Revising public expenditure management

Soon after assuming office, the interim government's planning and education adviser Prof. Wahiduddin Mahmud made his observation candidly clear about the country's development spending that in many cases, he considers, is not need-based, but politically motivated. "There are irregularities in taking up projects as some are undertaken by the influence of the contractors and some are by dishonest persons," he said while briefing journalists in his Planning Commission (PC) office. Projects which do not have priority and prospect of better outcomes have to be reviewed and scrapped, he categorically said in resetting priorities.
One may deduce from his statement that there may still be scope to revisit some of the development projects, including the ongoing mega ones, a number of which are either in the middle of being completed or nearing completion. The ongoing 10 mega projects have received nearly Tk 510-billion allocations in the current fiscal year (FY) 2024-25 Annual Development Programme (ADP). The Roopur nuclear power plant alone has got an allocation worth Tk 105.02 billion, MRT-6 Tk 19.75 billion, MRT-1 Tk19.42 billion, MRT-5 (northern) Tk 59.68 billion, Bangabandhu Rail Bridge construction project Tk 25.60 billion. Besides, the ongoing Padma rail-link project has received Tk 35.44 billion, Dohazari-Ramu-Ghundum rail line Tk 14.53 billion. Some other mega projects, including the Matarbari port development, Pyra port development, Dhaka Elevated Expressway, Dhaka-Ashulia elevated expressway, Airport 3rd terminal, and Elenga-Hatikamrul-Rangpur 4-lane highway projects are also going on. Revisiting them at this stage would of course not mean major changes or abandoning any of them but reviewing the course of work and remedying any flaw that may be found to hinder smooth completion.
What the Adviser mentioned is pretty well known. Poor and inefficient implementation of the ADP has been a problem the country has been struggling with on a regular basis. The two key factors often pointed out as instrumental to poor ADP implementation are faulty method of selecting projects and excessive donors' requirements. Selection of projects and methodology adopted has been a subject of controversy for long. A World Bank (WB) study sometime ago reiterated the need for a sound mechanism to be worked out by a set of knowledgeable professionals in order to identify projects consistent with national priorities. The study pointed to the lack of adequate economic analysis, funding strategies, abundance of unapproved projects, a lack of asset register and absence of coordination between development and non-development budgets, shortage of expert manpower and weak capacity of the Planning Commission and Planning Cells in the ministries as some of the major obstacles to establishing an efficient public investment management system in the country.
While selection of projects is often not aligned to national needs and priorities, a lack of capacity to handle projects efficiently has resulted in white elephants that produce negative returns. The WB study report also mentioned that slow and back-loaded disbursements and poor quality of expenditures reflect a far from adequate management system for public spending under the ADP. The report highlighted the undesirable cost the country has to shoulder on account of delays due to underutilisation of ADP projects that translates in cost and time over-run.
In line with the WB report, Prof. Mahmud said sometimes the ministries take non-priority projects for constructing complexes and buildings which remain idle and unutilised. He suggested that the PC officials scrapped the projects which are approved but involve waste of money. "There are lots of irregularities in project design, cost estimation and execution period. The irregularities could be due to a lack of capacity and could also be due to the influence of the contractors", he said. Referring to what is billed as the highest unit-cost record in Bangladesh's road construction, the planning adviser said that since there were irregularities, especially in the infrastructure-related big projects, their cost and time have been overrun. The Adviser told journalists that he had instructed the Implementation, Monitoring and Evaluation Division (IMED) of the Planning Ministry to make a report on reasons behind 3-4 times revision of some key projects.
Terming the past government's higher public-expenditure policy faulty, he said it had only run for enhancing GDP growth rather than for creating employments. In this connection, one may recall Economists like Prof. Amartya Sen who famously argue that GDP is not a true indicator of development and growth, though on paper, development investments reflect a growth in GDP which tends to be misleading. According to them, the predominance of GDP as a measure of economic growth is archaic because it is easier to quantify the production of goods and services than a multi-dimensional index can measure other welfare achievements. It's because of this, GDP is not, on its own, an adequate gauge of a country's development. The planning adviser echoed the same idea saying that the last government tried to invest more on infrastructure development for enhancing GDP growth considering it "very prestigious".
To bring the macro-economy to a stable state, the need for crafting public expenditure policy with an eye on curbing inflation alongside scrapping wasteful spending cannot be overemphasised. It's time the planning commission overhauled its modus operandi with strict guidelines to follow in the future.

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