World Bank Document

Report No. 24370-BD Bangladesh Public Expenditure Review May 25, 2003 Public Disclosure Authorized Poverty Reduction and Economic Management Sector Unit South Asia Region Public Disclosure Authorized Public Disclosure Authorized Document Prepared by the World Bank and the Asian Development Bank Public Disclosure Authorized CURRENCY EQUIVALENTS Taka (Tk.) US $1.00=Tk. 57.9 (June 2002) GOVERNMENT'S FISCAL YEAR July 1 - June 30 ACRONYMS AND ABBREVIATIONS ABC Assessment of Basic Competency BTB Bangladesh Tea Board ADP Annual Development Program BTMC Bangladesh Textile Mills Corporation BADC Bangladesh Agriculture Development Corporation BTTB Bangladesh Telephone and Telegraph Board BANBEIS Bangladesh Bureau of Educational Information and BWDB Bangladesh Water Development Board Statistics BBC Bangladesh Biman Corporation CAAB Civil Aviation Authority of Bangladesh BBS Bangladesh Bureau of Statistics CAO Chef Accounting Officer BCIC Bangladesh Chemical Industries Corporation C&AG Comptroller and Auditor General BEPZA Bangladesh Export Processing Zone CDA Chittagong Development Authority BFDC Bangladesh Film Development Corporation CG Central Govemment BFFWT Bangladesh Freedom Fighters' Welfare Trust CFAA Country Financial Accountability Assessment BFDC Bangladesh Fishenes Development Corporation CNS Child Nutntion Survey BFIDC Bangladesh Forest Industnes Development Corporation CPA Chittagong Port Authority BHB Bangladesh Handloom Board CPAR Country Procurement Assessment Report BHDS Bangladesh Demographic and Health Survey CPDMB Chittagong Port Dock Management Board BIA Benefit Incidence Analysis CPTU Central Procurement Technical Unit BINP Bangladesh Integrated Nutrition program CPuS The Consolidated Public Sector BIWTA Bangladesh Inland Water Transport Authority CWASA Chittagong Water and Sewerage Authonty BIWTC Bangladesh Inland Water Transport Corporation DESA Dhaka Electncity Supply Authonty BJC Bangladesh Jute Corporation Water Resources DFI Direct Foreign Investment BJMC Bangladesh Jute Mills Corporation DSL Debt Service Liability BOGMC Bangladesh Oil, Gas and Mineral Corporation DPE Directorate of Primary Education BPCPetroleum Bangladesh Corporation DWASA Dhaka Water and Sewerage Authority Transport and BPC Bangladesh Petroleum Corporaton DWASA Communication BPDB Bangladesh Power Development Board ERD Extemal Relations Department BRRI Bangladesh Rice Research Institute ESP Essential Services Package BRTC Bangladesh Road Transport Corporation FAMU Fiscal Analysis and Monitoring Unit BSB Bangladesh Sericulture Board FFE Food For Education BSC Bangladesh Shipping Corporation FFW Food For Work BSCIC Bangladesh Small and Cottage Industries Corporation EPIDC East Pakistan Industrial Development Corporation BSEC Bangladesh Steel and Engineering Corporation FRA Feeder Road Type-A BSFIC Bangladesh Sugar and Food Industries Corporation FRB Feeder Road Type-B FSS Female Secondary Stipend PBS Palli Bidyut Samity GPS Government Primary Schools PEC Public Estimates Committee GR Gratuitous Relief PETS Public Expenditure Tracking Survey HDM Highway Development and Maintenance Model PFI Public Financial Institution HEU Health Economics Unit PKSF PalliKanna Sahayak Foundation HIES Household Income and Expenditure Survey PMED Pnmary and Mass Education Division HtPC Heavily Indebted Poor Countries PRSP Poverty Reduction Strategy Paper HPSP Health and Population Program PSC Production Shanng Contract HSC Higher Secondary Certificate RI Rural Road Class I ICAC Independent Conmmission against Corruption R2 Rural Road Class 2 IFPRI International Food Policy Research Institute R3 Rural Road Class 3 IMED Implementation Monitoring and Evaluation Division RAJUK Rajdhani Unnayan Kartripakhya IOC International Oil Companies RAO Regional Accounting Office IPP Independent Power Provider RDA Rajshahi Development Authority KDA Khulna Development Authonty REB Rural Electrification Board LCG Local Consultative Group R&HD Roads and Highways Department LFS Labor Force Survey RIBEC Reforms in Budgeting and Expenditure Control LGED Local Government Engineering Department RNF Rural Non-Farm MDGs Millennium Development Goals RNGPS Registered Non-Govemment Primary Schools MFA Multi-Fiber Arrangement SD Supplementary Duty MP Member of Parliament SMC School Management Committee MoHFW Ministry of Health and Family Welfare SOE State-Owned Enterpnse MPA Mongla Port Authority SSC Secondary School Certificate MPDMB Mongla Port Dock Management Board Trading SWAp Sector-Wide Approach NCB National Commercial Bank TB Tuberculosis NCTB National Curriculum and Textbook Board TCB Trading Corporation of Bangladesh NEC National Economic Council TR Test Relief NIPORT National Institute of Population Research and Training TTCs Technical Training Center NSD National Savmg Deposit TVET Technical and Vocational Education System NU National University UP Unapproved Project PAC Public Accounts Committee VGD Vulnerable Group Development PAO Principal Accounting Officer VGF Vulnerable Group Feeding PARC Public Adrmnistration Reform Comnumssion WFP World Food Program PARMOC Public Adrmnistration Reform Monitoring Commission Vice President: Mieko Nishinizu, SARVP Country Director: Frederick T. Temple, SACBD Sector Director: Sadiq Ahmed, SASPR Sector Manager: Ijaz Nabi, SASPR Task Managers: Eric Bell & Elena Glinskaya, SASPR TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................ i PART I: UNSUSTAINABLE PUBLIC SECTOR SPENDING AND WVEAK GOVERNANCE INTRODUCTION ............................................................... 1 Chapter 1 - Fiscal Sustainability ................................................................ 2 1. Background ................................................................ 2 2. The Road to Fiscal Imprudence ................................................................ 2 3. The Need to Restore Fiscal Sustainability ................................................................ 4 4. Social Sector Spending and Sustainability .................... ............................................ 6 5. Exter De nalSustainability bt ................................................................ 6 6. The Way Toward Restoring Fiscal Sustainability ................................................................ 7 7. Additional aspects of fiscal sustainability ................... ............................................ 7 Chapter 2 - Main Features of Public Spending ............................................................... 11 1. Trends in public spendmg and financmg ............................................................... 11 2. Some important features of public spending m Bangladesh ......................................................... 12 3. Weaknesses m Public Expenditures ............................................................... 14 Chapter 3 - State Owned Enterprises............................................................... 17 1. The Sector ............................................................... 17 2. Weakened Fmancial Performance ............................................................... 17 3. Increased Financing and Budgetary Support ............................ ................................... 18 4. Governance and Equity ............................................................... 20 5. Implementing Parastatal Reforms ............................................................... 21 Chapter 4 - The Public Sector ............................................................... 24 1. Introduction ............................................................... 24 2. Issues in Budget Preparation ............................................................... 25 3. Issues in Budget Implementation ............................................................... 27 4. Issues in Budget Oversight ............................................................... 29 5. Issues in Budget Effectiveness ............................................................... 32 6. The Information Base for Measuring Outcomes ............................................................... 33 7. The Role of Donors ............................................................... 34 8. Prionty reforms in strengthening Budget Management .............................................................. 35 9. Perceptions of Poor Quality and Corruption in the Provision of Public Services ....................... 38 10. Institutions, Growth and Poverty Reduction ............................................................... 40 11. The new Government's Governance Reform Agenda ............................................................... 41 12. Implementing the GOB's governance strategy ............................................................... 42 13. Conclusion ............................................................... 44 PART II: FUNCTIONAL ANALYSIS OF EXPENDITURES OVERVIEW ...................................... 45 Chapter 5 - Education ....................................... 47 1. Overview ...................................... 47 2. Public Spending and Policies ...................................... 49 3. Equity of Public Sector Spending in Education ...................................... 51 4. Key Sector Issues ...................................... 53 5. Policy Priorities ...................................... 57 Chapter 6 - Health ...................................... 61 1. Introduction ...................................... 61 2. Government Expenditures and Policies .....................................

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