Bangladesh’s development spending has slowed sharply in the current fiscal year, raising concerns among economists and policy analysts about economic momentum, employment, and public service delivery.
According to data released by the Implementation Monitoring and Evaluation Division, ministries and divisions spent Tk 75,607 crore during the first nine months (July–March) of FY2025–26, representing just 36.19 percent of the Annual Development Programme (ADP). This is not only one of the weakest performances in recent years—it is the lowest nine-month implementation rate in at least 20 years, based on comparative data trends.
The slowdown comes amid a period of political transition following the fall of the Awami League government in 2024 and the installation of an interim administration led by Nobel laureate Muhammad Yunus. Analysts say the disruption has created administrative uncertainty, slowing project execution across sectors.
A clear 20-year comparison
A review of ADP performance over the past two decades highlights how sharply implementation has fallen:
- FY2021–22: about 45% implementation in the first nine months
- FY2023–24: above 42% during a relatively stable period
- FY2024–25: 36.65%, despite political unrest
- FY2025–26: 36.19%, the lowest in at least 20 years
Even in years marked by political instability or global shocks, Bangladesh typically maintained implementation rates above 40 percent during this stage of the fiscal year. The current figure therefore represents a significant deviation from long-term norms.
The decline is also evident in spending volume. During the first nine months of FY2023–24, development spending exceeded Tk 1,07,000 crore. That has now dropped to Tk 75,607 crore—underscoring both a slowdown in execution and a contraction in actual investment.
Structural slowdown, not just a temporary dip
Economist Mohammad Lutfor Rahman of Jahangirnagar University said the current pace reflects deeper structural challenges.
“The current pace of ADP implementation reflects both administrative hesitation and structural weaknesses in fiscal management,” he said.
He pointed to the unusual governance context, where two administrations operated within a single fiscal cycle.
“Since it was not an elected government, there was less accountability. As a result, towards the end, the focus shifted mainly to elections, and development spending did not get due attention,” he added.
Officials in the planning ministry acknowledge that the transition disrupted project continuity. Many project directors left their posts, while others faced allegations that delayed replacements. Procurement reforms also slowed tender processes, further affecting implementation.
Sectoral disparities: social sectors fall behind
The slowdown is not uniform across sectors. Instead, it reveals a widening gap between infrastructure-driven ministries and social sectors.
Health sector
The Health Services Division recorded implementation of just over 21 percent, one of the lowest among major ministries. In some sub-sectors, spending has been even weaker.
Md Deen Islam, research director at RAPID, warned that governance constraints are a major factor.
“The underperformance in the health sector reflects deeper governance challenges. In many cases, those in charge hesitate to take bold decisions, particularly when procurement-related scrutiny creates a climate of fear,” he said.
Given Bangladesh’s high out-of-pocket healthcare costs, such delays risk worsening inequality and pushing vulnerable households into poverty.
Education and transport
Implementation remains subdued in key human capital and connectivity sectors. Railways, primary education, and related divisions are reporting execution rates in the mid-20 percent range, limiting progress in both mobility and workforce development.
Mid-performing sectors
Road transport, housing, and public works have achieved implementation rates between 30 and 35 percent, reflecting moderate but still below-average progress.
Relatively stronger sectors
Energy, agriculture, water resources, and power divisions have performed comparatively better, with execution rates ranging from 40 to over 50 percent. These sectors have maintained momentum due to ongoing large-scale projects and stronger institutional capacity.
Economic ripple effects
Lower development spending is likely to have broad economic consequences.
The National Board of Revenue, which depends partly on taxes generated through project-related activity, may face reduced collections as spending slows.
Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh, said the slowdown reflects multiple pressures.
“Like last year, there were many disruptions in the current fiscal year, including the national election, political transition, as well as global turmoil,” he said.
He estimates that total implementation may reach only 60 to 65 percent by the end of the fiscal year—similar to last year’s historically weak outcome.
While reduced spending may temporarily limit government borrowing, economists warn that this short-term relief could undermine long-term growth, investment, and employment.
Policy uncertainty and project reviews
Planning Commission officials say the government has begun reviewing around 1,300 ongoing projects to align them with current policy priorities. Although such reviews are common after political transitions, their scale and timing have raised concerns about further delays.
Dr Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies, said reassessment is necessary but time-consuming. He cautioned against accelerating spending simply to improve statistical performance.
At the same time, administrative reshuffles, restricted institutional access, and broader governance concerns have slowed decision-making across ministries.
Since August 2024, rights groups—including Ain o Salish Kendra and Bangladesh Hindu Buddhist Christian Unity Council—have reported widespread instability and violence, contributing to an uncertain operating environment for public projects.
Outlook: limited room for recovery
With only three months remaining in the fiscal year, a significant turnaround appears unlikely. Although implementation typically accelerates in the final quarter, the current gap is too large to close fully.
Economists warn that continued underperformance in development spending will:
- Slow infrastructure expansion
- Reduce employment opportunities, especially for daily wage workers
- Weaken overall economic momentum
At a deeper level, the situation highlights a critical policy challenge: maintaining continuity in economic governance during periods of political transition.
For Bangladesh, the stakes are high. Development spending is not just a fiscal metric—it is a primary driver of growth, employment, and poverty reduction. When it slows, the effects are felt far beyond the balance sheet.
