Social spending gets less priority in lopsided budgets

The government has prioritised budgetary investments in three sectors, namely public services, transportation and communications, and energy, since the fiscal year of 2008-09. By contrast, actual spending witnessed a drop in vital sectors such as agriculture, social security, health, and education.

This implies that the government has given lower priority to these sectors although investments in education and health are necessary to build human capital and making the most of the demographic dividend.

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Narrowest budget deficit in a decade as govt to curb expenses

Finance ministry data showed that the government spent Tk 6,881 crore, or 7.81 percent of the total actual budgetary expenditure, on public services in FY09.

However, actual expenditure on public services, which cover government employee pay and other spending for goods and services, soared more than 10-fold to Tk 75,511 crore in the 13 years to 2021-22.

In FY22, the spending on public services increased to 15 percent of the total actual expenditure, nearly double the rate in FY09. Similarly, spending on the transport and communication sector surged to 12 percent from 4.7 percent in FY09.

In taka terms, the outlay on transport and communication shot up by more than 14-fold to Tk 60,200 crore from Tk 4,205 crore.

The energy sector, which accounted for 2.9 percent of actual expenditure in FY09, saw its share rise to 4 percent in FY22.

On the other hand, spending on education declined from 13.48 percent to 12 percent during the 13-year period despite already being lower than the 15-20 percent that the United Nations recommends countries invest in education.

Healthcare spending decreased to 5 percent in FY22 from 5.80 percent in FY09, which is much lower than the World Health Organization's recommendation.

The UN agency advises that countries like Bangladesh allocate 5 percent of GDP (gross domestic product) to the health sector. Bangladesh allocates only around one percent of the GDP.

"The imbalanced spending has pushed back the country from its smooth sustainable growth trajectory," said Debapriya Bhattacharya, a distinguished fellow of the Centre for Policy Dialogue.

"If you don't allocate enough to health and education, it will create a shortfall in output needed to build efficient human capital. It is upsetting that we are undermining the process."

Spending in social sectors such as education and health is low in Bangladesh compared to peer nations and very low compared to emerging nations.

"Against this backdrop, any further reduction in education and health budget is unwelcome," said Bazlul Haque Khondker, chairman of the South Asian Network on Economic Modeling (Sanem), a think-tank.

"The implications of such declines have been reflected in the decline in education quality and surge in out-of-pocket health expenses. Both have deleterious impacts on human capital development."

The Sanem chairman added that a chunk of the large expenses in the public service sector could be attributed to increased facilities for government employees, driven by the costs of implementing a new pay scale for public officials in 2015 and associated spending.

MM Akash, a former chairman of economics at the University of Dhaka, said the transport sector has boomed over the years in terms of the budget share, which has crowded out other sectors.

"We have spent much more than the actual requirement in the transport sector. For example, the work worth Tk 1 has been done for Tk 3. As a result, the education, health and social protection fell short of the mark."

Prof Akash expressed his concerns about a drastic fall in the share of expenditure in the agriculture sector.

The spending in the farm sector was 10.85 percent in FY09, but dropped to 7 percent in FY22 although Bangladesh is yet to attain self-sufficiency in cereal production.

"When the country needs more investment in agriculture to ensure food security and achieve self-sufficiency, we have not maintained the pace," Prof Akash added. "Rather, we have reduced it."

The implications of the falling investment in the agriculture sector are lower agricultural output and incomes and higher agricultural prices.

"Sustained recent increases in food prices in Bangladesh may have been associated with such a structural shift in the budget," Khondker said.

According to the Bangladesh Bureau of Statistics, one in every five households experienced food insecurity in 2022.

On a positive note, Khondker opined that there had been a massive shift in spending in the transport and communication sector, including paying for infrastructure projects like the Padma Bridge and metro rail, which benefited all sections of society.

"Expansion of transportation infrastructure is beneficial to businesses, industrialisation, and individual movement. Bangladesh has been reaping the benefits of these mega investments."

However, Bhattacharya believes that the government has opted for the physical signs of development. One may suspect that the government is trying to legitimise its rule by delivering visible development projects.

He also said the government will face complications in the coming days as it must pay huge amounts to service debts taken for such mega projects.

"From a financing point of view, it will put pressure on the debt burden if it is not covered by domestic sources. And it is increasingly becoming unsustainable."

Additionally, a huge gap was seen in the share of spending on social security and welfare, which dropped from 8.95 percent in FY09 to 6 percent in FY22, finance ministry figures showed.

The same occurred in the housing, rural government and rural development, and public order and safety sectors. However, the share of expenses for the defence sector and the recreation, culture and religious affairs sector has remained almost unchanged.

"Owing to the fallout of the pandemic and the Russia-Ukraine war, low-income groups have become more insecure and helpless. Therefore, they need social protection," said Prof Akash, adding that the proportion of both allocation and expenditure has gone down in the area.

Bhattacharya said the existing allocation in health, education and social protection is in stark contrast to the commitments made in the two documents of the government: the Eighth Five-Year Plan and the election manifesto.

He said the documents specifically mentioned it, but the allocation does not reflect the reality. "In fact, it is almost half of the budget promised in the two documents."