Despite the long history of local governance and recent decentralization efforts, the local government institutions in Bangladesh play a limited role in delivering services due to limited decision-making and financial authority; lack of resources and staff; and weak capacity. To achieve upper-middle income status, the country must empower the local government institutions through administrative and fiscal decentralization, says a new World Bank report.
The report released today, ‘Local Government Public Financial Management System Assessment,’ finds that Local Government Institutions (LGI) suffer from weak pubic financial management practices, hindering their service delivery capabilities.
Though the LGI’s spending as a share of GDP increased from 0.67 percent in 2001 to 1.1 percent of GDP in 2013, it remains nearly five-times lower than the developing country’s average. In Bangladesh, spending by LGIs accounts for 7 percent of total government expenditure, whereas on average it is 19 percent in developing countries and 28 percent in industrial countries. The relatively low share of LGI spending in government’s total expenditure indicates limited fiscal decentralization.
“We have seen globally that the local government institutions with the participation of the communities are best placed for providing basic services such as education, healthcare, water supply and sanitation, and local law and order,” said Dandan Chan, World Bank Acting Country Director for Bangladesh and Bhutan. “Through successive projects, the World Bank has supported the government’s decentralization agenda. There are successes to build on: a predictable and transparent financial resource transfer system covering all the Union Parishads—the lowest tier of local government—has improved planning, participatory budgeting, and transparency.”
The assessment identified the LGIs’ weak capacities relating to public financial management. These are: limitations in planning and executing budgets, inadequate book keeping and financial reporting, lack of internal controls over cash management and weaknesses in audit management process, among others.
In addition, LGIs still largely maintain transaction records manually. They need to expand the use of IT in accounting system and integrate with the government IBAS ++ system. Further, IT technologies should be used in administration and service delivery monitoring.
The Assessment made several recommendations: further administrative and fiscal decentralization; adequate staffing; stronger monitoring capacity; improved understanding of budget; multi-year budgets; timely release of budget transfers; expanded revenue collection efforts; and strengthened LGI audits, and others.
“Over the last decade, Bangladesh has improved its policy and legal framework and has taken concrete steps to effectively decentralize the local government. These steps have contributed to the country’s robust economic growth that benefitted majority of the population. The work is not yet complete. Our government is committed to taking further measures to empower the local government,” said M. A. Mannan, Honorable Planning Minister.
From September 2018 to March 2019, the assessment was conducted by the Policy Research Institute (PRI) on behalf of the World Bank.
The World Bank was among the first development partners to support Bangladesh following its independence. The World Bank has since committed more than $30 billion in grants and interest-free credits to the country. Bangladesh currently has the largest IDA program totaling $12.6 billion.