The interim government plans to slash the national budget for the current fiscal year by around Tk 1 trillion (1 lakh crore) aiming to ease pressure on forex reserves and control high inflation.
The plan to trim the budget is likely to be finalised by this month with the bulk of cuts expected to come from the Annual Development Programme (ADP).
Terming the move logical and time-befitting amid the current economic situation, experts have stressed the need for continuing with growth-oriented projects.
Earlier this year, the Awami League government placed a relatively smaller budget compared to previous years. However, the allocation structure saw little innovation. While the original budget projected spending of Tk 7.97 trillion, a significant portion of Tk 5.07 trillion was earmarked for non-development expenditure, including salary, allowance and debt servicing. ADP was set at Tk 2.65 trillion, depending on both domestic and foreign loans.
Planning Adviser Dr Wahiduddin Mahmud has recently hinted at potential revisions to ADP. To reduce expenditure, the interim government plans to scrutinise both ongoing and newly launched projects under ADP. At a meeting of the Executive Committee of the National Economic Council (ECNEC), the Planning Commission, Finance Division, and Economic Relations Division will assess the budget and propose necessary revisions.
Currently, ADP includes 1,326 projects, many of which were added in the fiscal year 2023-24 but have yet to see any expenditure. For example, the government has allocated Tk 17,500 crore to the Ministry of Local Government, Rural Development and Co-operatives for implementing 102 projects, including 30 new ones.
Dr Wahiduddin earlier said that reducing public expenditure is crucial for curbing inflation and stabilising the economy. Numerous politically motivated projects initiated in various constituencies would likely be cancelled. Among the new projects awaiting ECNEC nod, less important ones will be shelved.
Mustafizur Rahman, Distinguished Fellow of Centre for Policy Dialogue (CPD), said that some ambitious targets set by the government are often revised later due to a shortfall in revenue collection or internal savings. In many cases, loan targets also fall short, and inability to generate sufficient income or curtail spending has resulted in budgetary setbacks.
In recent years, ADP implementation has been disappointing, particularly in the last fiscal year, when the execution rate dropped to around 80 percent. This marked the lowest rate in five years, with the total expenditure amounting to only Tk 2.05 trillion, far below the initial target. Given these struggles, doubts have been raised about the feasibility of spending Tk 2.65 trillion, prompting the Ministry of Planning to consider cutting low-priority and politically motivated projects.
Currently, of the 1,326 projects in the ADP, only 295 are expected to be fully completed by this fiscal year. The focus on high-priority expenditures, while eliminating unnecessary or less impactful projects, reflects the government’s broader strategy to address the economic crisis ensuring that essential growth and development activities continue smoothly.
