Foreign assistance in pipeline twice the country's forex reserve

US dollarDeutsche Welle

An astonishing amount of foreign aid – USD46.55 billion or Tk 5120 billion – has remained unused in Bangladesh, despite the ongoing dollar crisis and dwindling foreign exchange reserves.

The funds were granted by the donor agencies, but are yet to be released.

It was learnt that the foreign assistance could not be released and used in a proper way due to some limitations at the recipient’s end and some bureaucratic hurdles at the donor’s end.

Economists believe that it would have been a relief if the funds were released during the current dollar crisis and waning forex reserves.

The situation is so critical that the amount of released funds will be less than one-third of the total grants. The size of the current annual development programme (ADP) is Tk 2,450 billion and the pledged foreign aid could fund ADPs for two fiscal years. Also, it could facilitate 15 metro rail projects.

The current size of the country's forex reserves is USD20 billion and the pledged foreign aid is equal to double of forex reserves.

Experts said the authorities lack efforts and goodwill to clear the funds.

Against such a backdrop, a committee has been formed to get the pledged funds cleared, with prime minister’s principal secretary Tofazzel Hossain Miah as its head.

Ahsan H Mansur, executive director of Policy Research Institute (PRI), said there is no disagreement over quick clearance of the foreign aids, considering the dollar crisis and the current state of reserve.

The government formed a committee in this regard. There were more committees in the past, but could not get the job done. The pipeline is getting lengthier with each passing day.

Pledge and clearance

According to the Economic Relations Division (ERD), different donor countries and organisations have pledged a total of USD187.64 billion in grants and loans to Bangladesh since independence. But, Bangladesh could not use about 32 per cent or one-third of the grants, and the amount of unused grants is rising consistently.

In total, Bangladesh has been able to use USD126.87 billion in foreign aid till last January, while the donors canceled the pledge of USD14.22 billion due to various reasons, including corruption.

The remaining USD46.55 billion is now in the pipeline, which Bangladesh can use if it wants.

A senior ERD official told Prothom Alo there are problems in project implementation, likewise, ministries are less interested in projects with foreign assistance due to donors' conditions and bureaucratic complexities related to development projects. According to this official, the release of foreign assistance funds has increased by several folds over the past couple of years.

3 donors hold half of the funds in the pipeline

A staggering amount of USD21.82 billion, which is half of the total fund in the pipeline, is now held to three big donor agencies and countries – the World Bank holds USD7.66 billion; the Asian Development Bank $5.71 billion and Japan holds the highest USD8.25 billion. Besides, China and India committed to providing large amounts on various occasions.

The nature of foreign aid and commitments has changed from time to time. Bangladesh received 14-15 per cent of total foreign aids in form of project assistance in the first couple of years after independence while the remaining portions came as food and goods assistance. The scenario has changed and nearly all foreign aids now arrive as project assistance though some grants came during the coronavirus pandemic.

Loans from the International Monetary Fund and specialised loans for several government agencies including Biman Bangladesh Airlines and Bangladesh Petroleum Corporation (BPC) are not included in foreign assistance.

Initiatives of the government

A committee led by prime minister’s principal secretary Mohammad Tofazzel Hossain Miah was formed on 24 January to enhance the implementation of the projects financed through foreign loans, as well as to accelerate the release of foreign aids. Planning ministry, and finance and Economic Relations Division secretaries are members of the committee.

The committee held the first meeting on 6 March where the planning ministry highlighted seven problems related to the implementation of projects financed through foreign assistance. These are; extension of project deadline; increase of project cost; mandatory approval of lenders on each step of tender; lack of coordination between project implementing agencies and donors, revision of projects repeatedly; undertaking of project without feasibility study and inexperience in using foreign aids among officials due to lack of training.

The planning ministry recommended taking initiative to ease bureaucratic complexities in releasing the promised loan assistance. Recently, planning secretary Satyajit Karmaker wrote a letter to the ERD secretary to take the initiative on this matter.

Policy Research Institute executive director Ahsan H Mansur said a portion of funds stuck in the pipeline can be transferred and released as budget assistance. Besides, it should be mandatory for ministries that are implementing projects in association with foreign aids to file monthly progress reports. A strong team should be formed to monitor the entire matter and ensure accountability. Besides, funds from foreign assistance will have to be released quickly by resolving all kinds of problems by holding talks with the development partners, he added.