board of Revenue (NBR) have sent the finance ministry reports on the country's economic situation during the first quarter of the current fiscal year.
The NBR blamed slow pace of ADP implementation for the sluggish collection of revenue. Bangladesh Bank echoed the same saying emphasis should be given on rapid implementation of the ADP to boost investment. In its quarterly report released recently, Bangladesh Bank said given the indication of sluggish trend of spending allotted money, full implementation of ADP targeted for this fiscal is a big challenge, which needs to pace up, particularly in infrastructure projects, to help private sector gain momentum in fulfilling the aspired GDP growth. Last week, an IMF mission submitted a report to the government where they mentioned that slow pace of ADP implementation is having a negative impact on the government's revenue earning. The IMF report said the government should urgently address the root of chronic poor implementation of the ADP, including the capacity constraints and governance issues. The World Bank last month released an economic update where they gave first priority to ADP implementation for overcoming the sluggishness the economy is experiencing.
There is no denying that the avowed aim of the Awami League-led grand alliance government was to bolster demand in the market and create employment opportunities in a bid to cushion off the effects of global economic meltdown. The government was also supposed to raise the level of public spending in development sectors in contrast to revenue expenditure. Yet these objectives are yet to be achieved.
Now it is time for all the ministries, lead and line, to make up for the lost time through tackling structural deficiencies. Not only the financial targets but also the physical targets need to be met to their closest approximations so that the economy is revved up with internal resource mobilisation, timely fund disbursements and investment. This needs to be done with haste. There is no time to waste.
szkhan@thefinancialexpress-bd.com
AGAINST the backdrop of poor project implementation, the planning minister held a special meeting last week with secretaries and representatives of different government agencies in a bid to streamline implementation of the development projects. The minister asked the top officials of the government to take action against fund misappropriation and fraud in the development projects and implement recommendations of the Implementation Monitoring and Evaluation Division (IMED) on the project evaluation reports.
The IMED monitors all the projects under Annual Development Programme (ADP) and submits their evaluation report after completion of the works to all the ministries for taking action. But the ministries usually overlook the report and do not take any steps to punish the corrupt persons.
The government agencies have implemented only 10 per cent of Tk 305 billion ADP budget during July-September this fiscal. The 10 largest fund spending ministries and divisions, which received nearly 80 per cent of the Tk 305 billion development budget, have utilised only 12 per cent of their respective allocations. Earlier in the national budget, the government had fixed an 'ambitious' ADP target for the current fiscal to implement 886 projects in order to build up the country's poor infrastructures and improve social security for adding an impetus to the national economy.
Indeed, the government was left just baffled as the project implementing agencies were still off the track despite some strict measures taken in July to enhance their capacity. They failed miserably in timely procurement, a major part of development project implementation. The planning ministry issued some guidelines for the development budget spenders taking their monthly action and procurement plans into account to spur project implementation. Yet the major spenders have failed to utilise enough fund, which gives a dismal picture of the first quarter project implementation, though they have received about 80 per cent of the total outlay in the development budget.
Reports say the largest fund holder, Local Government Division (LGD), spent only 15 per cent of its total allocation of Tk 65.14 billion, the second spender, Communications Ministry, spent only 7.0 per cent of Tk 37 billion. Similarly, the third largest fund receiver -- Power Division -- utilised only 11 per cent of the Tk 31.33 billion allocated and the fourth largest spender, Health and Family Welfare Ministry, spent only 7.0 per cent of Tk 30.64 billion.
The government undertook the biggest ADP this fiscal year to boost the economy from the sluggish momentum created during the tenure of the last caretaker government and the global economic meltdown. Yet the poor implementation rate did not match up with the expansionary public investment plans envisaged in the 2009-10 budget to give enough stimuli to the domestic economy to ward off global recession impacts and chase a growth target of 6.0 per cent or beyond. No big breakthrough in implementing the ADP was achieved in the first three months of the current fiscal year. As has been said, only 10 percent of the total ADP outlay was implemented which is 1.0 percentage point and 3.0 percentage points more than the first quarter of the previous two financial years while 1.0 percent point lower than 2006-07. During the time both revenue collection and investment were poor. The revenue growth was only 9.0 percent.
Financial analysts said a higher growth is essential for reducing poverty, which is the prime target of most of the announced development goals of the Awami League-led alliance government. To achieve that target, more public spending is needed to boost domestic production, demand and employment. If such a trend of slow project implementation continues in the coming months, the goals of increasing domestic demands will be jeopardised. Moreover, economic growth might slow down further, they said.
The country's gross domestic product grew only 5.8 per cent in the last fiscal year, lowest in past five years. The latest International Monetary Fund (IMF) mission forecast that Bangladesh's economic growth would slow down to 5.0 per cent because of global recession impacts while continued problems in ADP implementation would hold back the overall investment activities. Finance minister AMA Muhith, however, contested the forecast, saying the growth would not be less than 6.0 per cent, if not more. Huge idle money lying with commercial banks indicates that the private sector investment has also been stymied. Commercial banks have been wallowing in idle money worth Tk 350 billion as of June this year compared with Tk 130 billion in June 2008 due to slowing demand for credit from the private sector.
Meanwhile, the Ministry of Finance, Bangladesh Bank and the National Board of Revenue (NBR) have identified poor implementation of Annual Development Programme (ADP) as the prime cause of the country's present economic slowdown. The finance ministry has already prepared a position paper. Slow progress in implementing the programmes taken in the current fiscal year and challenges in the country's economy against the backdrop of world recession have been highlighted in the said paper. Bangladesh Bank and the National Board of Revenue (NBR) have sent the finance ministry reports on the country's economic situation during the first quarter of the current fiscal year.
The NBR blamed slow pace of ADP implementation for the sluggish collection of revenue. Bangladesh Bank echoed the same saying emphasis should be given on rapid implementation of the ADP to boost investment. In its quarterly report released recently, Bangladesh Bank said given the indication of sluggish trend of spending allotted money, full implementation of ADP targeted for this fiscal is a big challenge, which needs to pace up, particularly in infrastructure projects, to help private sector gain momentum in fulfilling the aspired GDP growth. Last week, an IMF mission submitted a report to the government where they mentioned that slow pace of ADP implementation is having a negative impact on the government's revenue earning. The IMF report said the government should urgently address the root of chronic poor implementation of the ADP, including the capacity constraints and governance issues. The World Bank last month released an economic update where they gave first priority to ADP implementation for overcoming the sluggishness the economy is experiencing.
There is no denying that the avowed aim of the Awami League-led grand alliance government was to bolster demand in the market and create employment opportunities in a bid to cushion off the effects of global economic meltdown. The government was also supposed to raise the level of public spending in development sectors in contrast to revenue expenditure. Yet these objectives are yet to be achieved.
Now it is time for all the ministries, lead and line, to make up for the lost time through tackling structural deficiencies. Not only the financial targets but also the physical targets need to be met to their closest approximations so that the economy is revved up with internal resource mobilisation, timely fund disbursements and investment. This needs to be done with haste. There is no time to waste.
szkhan@thefinancialexpress-bd.com