Education, health get priority over transport, energy in FY25 ADP
In the proposed ADP, the allocation from the government fund has been estimated at 62.3% of the total allocation and foreign financing at 37.7%. This contrasts with the figures of 64.3% and 35.7% in the ADP of FY24, respectively.
The government has increased allocations for the health, education, and agriculture sectors in the proposed Annual Development Programme (ADP) for the upcoming FY25. Allocations in previously prioritised sectors like transport and communication, power and energy, housing, and community facilities have been reduced compared to the current FY24.
There has also been a reduction in the allocation of government funds and increase in the share of foreign loans.
During a meeting of the Planning Commission on Tuesday (7 May), the size of the proposed ADP for FY25 was estimated at Tk265,000 crore, marking an 8.16% increase compared to the ADP of FY24.
Experts say the total interest expense of the country will not increase if the proportion of foreign financing in the ADP increases and internal financing decreases.
"Because the foreign loans we are taking are very cheap. On the other hand internal financing has become very expensive," said Zahid Hussain, former lead economist at the World Bank's Dhaka.
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In the proposed ADP, the allocation from the government fund has been estimated at 62.3% of the total allocation and foreign financing at 37.7%. This contrasts with the figures of 64.3% and 35.7% in the ADP of FY24, respectively.
Zahid Hussain said, "It is necessary to increase the share of foreign loans with emphasis on foreign financing projects. This will reduce the pressure on internal financing."
"But in the revised ADP, it will be seen that the share of foreign financing will decrease and the share of domestic financing will increase. This is the trend in this country," he added.
He further said, "We see a planned ADP every financial year. But there is a big gap between the proposed ADP and the ADP that will be implemented."
On the increase of allocation in sectors such as education and health, and the decrease in transport and communication sectors, Zahid Hussain said that reducing some allocations in the transport, energy sector does not trim the ADP. But trimming was needed more in the sectors including transport and energy which have many big projects.
He said no trimming was needed in the health or education sectors. Projects in these sectors should be implemented on priority basis."
He said there was no obligation to satisfy anybody for political reasons at the local level. As a result, this was the time to make unpleasant decisions.
The allocation of government funds in the proposed ADP has decreased by Tk4,000 crore or 2.37% compared to the current fiscal year's ADP. However, when compared to the current fiscal year's revised ADP, the allocation of government funds has increased by 2.17%.
Meanwhile, the amount of foreign aid in the proposed ADP has increased by 6.38% and 19.76% compared to the current fiscal year's ADP and revised ADP, respectively.
The proposed ADP stipulates an allocation of Tk165,000 crore from government funds and Tk100,000 crore from foreign aid.
The initial approval of the proposed ADP was given in an extended meeting of the Planning Commission under the chairmanship of Planning Minister Major General (retired) Abdus Salam. However, the proposed ADP will be presented to the National Economic Council (NEC) meeting for final approval. The NEC meeting will be held this month under the chairmanship of the Prime Minister.
According to Planning Commission sources, the demand of the ministries and departments for government funds for the next financial year was Tk185,391 crore and the demand of foreign loans and grants was Tk91,011 crore.
However, the government has decided on the allocation while considering the economic situation of the country. Presently, the country's economic situation prioritises foreign financing over government funds due to various reasons, including revenue collection, inflation, and the dollar crisis.
In the ADP of FY24, the allocation for the transport and communication sector was Tk75,944.62 crore, and in the proposed ADP for FY25, it has been reduced to Tk70,687.76 crore. Similarly, the allocation in the power and energy sector in the ADP of FY24 was Tk44,393 crore, which has decreased to Tk40,751.86 crore in the proposed ADP.
In the proposed ADP for FY25, compared to the ADP of the current financial year, the allocation has increased in the education, health, agriculture, environment, climate, and industrial and economic services sectors.
For example, in the proposed ADP, the allocation for the education sector is Tk31,528.6 crore compared to Tk29,889 crore in the ADP of FY24. Similarly, in the health sector, Tk4,478.84 crore more allocation has been proposed in the ADP for FY25 compared to the current fiscal year.
Sectors with highest allocations
The transport and communication infrastructure sector has been given the highest allocation, accounting for around 26.67% of the total allocation, amounting to around Tk70,688 crore. This emphasises projects such as the Metrorail MRT Line-5 and the Padma Rail Link Project in the proposed ADP.
Additionally, the power and energy sector received the second-highest allocation of Tk40,752 crore or 15.38%, prioritising projects like the Rooppur Nuclear Project and the Matarbari 1,200 MW coal power project.
Furthermore, the education sector received the third-highest allocation of Tk31,528.60 crore or 11.90%. Around Tk24,868 crore has been allocated to the housing and community facilities sector, representing 9.38% of the total proposed ADP allocation. The health sector has been allocated Tk20,683 crore, which accounts for 7.80% of the total allocation.
Following these, the local government and rural development sector received 6.79% of the proposed ADP allocation, the agriculture sector received 4.99%, and the environment and climate sector received 4.18%. The industry and economic services received 2.45%, while the information technology sector received 1.81%.
Projects with highest allocation
In the proposed ADP, the highest allocation of Tk11,056 crore has been given for the Fourth Primary Education Development Programme (PEDP-4) under the education sector.
The second-highest allocation of Tk10,503 crore has been allocated for the Rooppur Nuclear Power Plant project. The third-highest allocation of Tk6,005 crore has been proposed for the Matarbari Coal Power Project.
In the infrastructure sector, allocations of Tk3,796.88 crore and Tk3,594.37 crore have been proposed for the Dhaka-Ashulia Expressway and MRT Line-1 projects, respectively.
Besides, the Power Grid Network Strengthening Project under PGCB has been allocated Tk3,555 crore, the Padma Rail Link Project Tk3,544 crore, the Shahjalal Airport Expansion Project Tk3,536 crore, and the Expansion and Strengthening of Power System Network project under DPDC Tk3,385 crore.
An allocation of Tk3,000 crore has been proposed for a project in the health sector. The project is the Establishment of 500-bed hospitals in Jashore, Cox's Bazar, Pabna, and Malek Medical College and Nurul Haque Hospital, Noakhali, project.
According to the government's Five-Year Plan, 17.4% of the proposed ADP was supposed to be allocated to the transport and communication sector. However, in order to implement the projects undertaken in the last few years in this sector, 26.67% of the proposed ADP has been allocated.
The Five-Year Plan proposed an allocation of 5.3% to the general public service sector, while the allocation has been 0.81%. In the Five-Year Plan for FY25, allocation to the healthcare sector was projected at 11.1%, while there has been an allocation of 7.80% in the proposed ADP.
A project heavy programme
A total of 1,258 projects have been allotted in the proposed ADP. Additionally, autonomous institutions have 79 self-funded projects.
By adding Tk11,696.24 crore allocated to 79 projects funded by autonomous institutions to the proposed ADP, its size stands at Tk176,969.24 crore.
"It is a project-heavy programme and the number of projects increases every year. This increases project time and costs. This is our fundamental problem which does not resolve," said economist Zahid Hussain.
Saifuddin Saif is a Senior Staff Correspondent for The Business Standard. He has experience in the field of development budget and external debt for the more than a decade. He can be reached at [email protected]
