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Bangladesh government has lifted the restriction on spending block allocations for the police, allowing funds to be utilised for construction and repair works despite the ongoing austerity policy aimed at reducing public expenditure.
The government has been following a stringent austerity approach to curtail public spending amid national and international economic challenges. As part of this effort, the Ministry of Finance had imposed a ban on all forms of block allocations in the budget for the ongoing fiscal year 2024-25.
However, on September 11, the Finance Division issued an order exempting the police from the ban on block allocations, which had initially been put in place to reduce unnecessary spending. An earlier circular, issued on July 4, had introduced restrictions on several sectors, including foreign travel, as part of the government’s cost-saving measures.
The spending ban has been lifted to facilitate the repair of non-residential police buildings and other structures damaged during the anti-discrimination student protests.
Additionally, the restrictions have been eased for work on non-residential police buildings where 70 per cent of the construction has already been completed.
Private sector assistance
Dhaka Metropolitan Police (DMP) stated that while the government has not yet commenced repairs on non-residential police infrastructure in Dhaka, private companies have come forward to assist.
Some key police boxes are being repaired by private firms, illustrating the ongoing collaboration between the private sector and law enforcement in maintaining essential infrastructure.
Issues with block allocations
Sources from the Finance Ministry's relevant department have indicated that block allocations in the budget often go unspent due to the absence of detailed plans, leading to potential wastage, theft and embezzlement.
Nonetheless, block allocations continue annually to meet various demands, even though they are not always clearly outlined in the main budget framework.
The largest block allocations are typically directed towards the activities under the Local Government Division. In addition, funds are allocated to various initiatives aimed at uplifting marginalised communities and for special government initiatives. These allocations are also used to satisfy demands from government supporters.
Finance Division sources revealed that the Prime Minister’s Office and the Ministry of Finance usually jointly approve these block allocations. A significant portion is directed towards Members of Parliament (MPs), who receive these special funds in addition to regular development allocations for their constituencies. On occasion, ruling party MPs receive additional allocations for specific projects.
Reduction in block allocations
In the 2024-25 fiscal year budget, block allocations were reduced by Tk 1,029 crore compared to the previous year. Despite the reduction, the government decided not to spend this amount, considering the ongoing economic conditions.
The current block allocation stands at Tk 6,256 crore, down from Tk 7,285 crore in the 2023-24 fiscal year.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, told The Business Post that the government’s decision to suspend block allocations was wise.
He pointed out that the government spends between Tk 7,000 to 8,000 crore annually on subsidies for remittances. "Cutting this could save a significant amount and help reduce the budget deficit," he said.
"Additionally, this could reduce the need for domestic borrowing by at least Tk 6,250 crore, which would ease pressure on credit flow to the private sector," he added.
Local infrastructure needs
Despite the cutbacks, many local infrastructure issues require immediate attention. Roads, schools, and colleges often need urgent development and repair, necessitating funds. Block allocations also help the government meet emergency procurement needs or other discretionary expenses.
Additionally, the Ministry of Public Administration uses these funds to cover unforeseen expenditures, as managed by the Ministry of Finance.
Procurement halt and exceptions
Bangladesh Public Procurement Authority (BPPA) issued a circular on January 2, mandating that all forms of minor block allocations would be halted. However, up to 80 per cent of the allocated budget may still be utilised for essential services such as electricity, petrol, oil, lubricants, and energy.
The circular further stipulated that the construction of new residential and non-residential buildings would be suspended, except for projects under the Ministries of Education, Health, and Agriculture, as long as they fall within the operating budget.
For ongoing construction projects, funds can be released only if at least 70 per cent of the work has been completed. In such cases, expenditure will be allowed following approval from the Finance Division.
