Bangladesh - Public Expenditure and Institutional Review : Towards a Better Quality of Public Expenditure - Main Report

Abstract

Bangladesh has recorded many impressive
 achievements in economic and social development in the last
 decade and a half. It has achieved steady economic growth of
 over 5.5 percent annually (over 6 percent on average since
 2004), maintained relatively low inflation and stable levels
 of domestic debt. More remarkable have been its achievements
 in reducing income poverty and improving social indicators,
 such as life expectancy, fertility control, child mortality,
 literacy and enrollment rates, which, in many cases, exceed
 other countries in the region and outside. In addition to
 standard expenditure policy analysis typically associated
 with Public Expenditure Reviews (PERs), this study combines
 an assessment of key institutional elements that are likely
 to affect budget outcomes with political economy analysis of
 the budget institutions, in order to discover the underlying
 reasons behind the existing equilibrium. While the Public
 Expenditure and Institutional Review (PEIR) does not include
 a description of the technical aspects of Public Financial
 Management (PFM) institutions, it makes use of the numerous
 studies that exist in this area to illustrate their effect
 on incentives. This approach is motivated by
 Bangladesh's long journey of 14 years towards reforming
 PFM systems, which is yet to result in a fundamental break
 with past practices of input-oriented incremental budgeting
 and relatively weak expenditure controls, especially at the
 sector-specific level. This requires different thinking and
 an approach aimed at addressing the incentive structure of
 those who can influence more fundamental reforms in PFM.