Public investment returns belie expectations

FHM Humayan Kabir | Published: June 14, 2018 10:23:46 | Updated: June 15, 2018 21:55:57


Representational image

The government's growing public expenditure has failed to yield expected results due to unproductive spending, economists said Wednesday.

In its national budget, the government has set a target to spend public funds equivalent to 18.3 per cent of the Gross Domestic Product (GDP) in the upcoming fiscal year (FY) 2018-19.

The target is 1.7 percentage points higher than that of revised goal of the outgoing fiscal.

For the current fiscal, public expenditure target is projected to reach at 16.6 per cent of GDP.

Economists said the enhanced expenditure is not making potential returns as the public fund is failing to catalyse adequate private investments and ensure quality utilisation.

The public fund investment has started to pick up since FY 2018 as those were below 14 per cent of GDP over the past few years.

In FY 2017, the government was able to spend 13.6 per cent fund of the GDP.

It is projected to rise to 18.3 per cent of the GDP in the FY 2017-18.

In its medium-term macroeconomic framework, the government has set a target to boost public investment to 18.8 per cent of GDP in the FY 2020 and 19.2 per cent of GDP in FY 2021.

Professor of Economics at Dhaka University Dr MA Taslim said public investment should be increased in Bangladesh.

"But quality expenditure remains a major concern," he said.

"It is a big question as to whether the public fund is being injected into the real, productive sector," he told the FE.

"The government agencies revise almost all the development projects even twice or thrice and their execution time extends simultaneously. So, the expected return on public investments is questionable," Dr Taslim added.

The private investment has remained almost stagnant over the last few years.

According to the Bangladesh Bureau of Statistics (BBS), the private investment was 23.25 per cent of GDP in FY 2018, 23.10 per cent in FY 2017, and 22.99 per cent of in FY 2016.

The economics professor said the government also invests in the low priority or less priority sector, which ultimately does not bring expected outcome.

Prof Taslim cited governance, corruption, and the lack of transparency in public expenditures as the big problems.

Economist Mustafa K. Mujeri said public investment in Bangladesh is among the lowest in Asian nations.

"It is good news that the investment target is growing. But the serious concern is its utilisation and quality spending," he told the FE.

"In most cases, cost and times are being overrun due to the lack of appropriate and quality expenditure. It is taking even eighjt to 10 years to complete a project. So, expected returns are not there," said Mr Mujeri, executive director of Dhaka think-tank Institute for Inclusive Finance and Development (InM).

Mr Mujeri, said although the public expenditure has been rising over the years, the private investment is not picking up momentum.

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