The government wants to expedite the development projects apart from boosting the economy under pressure. At the same time, initiatives have been taken to expedite the disbursement of foreign loans and implementation of projects with foreign aids to increase the flow of foreign currency to tackle the dollar crisis that has been going on for the last one and a half years.
The policymakers of the government believe it will increase the foreign reserve and curb the dollar crisis.
At the same time, the government is also planning to increase state investments in the development projects considering the economic situation within the country. Besides, the Planning Commission is being made more active to ensure proper verification and implementation of the development projects.
The decisions were taken in the meeting of the Planning Commission on Wednesday. It was the third meeting of the planning commission since the independence of the country.
Prime Minister and Bangladesh Planning Commission chairperson Sheikh Hasina presided over the meeting held at the NEC conference room in the capital’s Sher-e-Bangla Nagar.
A total of four decisions were taken in the meeting. First, a committee led by the principal secretary of the prime minister will be formed to expedite the foreign aided projects and disbursement of foreign loans. The committee will hold a meeting every two months. The committee will include members from the concerned ministries, including the finance and the planning ministries.
Second, the process of scrutinising the project proposal and sending it for approval is being made more accountable. The programming division of the planning commission used to scrutinise the project proposals from various ministries. From now on, the members of various departments of the planning commission will also be involved in it.
Third, project directors will be appointed from an exclusive panel, which will include expert government officials from different sectors. Even retired government officials can be included in this committee if needed. The planning commission will work to finalise the structure of this committee.
Fourth, another decision was taken to increase the government investments in the development sector considering the global and domestic economic situations.
After the meeting, planning minister Abdus Salam briefed the newspersons about the meeting. Planning ministry secretary Satyajit Karmaker and other officials of the ministry were also present during the briefing.
Planning minister Abdus Salam said, “We are working on the decisions that have been made. We will provide detailed information after the meeting minutes are finalised.”
Initiatives for the disbursement of foreign loans
The planning commission made a presentation in the meeting, which said the utilisation rate of foreign loans and grants in the annual development plan (ADP) in the 2022-23 fiscal was 72.4 per cent. It means that the difference between the allocation and real utilisation is around 28 per cent. The utilisation rate of foreign loans was 92 per cent in the 2017-18 fiscal. That year the GDP growth was 7.8 per cent, the highest in the history of the country.
The planning commission thinks proper utilisation of foreign loans and grants helps maintain the balance of sustainable growth and transaction.
So it proposed the formation of a committee led by the prime minister’s principal secretary to review the progress of projects being implemented with foreign loans to ensure that it completed within the stipulated time. The proposal was granted in the meeting.
Speaking to the newspersons, the planning minister said there should be no delay in the implementation of the foreign aided projects. The money from the loans should be disbursed quickly.
The size of ADP in the current fiscal is Tk 2,746.74 billion. The amount of foreign loans in the ADP is Tk 940 billion. It was decided to reduce the foreign loans in the ADP by Tk 200 billion primarily as only Tk 180.23 billion from the foreign loans was utilised from July to November. There are several hundred foreign aided projects in the ADP.
Meanwhile, the rate of devaluation of taka against dollars is more than 25 per cent. The official price of a dollar is Tk 110. However, it’s being sold at Tk 122-123 in the open markets. Therefore the import cost increased. At the same time, the foreign reserve of the country is dwindling.
According to the sources in the Bangladesh Bank, the forex reserve of the country stood at USD 25.26 billion, which was USD 32.49 billion at the same time last year. However, according to the International Monetary Fund’s (IMF) calculating method, BPM, the actual amount of the forex reserve now stands at USD 20 billion.
The increase in the repayment of foreign debt has created a pressure on the local dollar market and the foreign reserve of the central bank. The repayment of foreign debts in the first six months of the 2023-24 fiscal is 49 per cent higher as compared to last year.
According to the reports of the Economic Relations Department (ERD), the amount of repayment of foreign loans in the first six months this year is more than USD 1.56 billion, which was around USD 1.06 billion at the same time last year.
Despite the increase in foreign debt, revenue collection from the domestic sector of the country is not improving. Currently, the tax-to-GDP ratio is approximately 8 per cent, and there is a significant shortfall in the revenue collection target assigned to the National Board of Revenue (NBR).
In response to questions about the government's initiative to secure foreign loans to maintain the balance of transactions, Mostafizur Rahman, an honorary fellow at the private research institute, Centre for Policy Dialogue (CPD), told Prothom Alo that the balance of transactions is now facing a substantial challenge. The main reason for this is a negative financial account, which has an impact on reserves. A significant contribution to the financial account comes from the financing of foreign-aided projects, and these projects are implemented in taka. Dollars are retained in transaction balances and reserves.
Mostafizur Rahman also said that if the implementation of foreign aided projects and disbursements is speedy, there will be relief in the balance of transactions and reserves. There is currently 40 billion dollar in foreign debt pipeline. He expressed hope that the situation will improve if the committee under the leadership of the principal secretary to the prime minister supervises well.
Other Discussions
Regarding the increase in government investment, planning secretary Satyajit Karmaker informed reporters that the rate of government investment compared to GDP in 2010-2011 was 5.5 per cent. It has now risen to 7.6 per cent, contributing to high growth. The prime minister has instructed the continuation of this government investment.
A reliable source from the meeting informed Prothom Alo that strict austerity measures will be lifted starting from the next fiscal. Subsequently, government expenditure is expected to increase further. Austerity initiatives were initially implemented due to the Covid pandemic and the war in Ukraine.
The presentation given by the planning commission in the meeting indicated that, according to the 8th Five-Year Plan, sufficient funds are not allocated to the Annual Development Plan (ADP). Such instances have occurred in five crucial sectors: health, education, agriculture, local government, and social security. On the other hand, sectors such as transport and communication, electricity and fuel, housing, environment and climate, and industry and economic services have been allocated more than initially projected.
Only three meetings in 52 years
The Bangladesh Planning Commission was established on 31 January, 1972, just one and a half months after the country gained independence. Surprisingly, only three meetings of the commission have been held in the last 52 years.
The first meeting occurred during the tenure of Bangabandhu Sheikh Mujibur Rahman. The second meeting took place on 21 January, 2015, presided over by the current Prime Minister, Sheikh Hasina. Following a gap of nine years, the third meeting was held Wednesday.
One of the functions of the planning commission is to review the overall economic situation of the country. This year's planning commission meeting addressed economic conditions under pressure.
Regarding the decisions made in the planning commission meeting, former Minister of State for Planning Shamsul Alam told Prothom Alo Wednesday evening that these decisions are relevant and correct, considering the current economic situation. There is some volatility with the dollar, and accelerated disbursements, coupled with the initiation of foreign-aided projects, will increase the inflow of dollars, having a positive impact on reserves.
He suggested strengthening initiatives to attract foreign direct investment (FDI) to further increase the inflow of dollars.
Shamsul Alam also commented, "There should be more focus on project assessment. Sometimes, the main objective of the ministries is to get the project approved. They do not come prepared for the project appraisal committee meeting. We have observed situations where the bridge has been completed, but the road has not."