A decrease in foreign aid makes it less likely for the government to change its fund allocation
The government is set to trim total fund allocation in the revised Annual Development Programme (ADP) by 4.83 percent to Tk1.93 trillion, leaving allocation from its own purse nearly unchanged as foreign aid has shrunk.
Foreign aid decreased by Tk9,800 crore in the revised ADP for the current fiscal year.
On the condition of anonymity, top Planning Commission officials said the Finance Division has already verbally informed them that there will be no changes.
"We will receive a formal letter in this regard soon."
Government fund allocation in the original ADP was Tk1.30 trillion against a total Tk2.02 trillion for the current fiscal year. Foreign aid was to meet remaining Tk0.718 trillion. The revised ADP of this fiscal year is 13.43 percent more than that of the 2018-19 fiscal year.
The proposed revised ADP does not cover self-funded projects.
Planning Commission officials said that they have received demands from ministries and divisions.
Programming Division of the Planning Commission will distribute the funds according to the finance ministry ceiling guiding the revised ADP, where the fast-track projects and projects scheduled to be concluded by this year will be prioritised in allocation.
The National Economic Council (NEC) meeting, chaired by the prime minister, reserves the supreme power to cut or raise government allocation in the revised ADP.
The volume of foreign aid in ADP also dropped by Tk0.09 trillion in the last fiscal year. In the revised ADP, government allocation was raised to Tk1.16 trillion from original allocation of Tk1.13 trillion. Earlier in the 2017-18 fiscal year, there was also a rise in government allocation.
"The government allocation in the revised ADP does not fall, rather it rises sometimes," said former World Bank lead economist in Dhaka Dr Zahid Hussain.
"But foreign aid keeps slipping in revised ADP owing to ambiguous aid projection in the original ADP," he said.
Dr Zahid further said both the government and foreign development partners have their own guidelines for fund disbursement. These policies often collide, and donors in some projects win in the end.
But such impasses linger fund disbarments.
"Even both government allocation and foreign aid in revised ADP remain unused in many cases at the end of the year," he added.
Dr Zahid says, "ADP implementation needs handsome allocation from the government where revenue collection has a major role. But this year's dull collection has already put the government into excess bank borrowing in H1 than its yearly target."
In the current fiscal year, the government had set a target to borrow Tk47,363 crores from the banks. However, the government borrowed Tk48,015 crore in the first six months of the current fiscal year.
Dr Zahid commented that internal loans may mount up further if foreign aid use does not spiral.
Slow project implementation pulls back foreign aid
The volume of foreign aid has dropped by Tk9,800 crore, or 13.65 percent, in the revised Annual Development Programme (ADP) due to slow project implementation.
Although the government had targeted to use Tk71,800 crore, or Tk0.718 trillion, foreign aid in the 2019-20 fiscal year, the amount has fallen to Tk62,000 crore, or Tk0.62 trillion, in the revised ADP.
After a series of meetings with the concerned ministries and divisions, the Economic Relations Division (ERD) set the new target of foreign loans for the current fiscal year and sent the revised allocation proposal to the Planning Commission recently.
Planning Commission officials said, ministries and government bodies have been showing reluctance in using foreign aid from the very beginning. They are more interested spending from government funds which have lax terms regarding accountability and transparency.
ADP implementation with government allocation in the first half of the current fiscal year is Tk37629 crore, which is 28.74 percent of the total government allocation. In the same period, foreign aid ADP implementation is Tk17495 crore, which is 24.37 percent of the total foreign aid allocation.
In the meantime, the revenue shortfall stood at 23.05 percent in the first half of the current fiscal year.
According to the National Board of Revenue, the collection target was Tk136,668 crore during the period, but only Tk15,161 crore was collected.
With revenue deficit and will provide development allocation, the government will be more dependable on the Bank loan.