Bangladesh embarks on climate public finance tracking

Bangladesh, home to a 160 million people, lies in Asia's largest delta and is considered one of the most climate-vulnerable countries in the world. Climate change presents a range of developmental issues and challenges as it imposes serious risks on a large population, in particular, those who are the most disadvantaged.

In the wake of rising climate vulnerability, the challenged nations around the world have taken recourse to include climate finance as an overriding agenda in their development pursuits.

The Government of Bangladesh as part of its agenda for establishing effective climate finance governance in the country began publishing climate budget report since FY 2017-18 with support from UNDP. 

It has already produced two reports and presented them before Parliament along with budget documents. Both the reports attracted attention of a wide array of stakeholders including CSOs, NGOs, academia, researchers and development partners.

However, the credibility of the data and analyses presented in these reports largely rests on the comprehensiveness of the approach and methodology followed in tracking climate finance. Against this background, the Ministry of Finance has developed a tracking tool to serve the purpose of wider accountability and transparency in climate public finance and tested it through its IT platform while preparing the climate budget report for FY 2018-19.

Climate public finance tracking is one of the set of climate related financial planning and management tools designed to extract data and information to understand how much a country can afford to commit resources to address the adverse effects of climate change. Tracking and reporting financial flows that support actions for climate change mitigation and adaptation, building trust and accountability with regard to climate finance commitments and monitoring trends and progress in climate-related investment are becoming increasingly important.

However, the current arrangements in place demand more transparency, comparability and comprehensiveness which are very important for the government.  The key objectives of this exercise are to: report on climate finance flows aligned with national climate strategies and plans, improve the governance of climate finance, facilitate the assessment of results from climate investments and support better project design.

The benefits that this exercise, as a key supporting tool, can deliver are many. These include ensuring alignment of climate finance with the Bangladesh Climate Strategy and Action Plan (BCCSAP), reporting of climate finances in the government's budget allocation, suggesting where further financing is necessary, as well as identifying areas that need to be reviewed and calibrated. In addition, the most significant long-term and sustainable impact of this exercise is enhanced awareness of the policy makers and planners on climate change actions.

These are evident in the climate budget report for FY 2018-19 which brings to light the fact that 8.82 per cent of the total budget for 20 ministries/divisions was climate-relevant.

The report also tells us which ministry/division allocated what amount of resources to address the climate vulnerabilities. The data presented in the report are unbiased as they are system-generated and do not leave any scope to be manipulated at the user end.

There are two main technical approaches to weighting climate relevance- the objectives-based approach and the benefits-based approach. Users find the former much simpler compared to the latter which is more complex and time-consuming, but potentially more robust.

In view of the lessons learnt from the countries around the world practising climate finance tracking and the advantages and disadvantages of different tracking approaches, Bangladesh has adopted a hybrid approach that can be better described as 'Objective-Based Cost Component Approach' to reap the maximum advantages from both the approaches. This approach not only classifies the climate relevance of projects and programmes, but also uses scientific methods to track the allocations made for those projects/programmes.

Climate change as a cross-cutting theme is typically scattered across a number of ministries, including for example, ministries of agriculture, water resources, energy and transportation. This dispersion poses the risk of a lack of ownership and awareness, together with the difficulty of planning, identifying and reporting climate related expenditures.

The tracking tool has been designed to help address these challenges. This will provide support in identifying, classifying, weighting and marking climate-relevant allocations in the budget system, enabling the estimation, monitoring and tracking of the expenditures. This includes the process of attaching a climate budget marker, such as a tag or account code to budget lines or groups of budget lines.

The tracking methodology derives a good deal from several studies including the one recently conducted by UNDP in 2018 which captures lessons from several climate budget tracking countries (Ghana, Indonesia Nepal, Kenya and Philippines) and summarises different frameworks and design principles adopted by the countries in terms of climate relevance weighting and finance tracking.

Extensive reviews of the existing literature were undertaken to contextualise  the exercise. This was supplemented by an extensive consultation not only at the national level but also at the grassroots to validate the premise of the exercise.

It follows a step-by-step approach and comprises five logical steps: linking BCCSAP themes and programmes with the climate-relevance criteria, assigning climate relevance weight against each of the climate relevance criteria, relevance of projects and programmes, estimating climate finance for multiple relevance criteria and climate finance weight for operating budget of the ministries/divisions. These steps have been worked out bearing in mind the level of understanding of end-users as in most cases they do not have adequate exposure to climate finance issues.

Climate public finance tracking being a broader package of reforms is meant to help operationalise national climate change policies and action plans.

It is an important component of Climate Fiscal Framework (CFF) adopted by the government in 2014 which has the broader scope of providing a comprehensive overview of domestic and international climate finance -- linking climate change policies with planning and budgeting, prioritising climate actions, and developing appropriate modalities to manage climate finance in an effective and transparent manner.

While putting in place a comprehensive tracking tool is a landmark initiative, its successful implementation and continued use call for capacity building of the relevant institutions. Sustainability of this exercise is more likely to be ensured where climate change expenditure reports are mainstreamed in the budget cycle and regularly published as part of the budget reporting system, and are used to inform and stimulate parliamentary debates and made available to the citizens at large.

Ranjit Kumar Chakraborty and Abu Sumon are respectably Project Manager and Expert, Inclusive Budgeting and Financing for Climate Resilience (IBFCR), UNDP. [email protected]. [email protected]