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Managing Expectations in Public Expenditure for Development-Updated

Managing Expectations in Public Expenditure for Development-Updated

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Published by: zchoudhury on Jun 04, 2012
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06/04/2012

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Managing Expectations in Public Expenditure forDevelopment
Ziauddin Choudhury
In a few days Bangladesh will have its forty first annual budgets since the
country’s inception, and third by the country government. Judging from the
past few years budgets it is likely to be a humongous budget, several
thousand crores higher than last year’s
budget of 1.64 trillion crores before
which the country’s f 
irst budget of 784 crores pales into nothingness. Yet,
Bangladesh’s public expenditures at 14
-15 percent of our GDP remainsamong the lowest in the world, which is consistent with a very low revenue-to-GDP ratio of about 10 percent. Our revenue base is low; therefore, ourcapacity for incurring huge public expenditures is also limited. We met ourfinancing gap initially through external financing (primarily officialdevelopment assistance). However, as our growth performance remainedstrong, net foreign financing of the deficit declined significantly from aboutfive percent of GDP in the 1990s to about two percent now.To an average person the budget has, however, two visible aspects
taxesand expenditures. Since direct taxes affect only a small percentage of ourpeople, it is the expenditure part of the budget
more precisely developmentexpenditure that grabs domestic and international attention, even though itis less than half of total public expenditure. Yet it is in spending andmanaging this part of our annual budget appropriation we seem to havenumerous pitfalls where we stumble, and are scolded internally andexternally. That part of the budget, known as the Annual DevelopmentProgram, finances our development needs and expectations. It is thisprogram that attracts financing from our development partners, and hencethis attention.The Annual Development Program has been growing at a rate of 12 percentover last six years on average. Three decades ago over eighty percent thisprogram would be financed with external assistance. The dependency hasreduced substantially averaging slightly below 50 percent now. Four bigpartners in this development are the World Bank (through its soft termlending agency IDA), Asian Development Bank, Japan, and UK. Althoughthese four do not exactly contribute to the full external assistance need, theyfund the bulk of our development expenditures. They provided about 71percent of total foreign during 2005-2009. Naturally they are anxious to see
 
along with us the beneficiaries how these expenditures are allocated, utilizedand managed.Every year we embark on this development program with high hopes, highbudgets, and we invite our donors to participate. The donors oblige becausethey want to see us develop, attain our goals to eradicate poverty, raiselevels of education, and provide employment and training to our people. Wealso want to develop our infrastructure in transportation, communication,health and education facilities, and invest in other modern technologies. Theresult is that every year we have a plethora of development projects in ourportfolio, some undertaken with due diligence, some with rudimentaryfeasibility studies, and some others at
the behest of a political leader’s
constituency. This we do despite the fact that we routinely revise our ADPevery year since the gap between plan and actual performance is tenpercent or more downward.In any given year we have nearly a thousand projects included in ADP.According to a report the FY07 ADP allocation was programmed to supportimplementation of 852 projects/programs (715 investmentprojects/programs and 137 technical assistance projects/programs) costingTk. 1,968 billion. By mid-year, only 33.1 percent of investmentprojects/programs and 11 percent of technical assistance projects had beenimplemented. This implies that it takes an average of 7.1 and 6.6 years tofully implement the remaining investment and technical assistanceprojects/programs respectively. According to another report for the currentfiscal year about 28 per cent of the allocation made under the ADP wasutilised during its first half up to December last.This is about the aggregate ADP implementation. Let us look at the segmentof development projects that is funded by the World Bank (IDA). Accordingto 2010 report on the status of IDA funded projects under implementation inBangladesh, there were 28 projects, including three that were yet to belaunched. Work had begun in some projects as far back as 1999, yetdisbursement in projects ranged from a low of 10% to a maximum of 90%of the grant/credit amount. And this is about projects where theimplementation period was generally assumed to be 4-5 years!Delays in implementation of projects have reached a chronic stage in ourcountry and these have far reaching consequences. On the one hand it tiesup funds which could have been better used for some other worthy causes,
 
and on the other it makes our donors shy away from new commitments. Weare between a rock and a hard place when we ask for new funds when theprojects that we have embarked upon drag on for years, and remainincomplete.Project implementation delays have led to another set of problems--a highlybunched pattern of reported ADP expenditure, particularly in the last quarterof the fiscal year. This has also raised questions about the credibility of expenditure utilization and program/project implementation.To what do we attribute this low performance and slow implementation of projects? Our development partners have often cited many obstacles androad blocks in ADP implementation. Principal among these are largelydiscretionary ADP allocation system that does not seem to accommodatespending ability; carrying a huge back log of old projects each year; anddiverting resources to some projects to accommodate increasing projectscope at the cost other projects. To these they have also added otherreasons such as lack of uniformity in capacity for implementation across lineministries; fragmentation of duties and accountabilities among ministriesand departments; absence of decentralization in decision making; andbureaucratic delays and inertia in procurement and disbursement.There is a considerable gap between planning and execution apart from lackof capacity for project planning and implementation. Skills in line ministriesare not of a uniform standard leading to a varying degree of success inproject implementation. The quality and effectiveness of the ADP portfoliothat averages more than one thousand projects/programs annually, hasbeen of great and long-standing concern to policy makers. Donors havequestioned the practice of adding new activities while continuing with allexisting projects/programs at the expense of inadequate maintenance of existing ones. Scope creep in projects and lack in resources to implementprojects have led to time and cost overruns; projects expected to becompleted in three years have taken double that or even more.Are there ways to manage our expectations in this highly visible area of public expenditure? Are there ways to better manage our AnnualDevelopment Plan and ensure a more pragmatic approach to implement it?

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