Sustainable development must be financed from domestic resources



Bangladesh faces a major challenge in achieving and sustaining high growth while ensuring that environmental degradation is minimized. While global climate negotiations are trying to spark rich countries' climate finance commitments, countries like Bangladesh must remember that the key to long-term environmental sustainability rests largely on their ability to attract climate change. Political attention and to allocate sufficient financial resources. .

Research conducted for Exercise Perspective Plan 2041 (PP2041) suggests that Bangladesh implement a green growth strategy to ensure coherence between growth and poverty reduction goals and the protection of poverty. # 39; environment. change related programs from 1 percent of current GDP to 3 percent of GDP by fiscal year 2031 and 3.5 percent of GDP by fiscal year 2041.

Compared to this huge need for funding, from 2009 to 2016, donor funds for environmental protection or climate change amounted to about $ 800 million, or $ 100 million. dollars per year (0.04% of GDP).

Bangladesh played a leading role in the establishment of the Global Climate Facility (GCF) with an ambitious program to mobilize $ 100 billion a year from rich countries by 2020 to finance climate change initiatives in developing countries. In November 2017, the GCF raised $ 10.3 billion in pledges from 43 governments. So far, the GCF has authorized some $ 2.6 billion worth of projects around the world. Bangladesh has only obtained one project approved to date, the Climate Resilient Infrastructure (CRIM) project, worth $ 40 million.

Aside from the very slow progress in raising funds, the GCF has reached a roadblock. The largest donor in the United States has announced its intention to withdraw from the Paris global environmental agreement, including the GCF. In addition, cumbersome procedures to access CMF funds remain a major barrier. In any case, although every effort should be made to take advantage of the GCF, the amount of funds that Bangladesh can access from the GCF in the near future is uncertain. Excessive reliance on external funds could therefore mean that the scale of funds required by Bangladesh for sustainable development will never be mobilized.

To achieve the development goals of Vision 2041, Bangladesh must make great efforts to unlock national resources for environmental management and sustainable development. The use of national funds will provide a reliable basis upon which long-term initiatives can be planned and executed. The deployment of national resources is also the best way to get citizens to hold the government accountable, knowing that the money they are spending comes from taxes they pay, not from external sources.

Environmental management suffers from insufficient resources

The direct expenditure of the Ministry of the Environment, the Ministry of Environment and Forests (MEF), is very limited, rising from 0.05% of GDP in 2000 to 0.06% of GDP in 2016. The absence of a substantial budget allocation indicates, above all, the lack of a strategic vision and roadmap towards sustainable development. If the MoEF is to be the real guardian of environmental management and protection activities in Bangladesh, the first step is to invest in its capacity and increase its budget allocation to at least 0.5% of GDP in Bangladesh. 39, here the exercise 2041.

Beyond the MoEF, there are government arms that fulfill critical functions for sustainable development. The overall public expenditures of the main ministries occupying water and environmental services and the water and sanitation component of the Local Government Division (LGD) and local government institutions ( IAG) represent 1% of GDP. Much of the resources come from expenditures on water, sanitation and waste management financed by LGD and LGI own resources (0.54% of GDP in 2016).

Yet, a level of spending of 1% of GDP for a country of 160 million people, with a huge problem of environmental protection, and ranked as the fifth most vulnerable country in the world, says long on relative neglect the program of environmental protection.

Intensifying domestic financing is possible

Public Financing Policies: The public finance constraint on Bangladesh's budget is well known. Most public programs are underfunded. Large infrastructure and human development needs regularly overshadow the financing needs of other programs. As noted above, successful implementation of the green growth strategy requires a sharp increase in public funding of environmental services, from 1% of GDP to 3.5% of GDP from now on. fiscal year 2014-2041. How can this level of public funding be mobilized? A suggested financing plan is shown in the table.

Overall, some 2% of the additional financing GDP will have to come from the mobilization of fiscal resources. Bangladesh has one of the lowest tax-to-GDP ratios in the world and the 2041 PP Macroeconomic Framework allows for a 5% tax-to-GDP ratio increase that can accommodate this additional financing.

The balance of domestic financing of 0.5% of GDP can be mobilized by applying the principle of the paying beneficiary (cost recovery) and the polluter pays principle (green taxes). At present, the water and sanitation services provided by Wasa and the municipalities are minimal. This imposes a serious funding constraint on public agencies which in turn limits the quality and quantity of supply. This pricing policy must change, both to raise funds for new investments and to ensure efficient use of water. The water and sanitation pricing policy must move to full cost recovery by FY2020 and full capital cost recovery. from here to fiscal year 2031.

With respect to green taxes, the fossil fuel tax and pollution taxes on polluting air and water industries and households pollute water are expected to generate sufficient revenue to finance environmental protection and other important programs. Emission taxes may be imposed, if the legal limits are exceeded, on highly polluting products and sectors. In the same vein, incentives should be offered for the use of environmentally friendly materials and consumer goods. These taxes will be politically difficult, but a start must be made if the government really wants to protect the environment.

It is also an area in which external support in the form of funds to partially subsidize the adoption of technologies and technical assistance to facilitate the transfer of technology and the design of 39, tax instruments can be beneficial in Bangladesh.

Private Financing Options: There are three main instruments for stimulating private financing of the environment. First, in a number of areas, such as forestry for timber, fishing, ecotourism, water supply and waste management, private supply can be encouraged by appropriate regulatory and tariff policies. These are commercial components of environmental services and many international experiences of good practice exist to stimulate private provision in a setting that is compatible with environmental protection. Bangladesh can learn from these experiences and develop appropriate policies and institutions to attract private investment.

Second, legal and regulatory policies can be used to encourage the adoption of measures that include private investment in environmental protection. Important examples include the adoption of air cleaning technologies in industries, the installation of effluent treatment plants in industries and private hospitals and the prevention of land degradation through appropriate cultural practices, including the ban on jhum cultivation.

Third, the public sector can enter into co-financing agreements for a range of environmental services through public-private partnerships, including partnerships with communities. For example, rural water supply and sanitation programs, the cleaning of rural ponds used for bathing and cleaning, public toilets and public baths can be implemented by rural communities. public subsidies to private providers. the community.

Sadiq Ahmed is Vice President of the Institute for Policy Research of Bangladesh, and Suvojit Chattopadhyay is the National Director of Adam Smith International in Bangladesh.



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