Budget implementation rate in Bangladesh unsatisfactory

A national budget is the means of providing control over expenditure and revenue by the government. Budgets help maintain stability and control over the government’s finances. They are also a means of providing accountability through financial reporting. The objectives of the budget are to address the needs and demands of the country’s people. The budget, known as a financial plan for a fiscal year, is mainly drafted to change the economic fate of the masses.

The actual output of the budget depends on the budget implementation rate. The budget can launch the economy in the right direction, and the government needs to display the action and will to implement it. Unfortunately, Bangladesh is yet to fully show its creditability in executing budgetary allocations. Due to a lack of efficiency, accountability, and capacity, the budget at the end of the fiscal year becomes questionable. Besides, widespread corruption is one of the key causes in implementing the total budget within the relevant fiscal year.

Though the economic size of Bangladesh has been expanding at a decent pace for the last one decade, Bangladesh even now faces troubles in respect of implementing the full budget size. Bangladesh’s GDP size recently stands at $ 465 billion whereas the size in FY 2020-21 was recorded at $ 416 billion. The economy grew by 7.25 per cent even amidst the virus-hit economic atmosphere. In its study, the World Bank (WB) said that Bangladesh’s economy is expected to grow by 6.4 percent in FY 2021-22 where around 6.6 percent was estimated by the International Monetary Fund (IMF). The economic growth in Bangladesh must expand further if the budget size is to be fully utilized.

Budget credibility remains a challenge. The gap between the original and executed budgets has grown substantially in recent years. A newspaper reported that since FY 2008-2009, the government has not been able to implement the budget fully. The government in FY 2011 was successful in implementing around 97 per cent of the budget. The budget implementation rate in FY 16, FY 18 and FY 20 was about 80 per cent. Around 79 per cent in FY 17, 84 per cent in FY 19 and 81 per cent in FY 21 was recorded.

Experts attribute this decline to a number of factors, including weak governance, the rise of corruption, increasing inefficiency, a lack of accountability, and a lack of capacity building. With an average of 80 per cent budget execution rate, the economy might not have reached the goals set earlier in time. Bangladesh is likely to face many economic challenges soon despite the present stable economic situation. When Bangladesh becomes a developing country, ongoing facilities related to international trade would be withdrawn.

Zahid Hussain, a former lead economist of the global lender’s Dhaka office, said budgetary targets can be over-achieved. “In the case of Bangladesh, it is always under-achieved. The problem lies in the target setting both in terms of revenue and expenditure. These two continue to be under-achieved.”

As per United Nations compliance, Bangladesh has to show significant success in Sustainable Development Goals by 2030. Materializing the strategic plan 2021-2041 set by the government relies on budget execution in efficient ways.

According to economists, in the context of Bangladesh’s economy, public expenditure to GDP ratio should be around 20-22 per cent. Bangladesh, for many years, has been seeing about 15 per cent public expenditure to GDP ratio. Bangladesh has one of the lowest public spending to GDP ratio in the world. India and Nepal – neighboring countries of Bangladesh–had public spending to GDP ratios at 27.1 per cent and 30.5 per cent in 2019 where Bangladesh had 15.1 per cent. In 2020, the unemployment rate in Bangladesh was at 4.15 per cent, but the youth unemployment rate stood at 11.56 per cent in the same year. 85 per cent of Bangladesh’s workforce are found in the informal sector as self-employed or wage earners. The national poverty rate for Bangladesh is estimated at 20.5 per cent and the extreme poverty rate at 5.6 per cent. Now the poverty rate is estimated to have risen due to the impact of the pandemic to 29.5 per cent and the extreme poverty rate to 10.5 per cent. According to the Medium-Term Macroeconomic Policy Statement, 2021-22 to 2023-24, “Reduction in poverty and inequality, and ensuring inclusive development has been at the core of the government’s development agenda”. The statement points out that the government expenditure for poverty reduction went up to 10.5 per cent of GDP in 2020-21 compared to 9.12 of GDP in 2008-09. The Gini coefficient, a measure of income inequality, rose from 0.458 in 2010 to 0.482 in 2016, indicating worsening income inequality in Bangladesh.

An Open Budget Survey (OBS) report said that Bangladesh lags far behind in budget transparency compared to South Asian economies. The Open Budget Survey is part of the International Budget Partnership’s Open Budget Initiative, a global research, and advocacy program to promote public access to budget information and the adoption of inclusive and accountable budget systems. According to an OBS study in 2019, Bangladesh scored 36 in budget transparency issues whereas Afghanistan scored 50, India 49, Sri Lanka 47, and Nepal 41–all above scored more than Bangladesh.

Only Pakistan’s score is 28. And Pakistan is the only country in South Asia with a score below Bangladesh. Bangladesh ranked 79th out of 117 countries in budget transparency. Pre-budget consultation practice has, in the meantime, been started under the collaboration of the Bangladesh National Parliament. Public hearings before budget approval are urgent for ensuring acceptability among the country’s citizens. Public participation in Bangladesh on budgetary affairs is not significant at all.

An OBS (Open Budget Survey) study revealed that Bangladesh scored 13 out of 100 in public participation on budget issues. Nepal 14, Sri Lanka 22, and Afghanistan 15 are ahead of Bangladesh regarding public participation. But, Bangladesh is ahead of India and Pakistan in this respect. India scored 11 and Pakistan only 4.

Since Bangladesh has set goals to become high middle-income country in 2031 and a developed country in 2041, the need to execute the full budget is a must. In this respect, efficiency in utilizing the entire budget has to be grown at any cost. Intending to expect a decent macroeconomic outlook, there is no alternative to increase the budget implementation rate. It is high time to follow the peer economies of Bangladesh regarding the ways they are showing success in budget execution in full.

With increased implementation rate, success is expected to come in the issues of the unemployment rate, poverty reduction, high-income inequality, and LDC graduation challenges.

The stakeholders must focus on the importance of budget execution. There is hardly any point in having a budget if it remains largely unimplemented. Budget implementation has registered a declining trend in recent years. The authorities concerned must gear up their efforts to contain the trend.

The expectation from the current visionary government is to see a hundred per cent budget implementation rate from the next fiscal year of 2022-23. We hope that the expectation is fulfilled.

Md Mazadul Hoque is an economic affairs analyst. He can be contacted at mazadul1985@gmail.com