Every year, the national budget revives the debate over inadequate investments in the health sector of Bangladesh. Although this year’s budget allocates Tk 69,409 crore—7.4 percent of total public expenditure—to health, a more fundamental problem persists: the health ministry has consistently failed to fully utilise the allocation. When hospitals continue to face shortages of medicines, equipment and manpower, the obvious question is why the ministry cannot ensure full utilisation of the health budget.
Although the budget gets approved in June, delays in approving plans, entering allocations into the government’s Integrated Budget and Accounting System (iBAS++), and releasing funds mean many programmes don’t effectively begin before September. District and upazila managers often start procurement planning late, compressing implementation into the final quarter of the fiscal year. This “May-June syndrome” creates pressure to spend quickly rather than strategically, leading to either hurried spending or unspent allocations, as a 2022 survey by the World Bank found. Project implementation and budget execution are further constrained during the first quarter of the fiscal year by the monsoon season and recurring natural disasters, which often delay construction work, procurement, and field-level activities.
Public procurement in the health sector is complex. Medical equipment, pharmaceuticals, infrastructure projects, and specialised supplies all require different procurement procedures. Procurements through government funds, UN agencies or other development partners follow slightly different procedures, reporting systems, and approval requirements. The mandatory requirement that health facilities procure a large share of medicines from the Essential Drugs Company Limited (EDCL) can create supply bottlenecks when production or delivery schedules don’t match local demand. Managers often have limited flexibility to source medicines elsewhere even when shortages occur. The Central Medical Stores Depot (CMSD), responsible for much of the government’s procurement and distribution, also faces capacity constraints. Procurement often waits until multiple requisitions are accumulated to maximise bulk purchasing, delaying deliveries to hospitals. It is frequently driven by available budgets rather than actual service needs. There is also a continuing lack of understanding among hospital managers about the Public Procurement Act (PPA) and the latest Public Procurement Rules (PPR), 2025.
Every health facility must prepare an annual procurement plan (APP), which must be reviewed and approved by the Directorate General of Health Services. Because approval capacity at headquarters is limited, many hospitals receive approval only in March or April. Open tenders are also reportedly subject to external influence, creating additional delays. If the first tender fails, there is often insufficient time to initiate a second tender, and the budget is simply surrendered. Outdated standard price schedules also exacerbate the problem. The standard procurement ceiling rates of most common furniture and equipment are still set in 2014 base prices, which no longer reflect market realities. Hence, the lowest bid may still exceed the approved ceiling, forcing procurement to restart.
Another barrier to effective budget execution is the fear of audit objections, particularly for facility managers who are nearing their retirement and who are reluctant to initiate any procurement in order to avoid possible audit objections. This risk-averse culture often results in delayed or unspent budgets. Some expenditures for the health ministry are unique in nature and often are not aligned with economic codes under iBAS++. Hence, expenditures are often posted against an inappropriate economic code, causing audit objections.
Vacant positions affect budget execution in two ways. First, salary budgets remain unspent. Second, understaffed institutions lack the managerial and technical capacity needed to implement activities, prepare procurement plans, supervise contracts, and deliver services. The critical shortage of financial managers, procurement specialists, accountants, biomedical engineers, and project management professionals, frequent transfers of staff and insufficient training in iBAS++, government financial rules, procurement regulations, e-GP systems, and budget management further weaken budget execution. Even administrative delays, such as registering a new drawing and disbursing officer, can prevent facilities from accessing their budgets for months.
Bangladesh’s health budgeting system remains centralised and input-driven. Budgets are prepared and approved according to detailed expenditure codes, leaving managers with little flexibility to respond to changing needs during implementation. Suppose a district hospital has savings under one budget line but urgently needs additional funds to purchase laboratory reagents or to repair medical equipment. Reallocating funds between expenditure codes—a process known as virement—is not possible. Consequently, money remains unspent in one account while patients go without essential services in another. While this system ensures financial control, it compromises operational efficiency. The result is both underutilisation and often misallocation of funds.
In addition, programme design and budgeting are undertaken by separate groups of officials. Programme managers may have limited understanding of budgeting procedures, while finance personnel have limited understanding of programme implementation realities. The inadequate coordination often causes optimistic budgeting, and mismatch between activity, expenditure requirement and proposed budget, leading to underspending of funds. Budget formulation itself contributes to inefficient spending. Most allocations continue to follow incremental budgeting—last year’s allocation plus a modest increase—rather than estimating actual service requirements.
Spending block allocation remains another challenge. Rigid process of using the block allocation and the lengthy approval process often leave the block allocation underutilised. Persistent underutilisation creates another unintended consequence. Because the health ministry repeatedly fails to spend allocated resources, it raises the chances of the finance ministry reducing subsequent budget proposals. Ironically, poor budget execution today becomes one reason for lower health allocations tomorrow. Hence, the country faces a vicious cycle: low allocations, weak implementation, reduced future budgets, and continued underinvestment.
In FY2026-27, spending the development budget and the huge block allocation will be more challenging. Introducing the Health, Population and Nutrition Sector Programme (HPNSP) in 1998, the health ministry used to implement the programme under the development budget, which included multiple operational plans, such as communicable disease control, non-communicable disease control and tuberculosis control programmes. The HPNSP was discontinued during the interim government. In its absence, the health ministry should prepare the development project proposal (DPP) for multiple programmes within a very short span of time to ensure the full utilisation of the development budget along with the block allocation. It needs to begin with earlier design and approval of DPP and procurement plans for timely spending of the budget. The process of preparing the APP should start immediately so that it can be sent to the respective directorate for approval by early July.
Bangladesh certainly needs a large health budget, but increasing allocations without addressing implementation bottlenecks will ensure little improvement. Reforms need to focus on greater flexibility for reallocating funds between budget lines, and a shift from incremental to need-based and performance-oriented budgeting. The health sector also needs professional procurement and financial management cadres, stronger capacity at the directorates, EDCL and CMSD, updated procurement price schedules, streamlined approval processes, and greater decentralisation of financial authority. Financial data needs to be available and analysed on time to take corrective measures. A help desk facility can be set up to provide easy access to technical and digital advice and support for budget preparation, execution and audit process.
Bangladesh’s health financing challenge is not only about allocating more money; it is about building institutions capable of spending public resources efficiently and transparently. Until these structural bottlenecks are addressed, larger budgets alone will not deliver better healthcare.
Dr Rumana Huque is professor in the Department of Economics at Dhaka University and executive director at ARK Foundation.
Views expressed in this article are the author's own.
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