In an extraordinary move, the government yesterday abruptly added Tk 5,000 crore to the revised ADP, a decision which is set to increase the government's bank borrowing.
If the government's ability to spend is taken into consideration, the number seems “unrealistic”, World Bank's lead economist at its Dhaka office Zahid Hussain told The Daily Star.
“And there remains a possibility of wasteful expenditure.”
The National Economic Council (NEC) at a meeting chaired by Prime Minister Sheikh Hasina approved the revised ADP, increasing the outlay to Tk 60,000 crore from the planning ministry's proposal for Tk 55,000 crore.
The planning ministry made the proposal in line with the allocation made by the Finance Division considering revenue shortfall and low implementation of ADP projects.
The additional allocation was made under pressure from various ministries despite reservation from the finance minister, which is unprecedented.
Though there are past instances of increasing the allocation at the NEC meeting considering the demands from ministries, the amount never went past Tk 500 crore, a planning ministry official said.
Finance Minister AMA Muhith told the meeting that revenue collection would see a deficit of Tk 11,000 crore this year and that ADP implementation was also slow, said officials present at the meeting.
Muhith also criticised the ministries that demanded additional fund without considering the reality. The ministries are less interested in spending foreign funds and want to spend more from the government funds, he said.
The revised ADP should be Tk 55,000 crore and if more allocation is made, the extra amount will have to be borrowed from the banking system, Muhith said.
In the first eight months of the current fiscal year only 38 percent of the ADP (annual development programme) or Tk 25,218 crore was spent as against 44 percent in the same period last year, according to planning ministry statistics.
To implement the revised ADP, more than Tk 34,000 crore has to be spent in the remaining four months which, officials said is impossible.
However, Planning Minister AHM Mustafa Kamal after the NEC meeting said the implementation status of the ADP is not unsatisfactory.
The ADP projects are running in full swing but the progresses are not visible yet, as payments were not made against the projects, he said.
When the payments will be cleared at the end of the fiscal year, the implementation status will look remarkable, Kamal added.
The planning ministry informed the meeting that different ministries and divisions had sought an additional allocation of Tk 8,777 crore from the government funds.
However, the demand for foreign funds was low as many ministries and divisions have returned foreign aid instead of seeking more money from it, the planning ministry official said.
Due to the low demand, the allocation of foreign funds in the revised ADP has been cut by around Tk 3,363 crore, he said.
The reason behind the poor demand for foreign funds is that transparency has to be maintained in spending such funds, officials of both the planning and finance ministries said.
The number of projects in the revised ADP will increase to 1,254, from 1,046 in the original plan.
Though economists stressed cutting down the number of projects in the ADP, another 557 new projects with no allocation have been included in the outlay.
In the remaining few months of the current fiscal year, the projects will be given some small allocations.
However, Muhith said no new road projects will be given allocation.
He also said the allocation for the Padma bridge project in the revised budget will not be diverted to other projects.
The government in June last year rolled out Tk 65,870 crore for the ADP, but later revised it down to Tk 55,000 crore due to deficit in revenue collections and low implementation of projects.
In the last two months, the planning and finance ministries were locked in dispute over the demand for additional funds from various ministries and divisions.
The Finance Division prepared the revised budget for the current fiscal year setting the bank borrowing target at Tk 25,860 crore. But a new bank borrowing target has to be set at Tk 31,000 crore as the allocation has been increased.
WB's Hussain said there is an incentive at the individual level to push new projects for inclusion in the ADP even when it is not necessarily justifiable on grounds of national interest.
He said: "It brings local glory besides opening opportunity for patronisation in the form of employment and works contracts."
These immediate gains sometimes lead to overlooking issues related to the propriety of technical design, management, and financing of new projects, he added.