The government formulated a national budget worth Tk1,63,589 crore in the fiscal year 2011-12 and cut it by 1.45% at the middle of the fiscal. However, the implementation rate stood at 93.18% at the end of the fiscal as the government spent a total of Tk1,52,428 crore.
Formulating a budget worth Tk6,78,064 crore in the fiscal year 2022-23, the finance division cut allocation by 2.59%.
At the end of the year, the total expenditure on budget implementation stood at Tk5,73,857 crores.
Documents of the finance division said the budget implementation rate has come down to 84.63% in the FY23 over the span of 12 years as actual expenditure Tk1,04,207 crore lower than the allocation.
The review found major deterioration in every indicator of budget implementation including revenue mobilisation, public expenditure, and implementation of the Annual Development Programme (ADP) in recent years.
The rate of target achievement in revenue collection has declined from 96.88% to 84.68% over a period of 12 years.
At the same time, the ADP implementation rate has decreased from 89.95% to 78%.
The implementation of a new budget worth Tk7,97,000 crore in FY2024-25 started on Sunday (1 July) amid the continuous failure of implementation.
The size of the budget increased by only 4.62% compared with the original allocation of the outgoing fiscal, but expenditure increased by 11.56% compared to the revised budget.
Revenue collection should increase by 13.18% to achieve the target, while the tax collection by the National Board of Revenue (NBR) is to be increased by 17.07%.
Economists and experts believe that the implementation of this budget approved by the parliament will be challenging due to slow revenue collection, the government's financial crisis, increasing inflation, foreign currency reserves and the exchange rate crisis.
They said that it would be very difficult to meet this huge revenue collection target, which would hamper public spending particularly financing for the implementation of the ADP.
They also said that the approved budget for the new fiscal in Bangladesh is very low compared to neighbouring and peer countries in terms of the Gross Domestic Product (GDP).
The allocation in education, health, social infrastructure and social security is insufficient as the size of the budget is less than the demand.
Fewer implementation of the declared budget would disrupt important services like education, health and social infrastructure.
Analysis of the budget allocations and actual outturns over the past 11 years reveal systematic overallocation in each year, revealed a report titled, Medium-term Macroeconomic Policy Statement” published by the finance division.
The report claimed that the average allocation termed as the expenditure forecast error has been found to be 2.4% of the GDP during the period FY13 to FY23.
Like expenditure, revenue forecast is also shown to be overestimated systematically claimed the report and said the magnitude of overestimated revenue every year shows a similar repeating pattern.
This pattern of optimistic bias in revenue collection may pose a risk in the government financing arrangements.
After quantifying deviations of the past 11 years, the average size of the optimistic bias has been found to be 2% of the GDP, the report concluded.
The document revealed that the size of the national budget in the new fiscal year is estimated at 14.2% of GDP, which is about half of the Budget GDP ratio in India.
Apart from that, the size of the budget in Bangladesh is significantly lower than China, Malaysia, Vietnam and other countries in terms of GDP.
“Bangladesh’s economy is stuck in the trap of lower implementation both in terms of revenue mobilisation and expenditure,” said Policy Dialogue (CPD) Executive Director Dr Fahmida Khatun.
She said the budget deficit remained at a lower level as the government's revenue and expenditure are lower than announced in the budget.
“The people of the country are being deprived of real welfare and the stability of the macroeconomy is also being disrupted due to such sub-optimum level equilibrium,” the economist said.
She said that the budget is prepared in every fiscal without providing the expected allocation to the development sector especially the education and health sector by continuing the expenses of the management sector including the salaries and allowances of government employees, and loan interest.
Commenting that this has been done in the budget of the new financial year, she said, “Although there is an urge to reduce inflation, provide cash and food assistance to protect the poor from the pressure of inflation and increase the allocation for the poor in social security, there is no proper initiative in this regard in the budget.”
Stating the government’s promise of allocating 1% of GDP to health and 2% to education has not been fulfilled this time either, she commented that if the amount allocated in the budget is not spent, the problems of low-income people will increase.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur said the lack of efficiency and sincerity of the officials concerned in the implementation of the budget as well as the lack of ability of the government in financing are the reasons behind the lower budget implementation.
He said spending on salary, allowances other revenue expenditures are automatic but spending on development depends on project implementation.
According to the economist, a huge number of projects have been stalled for years and money allocated to all these projects remained underutilised. However, those involved are not being held accountable or punished for their failure.
He said that if the successful officials can be rewarded in addition to punishing the failed officials, the project implementation will speed up and the budget implementation will also be accelerated.
Dr Ahsan H Mansur said the entire implementation of the budget will not be possible due to the financial crisis in addition to inefficiency in implementing the projects.
He said that even as of 11 months of the fiscal year, the NBR is lagging behind in tax collection by a large margin.
“NBR's tax collection will be at least Tk25,000 crore short of the target in the outgoing fiscal and it would be difficult to achieve a growth over 17% overcoming this shortfall,” he said.
He also said that aggregate domestic demand is decreasing due to inflation. The government also implemented an import restriction policy due to the dollar crisis. Due to all these reasons, it will be difficult to increase the collection of VAT and import tax.
Commenting that it will be difficult to increase the implementation of ADP due to the contractionary policy, he further said that the foreign aid exemption for the implementation of the project is also not increasing.
“All in all, implementing the budget of Tk7,97,000 crore will be a big challenge,” he said.
16.12% average deviation in budget implementation
The government has been able to spend only 83.88% of the budget allocation in the last 12 years from FY 2011-12. That is, for every Tk100 allocated, Tk16.12 remained unutilised.
However, the budget implementation rate decreased by 8.55 percentage points from 93.18% to 80.31% at the same time.
In FY2013-14, the budget implementation rate fell to 84.59% - a big drop from over 90% in the previous fiscal.
The rate fell to 80.31% in FY2019-20 due to several lockdowns in the COVID-19 pandemic.
While the budget implementation rate rose to around 86% in the fiscal year 2011-22, and it declined continuously in the following two years.
