ADP spending picks up in July-March

Development spending rose 42.30 percent in the first nine months of the current fiscal year (FY) thanks to a higher execution rate in March following the national election.

The government managed to spend Tk 107,612 crore from the annual development programme (ADP) in the July-March period of fiscal 2023-24, according to data of the Implementation Monitoring and Evaluation Division (IMED).

During the same period of FY23, public development spending amounted to Tk 98,521 crore, or 41.65 percent of the ADP.

This is the first positive growth since at least August this fiscal year as expenditure from the ADP has dipped every month since then compared to a year ago.

For example, the execution rate in the July-February period was the lowest in at least 14 years.

The ADP execution rate increased by 8.65 percent in March, contributing to the overall execution rate of 42.30 percent for the first nine months.

Following the national election, the line ministries made significant efforts to guarantee that development projects are completed on time, according to planning commission officials.

"Though the growth has slightly increased, the picking up trend is a good sign," said Ashikur Rahman, a senior economist of the Policy Research Exchange of Bangladesh, a private think-tank.

"It [increased ADP spending] is a reflection of the post-election situation as line ministries and divisions had started to release payments for contracts at the time," he added.

Citing how FY24 is witnessing sustained macroeconomic tension while there was political uncertainty surrounding the recent election, Rahman said the slowdown in ADP implementation was expected.

"But the situation might improve in FY25," he added.

Effective ADP implementation improves the usage of public resources as it enhances the quality of public investment.

However, ADP utilisation is measured by resource usage and not the quality of projects or infrastructure.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, believes the government should ensure quality implementation using its revenue budget rather than depend on foreign loans.

"There is a basic difference in ADP implementation during normal and challenging periods of the country's economy," he said.

If the government agencies can execute projects on time and at the initial estimated cost, it will definitely be a positive move, Moazzem added.

He also said such efforts would help reduce the project cost and time overruns alongside corruption while ensuring a good economic return as well.

But even if the government cannot implement its expected highest rate of ADP execution, it is not a disappointing issue.

Here, it is important to question how the government is sourcing the disbursed money, Moazzem said.

"Without increasing the debt burden, we expect austerity measures from the government to rein in inflation," he added.

In March, Bangladesh's external debt crossed the $100 billion mark for the first time, indicating a challenging future amid foreign exchange shortages. Of the amount, most was secured as project loans.

The government plans to spend Tk 2.74 lakh crore for implementing some 1,400 development projects under the ADP in FY24.

But in response to the lower execution rate this year, the Planning Commission revised down its ADP implementation target to Tk 2.54 lakh crore on March 12.

During the July-March period of FY22, ADP implementation stood at 45.05 percent of the total budget while it was 41.92 percent in FY21.

Among the 15 highest recipients of ADP allocations, the shipping ministry was the worst-performing division in the July-March period while the power division was the top performer, spending 63.87 percent of its budget.