Limiting development project spending

The government is opting for austerity measures amid the high inflation and price hike of goods across the world due to the Ukraine-Russia war and the fallout from the Covid-19 pandemic. The government has gone for postponing fund releases for less-priority projects as a cost-cutting measure amid the global economic downturn. According to a report published in The Business Post yesterday, Prime Minister Sheikh Hasina on Monday directed not to implement any less important development projects that fall under the C-category in a bid to save resources in this trying time of austerity.

The development projects of the country have already been categorized into A, B and C categories. Projects under the A-category would be implemented immediately. For the B-category projects, up to 75 per cent of costs can be spent while the implementation of C-category projects will remain suspended now. This directive is the latest in a series of austerity measures adopted by the government to thwart a serious economic crisis.

According to the TBP report, the Prime Minister came up with the instruction at the cabinet meeting through a virtual platform from her official residence Ganabhaban on Monday. After the meeting, Cabinet Secretary Khandker Anwarul Islam at a press briefing mentioned several PM’s directives on several issues including minimizing project costs, avoiding unnecessary procurement and the use of cars by government officials. The report further says that there is still scope for overseas tours by government officials under foreign aid and procurement matters. But other overseas visits are restricted. No official can go abroad on a study tour spending the government’s money.

Thankfully the effects of the pandemic have diminished to a great extent. However, the global economy started slowing down last February because of Russia's unwarranted invasion of Ukraine. A number of factors, including the depreciation of the taka against the dollar, increases in the cost of imports, and increases in the price of raw materials, have led to inflation and a rising cost of living. Against this backdrop, the government has taken a number of measures to cut costs since last June. Decisions have already been made to introduce power cuts, suspend foreign tours, discourage the import of luxury goods, increase LC margins on imports, and bring back money laundered abroad.

Setting limits to project spending is a timely initiative. Many of the development projects are a drain on the current economy; which Bangladesh can ill afford. Making requests for an extension of a project's tenure and its costs is a regular phenomenon in the country. The huge time and cost overruns of many projects are encouraging a culture of seeking revisions since there are several grounds given in the ADP guidelines for revisions.

At the beginning of the year, 10 projects were placed before the ECNEC for revision whose original costs were around Tk 3,099 crore. We have repeatedly said that the government needs to take a closer look at the way project plans are drawn up, the reasons for the increase of project costs and the appropriate steps needed for timely completion of projects.

Economists suggest taking further steps to stop the economic situation from deteriorating into a full-blown crisis. The government has to think seriously about how it can reduce expenditure. It has to tighten its belts in the areas when it comes to spending from the state coffers. Economists have also urged the government to focus more on implementing projects that are backed by foreign aid, instead of those being implemented by domestic resources.

Amid the current fragile economic scenario, maintaining macroeconomic stability has become a big challenge. So, we support the government’s austerity drives. We believe that there is no option left for the country other than taking austerity measures to stabilise the country’s economy and avert any crisis.