Foreign loan pledges fall 60% in H1
The government expects $9.7 billion in foreign loan commitments and $12 billion in disbursement in FY23
Bangladesh saw a decline in both foreign aid commitments and disbursements in the first half of the current fiscal year, show latest data, thanks to lengthy approval of development project proposals and a lack of spending capacity by government agencies.
In the July-December period, foreign aid commitments fell by 60% to $1.76 billion – down from $4.39 billion in the same period last fiscal year, according to the Economic Relations Division's (ERD) data published on Sunday.
In the first half of FY23, foreign aid disbursement has decreased to $3.78 billion – also registering a 9.47% fall compared to $4.17 billion in the same period of FY22.
An ERD official said that many ministries and divisions were yet to submit preliminary development proposals for different projects in FY23, eventually leading to the delay in receiving the loan pledges.
For example, the official cited a total $2 billion flexible loan by the World Bank to five projects.
Though the lender has approved the loan in its board, government agencies could not table the projects before the Executive Committee of the National Economic Council (Ecnec) – pushing back the loan signing.
The official noted that the same inefficiencies and negligence in other projects plague the foreign assistance.
He also attributed discontinuation of vaccination support by foreign development partners this year to the plummeting aid commitment and disbursement.
According to ERD's annual borrowing plan, the government expects $9.7 billion in probable commitments in FY23, including budget support.
Owing to the economic shocks stemming from external and internal factors, the government is seeking more budget support this year from key development partners, including the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and Japan International Cooperation Agency (Jica).
So far, Bangladesh has received $250 million in budget support from the Asian Infrastructure Investment Bank (AIIB).
The country has received the highest $383.25 million aid commitments from the ADB, following the second highest of $300 million by the World Bank.
According to ERD data, Japan released the largest chunk of foreign aid for Bangladesh in July-December. The island nation freed $921.61 million to Bangladesh, followed by $567.34 million by the ADB.
Of the key donors, the World Bank released $540.37 million, China $535 million and Russia $439.81 million to Bangladesh in the first half of FY23.
The government has set a $12 billion disbursement target for this year, as disbursement in FY22 stood at record $10 billion.
In the FY23 national budget, the government had originally proposed to spend Tk93,000 crore from foreign aid allocation. The figure has been proposed to be reduced to Tk78,000 crore in the revised development spending plan.
The proposed cuts amounting to Tk15,000 crore in foreign funded development works indicate a serious lack of implementation capacity by the government agencies.
The prime minister's office and the planning commission have asked the ministries and divisions to spend more from the foreign development funding, taking some pressure off the ailing forex reserve.
In the first six months of the current fiscal year, the government's loan repayment saw an increase as Bangladesh paid $1.05 billion back to its development partners. The volume of repayment was $1.04 million in July-December in FY22.