The finance ministry has suspended the block allocation expenditure in the budget for the current fiscal year 2024-25 as part of efforts to cut government spending amid national and international economic conditions.
This year, the allocation was set at Tk 6,256 crore, down from Tk 7,285 crore in the fiscal year 2023-24.
A new directive issued by the Finance Division on 4 July includes guidelines on expenditure across various government sectors, including restrictions on all types of foreign travel.
Sources within the finance ministry indicate that block allocations in the budget often remain unspent due to a lack of specific plans, resulting in waste, theft, and embezzlement. Despite this, annual demands for these allocations persist, often without clear mention in the budget's main framework.
The largest allocations go to activities and initiatives under the Local Government Division. Additionally, block allocations are used to implement various projects for disadvantaged groups and to fund special government initiatives. These allocations also cater to various demands from government supporters.
These funds are jointly approved by the Prime Minister's Office and the Ministry of Finance, frequently earmarked for MPs, providing extra funds for local development beyond regular allocations. Occasionally, these special allocations are made for specific projects requested by ruling party MPs.
However, many allocations remain unused due to inadequate planning and accountability.
Critics argue that these allocations often go to waste, with MPs often not being able to spend the entire amount.
Specialists defend block allocations
On the other hand, specialists state that block allocations play a crucial role in advancing underprivileged groups and supporting female entrepreneurs. Economists believe that block allocations are essential for sustaining initiatives aimed at disadvantaged communities and projects that empower women, provided there are clear plans and proper accountability.
In the current FY25 budget, block allocations have been reduced by Tk 1,029 crore compared to FY24. Despite this reduction, the government has decided not to spend these funds due to the national and international economic situation. The allocation for the current fiscal year is Tk 6,256 crore, down from Tk 7,285 crore in FY24.
Dr Zahid Hossain, former lead economist at the World Bank's Dhaka office, told The Business Post that the government's decision to halt block allocations is correct.
He noted that the government provides Tk 7,000 to Tk 8,000 crore in subsidies annually for remittances.
“Halting the block allocation could save significant funds and reduce the budget deficit. Additionally, borrowing from domestic sectors could decrease by over Tk 6,000 crore, benefiting private sector credit flow,” he said.
Local issues often require urgent funding for road repairs, schools, and emergency purchases, which these allocations cover. Additionally, these block allocations are maintained for urgent government purchases and high-end expenses. The Finance Division also uses these funds to cover unexpected costs of the Ministry of Public Administration.
Late finance minister cite fund misuse
The late finance minister Abul Maal Abdul Muhith criticised the misuse of these funds, stating that MPs' development proposals often go unexecuted by Local Government Engineering Department (LGED) engineers.
He added that engineers from the Local Government Division provide many excuses, which are often baseless.
Muhith also noted that Zilla Parishad spend allocations late in the fiscal year, carrying over expenditures to the next year, facilitating corruption.
Austerity measures
As per the circular issued on 4 July, besides suspending block allocation expenses for FY25, all types of government-funded foreign travel, workshops, and seminars have been halted. Essential travel may be allowed with approval from relevant authorities.
Participation in Master's and PhD courses funded by foreign sources, government-supported scholarships, or fellowships is exempt. Training abroad, fully funded by foreign entities, is permitted upon invitation.
The Bangladesh Public Procurement Authority's circular from 2 January must be followed for foreign travel under Pre-Shipment Inspection (PSI) or Factory Acceptance Test (FAT), requiring prior approval from the Prime Minister's Office (PMO).
The finance ministry has also issued guidelines for austerity, limiting expenditures from various economic codes under the operating budget of FY25. A maximum of 80 per cent of allocated funds can be spent on electricity, fuel, and energy sectors.
New construction is halted except for the education, health, and agriculture ministries. Ongoing projects over 70 per cent complete may continue with Finance Division approval.
