Dr. Nasim Ahmed :
Public Financial Management (PFM) plays a crucial role in governance by ensuring proper allocation, management, and accountability of public resources. It includes processes such as budgeting, controlling expenditures, accounting, auditing, and reporting that governments depend on to oversee public funds. Strong PFM fosters economic stability, fiscal discipline, and sustainable growth, especially in developing countries like Bangladesh, where socio-economic challenges are complex.
Effective PFM systems are essential for maintaining fiscal discipline, which involves managing revenue and expenditures to prevent significant deficits and growing debt. In Bangladesh, controlling fiscal deficits is crucial for maintaining economic stability and preventing inflation. Strong PFM frameworks provide tools for accurate budgeting, prioritizing expenditures, and analyzing debt sustainability.
Although PFM in Bangladesh has made several improvements, it still faces challenges that limit its ability to manage public resources effectively. These problems are complex and arise from a combination of institutional, technical, political, and socio-economic factors.
A persistent problem is the low rate of budget execution, particularly for the Annual Development Programme (ADP). The ADP, which emphasizes infrastructure and development projects, often faces underspending. In some instances, the execution rates dip below 70%, leading to inefficient use of funds and delays in completing projects.
Several factors lead to these gaps, including overly optimistic budgeting, delayed fund releases, procurement setbacks, and capacity issues within implementing agencies. Also, frequent budget revisions during the fiscal year weaken fiscal discipline and predictability, making it harder for line ministries to plan effectively.
Capacity limitations pose a significant barrier to PFM reform efforts. Many public sector officials lack adequate training in modern PFM techniques such as program-based budgeting, risk-based auditing, and fiscal risk management.
In Bangladesh, political economy factors often influence budget allocations more by electoral interests than by objective standards. For example, some constituencies or sectors receive disproportionately large budgets due to political lobbying. Furthermore, procurement processes for major infrastructure projects are frequently vulnerable to patronage and corruption, which undermine transparency and cost-effectiveness.
While Bangladesh’s constitution guarantees local government independence, actual fiscal decentralization remains limited. Local authorities rely heavily on unpredictable grants from the central government and lack sufficient authority to generate revenue. This dependence hampers their ability to plan and deliver services effectively and diminishes their accountability to local communities.
Audits mainly focus on compliance rather than performance, which reduces their ability to enhance governance. The Public Accounts Committee, responsible for parliamentary oversight, often lacks the technical expertise and enforcement power needed, limiting its ability to ensure audit recommendations are properly implemented.
The tax-to-GDP ratio remains low at around 8 to 10%, which is not sufficient to sustainably meet public needs. Several factors contribute to this problem: (a) a small tax base, with only a limited portion of the population filing income tax returns, (b) heavy dependence on indirect taxes like VAT, (c) weak enforcement systems that lead to significant tax evasion and under-reporting, and (d) limited integration and automation within the tax administration, causing inefficiencies.
Bangladesh needs a comprehensive, government-wide PFM reform plan aligned with its development goals and international best practices. This plan should cover areas such as budgeting, revenue collection, procurement, auditing, and fiscal decentralization, with a focus on promoting cooperation among agencies and maintaining consistency in foreign aid. Adopting international standards, including the International Public Sector Accounting Standards and guidelines set by the International Organization of Supreme Audit Institutions, will help Bangladesh improve fiscal transparency and accountability.
Ongoing investment in capacity building is crucial. This includes: (a) providing professional training for public finance officials in areas like budgeting, auditing, and procurement; (b) establishing certification and continuous professional development programs; (c) enhancing financial management skills at regional and local levels; and (d) integrating leadership development into capacity-building initiatives to promote reforms and innovation.
Bangladesh should enhance the integration and automation of its financial management systems by: (a) completing the implementation of the Treasury Single Account to centralize government cash management, (b) linking iBAS++, e-GP, payroll, and public investment systems for real-time data exchange, and (c) improving cybersecurity measures and providing stronger technical support for users.
Improve audit institutions and parliamentary oversight by: (a) conducting risk-based and performance audits, (b) providing the Public Accounts Committee with technical assistance and enforcement authority, (c) strengthening follow-up processes to ensure audit recommendations lead to corrective actions, and (d) increasing fiscal independence and stable funding for local governments to enhance service delivery and accountability.
Successful reform involves addressing vested interests and political risks by: (a) forming alliances among government, civil society, and development partners; (b) promoting transparency and citizen involvement through social audits and open budget initiatives; (c) strengthening compliance with better taxpayer services and enforcement; (d) increasing the use of digital systems for tax filing and payment; and (e) expanding the tax base by formalizing informal sectors and improving data integration.
The future of PFM depends on implementing a reform plan that includes institutional changes, capacity building, technological advancements, and managing political economy factors. With steady political commitment and active stakeholder participation, Bangladesh can transform its PFM into a strategic tool for inclusive, sustainable development and better public services. This change will improve fiscal stability, strengthen democratic governance, and increase citizen trust, ultimately supporting the country’s long-term prosperity goals.
