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Problems of Economic Planning

The problems associated with economic planning include:

Political Instability

Political instability often leads to change in plans. Sometimes, if the development plans are continued, there are shifts in targets and area of emphasis. The new government in turn will come up with plan review and implementation only to be ousted by another government e.g. in Nigeria, the 1962-1968. Development plan was not fully implemented partly because of the civil war between 1967 and January, 1970.

Inadequate Capital

Inadequate capital militates against funding planned projects, especially when cash inflows fall below the expected revenue. This has led to some projects being either delayed or neglected.

Wrong Planning

Wrong planning due to misplaced priorities makes plan implementation difficult.

Insufficient Statistical Data

This implies that most of the planning is done on wrong projections and guesses. Where the data is not available, it means that economic planning proceeds on guesswork with the result that planned targets are so divergent from realised targets.

Inadequate Skilled Labour and Experts

Acute shortage of technical manpower to implement the policies according to plans frustrates development plans. This makes plan implementation difficult.

Rapid Population Growth

This often destabilises planning. Unreliable population census figures necessary for socio-economic planning have remained a dream in many developing countries including Nigeria. Because of this, effective planning cannot be done.

Reliance on Foreign Aid

Reliance on foreign aid and adherence to their conditionalities often leads to plan failures.

Corruption and Nepotism

Planned decisions may be influenced by selfish and parochial considerations. This singular fact makes a project become a “sinking fund” project; without completion time in view.

High Cost of Project

Unexpected sudden increases in the cost of projects compared to original estimates. This has been due to lack of proper project analysis. The solutions are either to abandon the projects or to have them inadequately executed.

Fluctuation in Foreign Exchange

Fluctuation in foreign exchange earnings on which plans are based, hinder plan implementation. A fall in foreign exchange earnings have made many developing countries to practise “tight budgets”. Thus, some projects which were already started may not be fully executed or sometimes left uncompleted.

Infrastructural Constraints

The inadequacy of infrastructure is another problem that has prevented the successful implementation of certain projects laid down in development plans. The successful implementation of some projects depends on the availability of economic and social infrastructure such as electricity, water supply, road network, etc. Where they are inadequate, such projects suffer.