City corporations gain more flexibility in spending ADP funds on infrastructure

Infographic: TBC

Revised Allocations:

• Infrastructure: 30-35%
• Public health and primary healthcare: 20-25%
• Waste management and drainage: 15-20%
• Water and Sanitation: 10-15%
• Climate change impact mitigation: 15-20%

City corporations can now use Annual Development Programme (ADP) funds to invest in infrastructure projects such as bridges, parks, playgrounds, and water bodies.

This change follows a revision to the "Guidelines for Allocation and Utilisation of Development Assistance Funds for City Corporations under the Annual Development Programme - 2022" on 12 September.

Previously, city corporations could only use their own budgets for these types of projects.

Under the revised guidelines, city corporations are granted greater flexibility in spending, allowing them to focus on broader infrastructure development.

However, in exchange for this increased flexibility, the overall allocation for various sectors has been reduced by 3%. The changes also discontinue the use of ADP funds for drinking water projects.

According to the new rules, between 30% and 35% of ADP funds can now be directed towards constructing, maintaining, and upgrading roads, bridges, and other infrastructure.

Public health and primary healthcare services will receive 20% to 25% of the allocation, which was previously combined with waste management.

For waste management, flood control, and drainage, 15% to 20% of the allocation will be available, compared to the earlier budget of 20% to 25% specifically for flood control.

The revised guidelines also allow city corporations to allocate 10% to 15% of their ADP funds for water and sanitation.

However, in areas where the Water Supply and Sewerage Authority (Wasa) operates, this allocation can be redirected towards flood control and drainage.

Cities such as Dhaka, Chattogram, Rajshahi, and Khulna, where Wasa services are available, will have the option to utilise these funds for flood control measures instead, an issue that has become increasingly significant in light of the regular waterlogging occurring during heavy rains.

In addition, 15% to 20% of the funds can be spent on the construction and renovation of green parks, open spaces, playgrounds, and water bodies, with an emphasis on addressing climate change impacts.

Regarding the changes, Mir Khairul Alam, chief executive officer of Dhaka North City Corporation, told The Business Standard, "The government must have made this decision after thorough examination and review. If additional allocation is needed in any sector beyond the government's provision, the city corporation will allocate it from its own budget. The change in fund distribution will not affect civic services or development activities."

The Local Government (City Corporation) Act of 2009 empowers city corporations to impose and collect taxes, prepare budgets, and manage their own funds.

Each year, the Local Government Division allocates development assistance to city corporations to increase their financial capacity, along with funds under the ADP for implementing special projects and handling emergencies.

Previously, city corporations could not use the ADP fund for infrastructure development such as bridges, parks, playgrounds or water bodies. But they could spend it on roads, culverts, waste management and sanitation.     

The revised guidelines are aimed at ensuring greater transparency, accountability, and financial discipline in the use of development assistance.

They also reflect the growing role of urban centres in Bangladesh's development, as cities now account for 28% of the national population, with the urban growth rate at 2.5% annually.

The productivity of urban areas is 60% higher than rural areas, and 60% of Bangladesh's urban population resides in city corporation areas.

As local government institutions, city corporations face increasing demands to provide modern services for the rapidly growing urban population.

These services include waste management, sanitation, drainage, road construction and maintenance, healthcare, education, and local law enforcement.

To meet these challenges, city corporations must effectively mobilise resources and manage their budgets.

Currently, there are 12 city corporations in Bangladesh. The national budget for the 2024-25 fiscal year has allocated Tk400 crore under the ADP for development assistance to these city corporations.

Additionally, Tk5,600 crore has been allocated under the special assistance sector for city corporations.

With the new guidelines, city corporations are expected to have greater flexibility in addressing infrastructural needs and improving civic services.

This move is anticipated to enhance the efficiency of city corporations in managing urban development and responding to the challenges posed by rapid urbanisation.