Municipalities fail to pay staff as revenues dip

Cities and municipalities across the country are facing a cash crunch in the wake of the Covid-19 pandemic that has struck the collection of municipal taxes and lease payments.

Most municipalities are unable to pay the salaries of their staff – let alone carry out development work – due to a financial crisis.

A first class municipality like Nandail in Mymensingh district is experiencing the same shortage of funds.

Sources said the annual expenditure on salaries of the municipality employees is around Tk1 crore against its income of Tk1.20 crore from various taxes and lease payments.

After meeting the demand for some minor emergency reforms in areas under its jurisdiction, the reserves of this municipality remain at almost zero.

Mayor Rafiq Uddin Bhuiyan – who has been in charge of the local government body for about five years – explained that tax collection has dropped due to the novel coronavirus. It hit the country between April to June, a peak period for collecting civic taxes.

Conversely, the cost of creating public awareness and distribution of relief has increased, added the mayor.

"We have got at least six months' salary arrears to pay the municipality officials and employees," he explained.

This figure is present in almost all the municipalities across the country.

Nilphamari Municipality Mayor Dewan Kamal Ahmed, also secretary to Municipal Association of Bangladesh (MAB), said most of the municipality taxes are collected during the March to July period, but this time is the exception. Most municipalities are not able to pay their staff salaries due to the existing financial crisis.

Abdul Alim Mollah, central president of Bangladesh Municipal Service Association, said staff salaries at 260 of the country's 327 municipalities are in arrears.

The livelihoods of about 40,000 officers and employees are in crisis, he said, adding that municipalities need financial assistance of Tk1,249 crore to meet salaries and other needs.

Helal Uddin, secretary to the local government division, said the government has so far given Tk45 crore to municipalities to cope with Covid-19's effects, and it has no plans to pay any more. The municipalities have to run on their own income.

Asadul Haque Bhuiyan, mayor of Kendua municipality in Netrokona district, said salaries and honoraria of elected representatives that are in arrears have been piling up – while the income of the municipality has declined due to the novel coronavirus.

The World Bank (WB), a multinational development agency, says local government agencies in urban areas – such as municipalities and city corporations – have increased spending on food and medicare as well as on awareness-building programmes in the fight against the novel coronavirus.

According to the World Bank's Dhaka office and the government's Economic Relations Department (ERD), the global lender has already agreed to finance the Local Government Covid-19 Response and Recovery Project.

The concept paper of the WB depicts the negative impact of the novel coronavirus in urban areas and fragile financial situation of local government institutions.

It said although 36% of people live in urban areas of Bangladesh, their contribution to the national economy is 65%. Although a lower number of people play a greater role in national production, the actual number of poor people in urban areas is on the rise.

If a World Bank loan is provided, $182 million will be given to the municipalities and $93 million to 10 city corporations in three years, said the authorities concerned.

The project will give priority to developing local services, creating livelihood opportunities, ensuring economic development, conducting income-generating activities, and developing local infrastructure.

However, local government Secretary Helal Uddin said no money will be paid for salaries and allowances of the workers from the project. Funding will be provided from this project only for development work.

ERD officials said the final negotiations are now under way after receiving initial approval for financing the project.

After the final discussion, the loan proposal will be presented at the board meeting of the World Bank. The government is hopeful that the project will be implemented from the beginning of the next financial year.

According to the World Bank's concept paper on the project, the rate of Covid-19 infection is higher in cities.

Economic activities in urban areas declined by about 70% during the government shutdown, and as a result, per capita consumption decreased by 15% and poverty shot up by 82%.

The number of poor people in the city has crossed 2.7 crore as 1.5 crore people have fallen into fresh poverty.

In addition to Covid-19 infections, the situation was further aggravated by waterlogging due to super cyclone Amphan hitting in May and excess rainfall in July and August.

Local government expert Tofail Ahmed told The Business Standard most tax revenue in municipal and city areas are under the control of the government. Institutions are being weakened without any specific initiative to ensure financial well-being and independence of the local government bodies.

He added that most basic services for citizens are provided by the local government institutions. The government should provide adequate funding to these institutions to continue citizen services.

"However, the government is not doing that. Money should have been allocated to the municipality and city corporations earlier," he observed.