Foreign aid crosses record $7B amid Covid-19

The Bangladesh government has achieved record foreign aid disbursement from development partners amid the Covid-19 pandemic.

Development partners disbursed $7.2 billion throughout Fiscal Year 2019-20, compared to $6.5 billion during FY2018-19. The disbursement growth is 11 percent, according to the preliminary report of the Economic Relations Division (ERD).

In the beginning of FY2020-21, the opening pipeline of foreign assistance reached $49.55 billion, compared to $47.26 billion in the same period the previous year.

ERD officials believe that the total disbursement could increase further in the finalised report, to be readied in the next two-three months.

The feat was achieved because the World Bank, Asian Development Bank (ADB), International Monetary Fund (IMF) and Asian Infrastructure Investment Bank (AIIB) had disbursed budget support in accordance with their commitment, the officials added.

The partners provided the support to help Bangladesh's economy recover from the Covid-19 fallout. The World Bank and ADB have quickly disbursed loans for several health-related projects to allow the purchase of Covid-19 testing equipment.

The ADB on May 7 this year approved $500 million for Bangladesh as budget support for a project, titled "Covid-19 Active Response and Expenditure Support Programme." On May 13, it approved an additional $100 million in the "Covid-19 Response Emergency Assistance Project" for health sector development.

Besides, the AIIB provided $250 million in budget support to Bangladesh in the preceding fiscal year.

The World Bank has quickly disbursed the previously promised $250 million in budget support to Bangladesh, to help the country deal with the impacts of the pandemic. The agency also approved an additional $100 million for a health sector project.

Meanwhile, the IMF has approved $732 million as emergency assistance to Bangladesh.

Zahid Hussain, former lead economist at the World Bank, said, "It takes time for development partners to disburse funds for project support, but they can disburse funds for budget support in a few days after getting board approval.

"The Bangladesh government does not get budget support annually, as it usually takes at least a few years. However, considering the ongoing Covid-19 situation, the government has received around $2 billion in budget support from development partners."

According to an ERD report, the activities of the partner development organisations have slowed down since January this year.

Both the government and development partners are focusing only on projects related to the novel coronavirus, and the partners are providing budget support to help the country's economy recover from the pandemic fallout.

"Aid for other development projects has been affected," said an ERD official. Implementation of those development projects has also slowed down from January this year and was further hampered by the shutdown in March.

During that period, Chinese workers and experts left Bangladesh to celebrate the Chinese New Year in their home country. But due to the outbreak of Covid-19, they got stuck in China, causing the implementation of many projects to slow down.

ERD officials said disbursement of funds for some ongoing projects that rely on foreign funding has also slowed down due to their sluggish implementation.

However, work on the Rooppur Nuclear Power Plant project has progressed almost as usual. Work has also continued on several projects, such as the Karnaphuli Tunnel, even under the pandemic lockdown, using funds from foreign loans.

The development partners disbursed $6996.24 million as loans and $275.73 million as grants in the FY19-20. The loan amount was $6262.87 million and the grant amount was $279.7 million during the FY3018-19.

Meanwhile, foreign aid commitment from development partners dropped by only 3.55 percent from FY18-19, compared to the corresponding period of the previous fiscal year.

According to the ERD report, the development partners had committed to provide $9554.42 million in the FY19-20, which was $9906.86 million during the FY18-19.

ERD officials said they had concerns that assistance from the development partners would decrease due to the pandemic, but their commitment has exceeded expectations.

The government received $9052.14 million in loan commitments and $502.28 million in grant commitments in FY19-20. The numbers were $8334.97million in loan and $1571.89 million in grant commitments respectively inFY18-19.

The rate of repaying foreign loans, including interest, increased by 8.30 percent to $1726.22 million, compared to 1593.78 million in the FY18-19.