Bangladesh’s Annual Development Programme (ADP) experienced a significant setback in the first eight months of the current fiscal year (FY), amid sluggish economic activity and the political unrest that occurred during the 2024 national election. According to the Implementation Monitoring and Evaluation Division (IMED) of Bangladesh, spending under the FY2023-2024 (July 2023 to June 2024) ADP hit a 14-year low in the first eight months of the current fiscal year, with implementing agencies using just 31.17% of the total allocation – equivalent to Tk856bn ($7.2bn) – until February 2024. Despite the government’s austerity drive – which included a curb on development spending and a caution in borrowing, amid the urgency to address fiscal challenges – the implementation rate stood at 32.1% during the same period of FY2022-2023. The current implementation rate is even lower than that recorded during the coronavirus pandemic (during the same period of FY2020-2021) – equivalent to 33.83%. The shipping ministry, which is among the top ten ministries and departments that received the highest allocation in the FY2023-2024 ADP, had only spent 13.88% of its allocation as of February 2024. Additionally, several top 15 ministries and departments have also not been able to increase their expenditure; for instance, the Directorate of Secondary and Higher Education spent only 14.71% of the FY2023-2024 ADP outlay in the first eight months of the current fiscal year, while the Directorate General of Health Services spent 20.59%, and the industries ministry spent 20.81%.
In early March 2024, the government revised down its allocation for the current ADP by 6.8%, from Tk2.6bn ($22bn) to Tk2.5 trillion ($20.5bn). This downward revision is due to the slow pace of the implementation of projects, along with a shortage in mobilised funds amid gaps between revenue-collection targets and real receipts. Education and health are the two sectors that will have the deepest funding cuts in the revised ADP (RADP), with the allocation for the education sector being slashed by 42.35%, and that for the health sector being slashed by 25.53%. As part of the RADP, BTk1.6tn ($13.4bn) of funding will come from the government’s own resources, while the remaining Tk835bn ($7bn) will come from external sources as project aid (PA). At a press conference that was held after announcing the RADP, the Bangladeshi Planning Minister reported that the implementation of development projects had been affected by the political violence that occurred before the January 2024 elections; as a result, the ADP implementation rate will be slightly lower this fiscal year.
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According to the IMED, considering the current economic situation, the government does not plan to release funds for less crucial projects. However, there will be no disruptions to the funding of projects that are deemed important and directly benefit people, generate employment, and contribute to the country’s economic development. In a positive development, the government has decided to boost allocation for the Rooppur Nuclear Power Project (RNPP) despite budgetary cuts in the ADP, in line with its commitment to expedite the implementation of one of the country’s most expensive projects. According to an official of the Planning Commission, the allocation for the project – which was originally set at Tk87.1bn ($729.6m) in FY2023-2024 ADP – will increase by an additional Tk10bn ($83.8m), upon the recommendations of the Ministry of Science and Technology.
Considering the delays in project implementation, coupled with other headwinds like elevated inflation and its impact on private consumption, low foreign exchange reserves and import restrictions and their subsequent impact on private investment, GlobalData expects growth in the Bangladeshi construction industry to slow from 5.9% in 2023 to 4.6% in 2024. Growth will however be supported by public investment, amid Prime Minister Sheikh Hasina’s continued focus on infrastructure investments. In the first meeting of the Executive Committee of the National Economic Council (ECNEC) under the tenure of the new government, which was held in February 2024, Prime Minister Hasina directed concerned authorities to give utmost importance to project selection and processing, along with speedy completion of the ongoing projects. In the meeting, the government approved nine projects with an overall estimated cost of Tk33.5bn ($281m).
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