IMF’s fiscal oversight extends to Bangladesh’s dev budget

The International Monetary Fund (IMF) has recommended implementing the Multi-Year Public Investment Programme to instill discipline in Bangladesh’s development budget allocation.

An IMF delegation is currently in Dhaka conducting an initial review of the $4.7 billion loan programme. Over the past few days, the delegation has met with officials from the central bank and other government agencies.

On Monday, the four-member delegation, led by IMF economist Genet Zinabou, met with officials of the Planning Commission.

The Multi-Year Public Investment Programme was a key topic of discussion at the meeting attended by Satyajit Karmaker, secretary of the Programming Division, Abdul Baki, member of the Industry and Energy Division at the Planning Commission, and other officials.

So far, IMF representatives have met with officials of the Bangladesh Bank, Finance Division, and National Board of Revenue (NBR) and outlined numerous conditions – such as reserve management, exchange and lending rates, and NBR reforms to augment revenue – for the release of the next tranche of the loan.

Now the IMF has called upon the government to oversee the management of the development budget with the implementation of the multi-year plan which presents the list of investment projects by sector and institution for 2022-2025 and the amounts allocated to each one.

Planning Commission officials said due to the large number of projects taken up by government ministries and departments, it is not possible to ensure equal funding for all projects. This is why five-year projects often take eight years to complete, and when projects are not implemented on time, the cost increases.

They said this problem occurs mainly because ministries and departments undertake projects beyond the allocation of the Medium-Term Budget Framework. To address this issue, the IMF has proposed the Multi-Year Public Investment Programme, a new formula for allocating money to development projects.

The Medium-Term Budget Framework estimates a three-year budget for all types of development and non-development allocations in each ministry and department, while the Multi-Year Public Investment Programme will only project development allocations over three years.

Officials of the Implementation Monitoring and Evaluation Division (IMED) also said if the Programme is put into practice, it will alleviate the pressure to add numerous new projects at the same time, often influenced by political considerations and lacking adequate allocation.

Planning Commission officials also said a lot of progress has been made in the formulation of the multi-year programme. The plan for the power and energy and local government sectors will be completed this year, and the preparatory work for the health sector multi-year plan is complete. These three plans, plus two more, will help the government in meeting the December 2024 target.

The IMF has also set targets for the implementation of sector-wise action plans. By December 2024, the government should have action plans in place for five sectors. The action plans for the remaining ten sectors should be readied by December 2025.

Several action plans, including those for the power and energy, local government, health, education, agriculture, and environment sectors have already been prepared, officials said, adding that the IMF has also urged the commission officials to improve their skills in making project proposals.

Why multi-year plan is important

According to a Programming Division analysis of the power and energy sector’s Multi-year Public Investment Programme, two big power projects have eaten up more than 54% of the budget for the sector in the revised Annual Development Programme (ADP) for FY22, while 85 other projects remain underfunded, which could lead to an additional delay in implementation.

The total revised ADP allocation for the power sector for FY22 amounted to Tk39,214 crore.

The report said the revised ADP allocations for 85 projects were lower than expected on the basis of the expenditure profiles for these projects.

“This increased negative fiscal space is mainly caused by the inclusion of the Rooppur Power Plant Project with a total cost of Tk1,13,000 crore and a total increase of the Matarbari Ultra Super Critical Coal-fired Power Project from Tk35,984 crore to Tk51,855 crore,” reads the report.

The report mentioned that the budget ceiling for the power and energy sector for the ADP 2022-23 and beyond needs to increase by more than 10% to accommodate the Rooppur Plant and the cost increase of the Matarbari power project.

Otherwise, it will most likely negatively impact project implementation of the whole sector, the report said.

One such underfunded project was the Barapukuria-Bogura-Kaliakoir 400kV Transmission Line Project which was taken up in January 2019 to ensure quality power supply to the country’s northern region.

The project, with around 12% physical progress as of December last year, saw an 18% cut in budget allocation in the revised ADP, which might further delay its implementation.

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