Bangladesh has lower utilisation capacity of foreign resources than lack of their disbursement, said Professor Rehman Sobhan, chairman of the Centre for Policy Dialogue (CPD).
He said remittance is the largest part of the foreign financing in Bangladesh which should be utilised to a toll of investment rather than consumption financing.
He made the remark at a virtual discussion titled "The Multilateral Response to Covid-19: Perspectives from South Asia" jointly organised by the CPD and the OECD on Tuesday.
Rehman Sobhan said the donor agencies and countries are playing vital roles in identifying the projects to be implemented with their resources and making several interventions with the terms and conditions.
He urged the government to formulate and implement a strong policy to identify for which project foreign aid would be collected.
The noted economist also stressed the need for finding resources from the south-south sources and regional multilateral sources like Asian Infrastructure Investment Bank (AIIB).
Debapriya Bhattacharya, distinguished fellow of the CPD, presented a paper titled "Contextualising the OECD Multilateral Development Finance Report: Bangladesh and Development Finance Response to Covid-19".
In his presentation, Debapriya Bhattacharya said Bangladesh received about $7.12 billion, the highest record of foreign aid in the Fiscal Year of 2019-20, which was $6.2 billion in 2018-19.
Bangladesh has aid dependency worth 2% of the GDP while export and remittance are equivalent to 15% and 6% of the country's Gross Domestic Product respectively, said the CPD distinguished fellow.
The foreign aid has a contribution to the development activities he said, adding that about one-third of the Annual Development Programme (ADP) is financed by foreign aid while some sectors have relatively higher dependency on such aid, he observed.
Share of concessional finance is decreasing in Bangladesh that dropped to two-thirds of the total aid, he said, adding that both the grant and concessional loan are becoming less available.
External debt stock remains comfortable at about 38% of the GDP and debt per capita increased slightly to $232. The debt service liability in Bangladesh is about 6.5% of the GDP, according to the economist.
Bangladesh has to face challenges to find foreign finance to meet the recovery crises arising from Covid-19, to meet new challenges after graduation from the LDCs and to achieve the SDGs, Debapriya maintained.
"We need to understand how the importance of multilateral institutions is increasing day by day. Though we think we've run out of foreign aid, in reality it is not the case. The situation is different."
"There is no accounting as to whether the assistance we received from donors during the Covid has been properly used," he said.
Presenting his paper, Olivier Cattaneo, Head of Unit, Policy Analysis and Strategy, Development Co-operation Directorate, OECD, observed that there was already a shortage of resources and investment to achieve SDGs worldwide.
The crisis has deepened because of the corona crisis, and under the circumstances, no country is on the way to achieve SDG by 2030, he noted.
Sachin Chaturvedi, Director General at the Research and Information System for Developing Countries (RIS), Abid Qaiyum Suleri, Executive Director of Sustainable Development Policy Institute, Islamabad, Pakistan, Dr Dushni Weerakoon, Executive Director of the Institute of Policy Studies of Sri Lanka (IPS), Sri Lanka, and Dr Puspa Sharma, Executive Director of South Asia Watch on Trade, Economics and Environment (SAWTEE), Nepal, spoke at the event as regional partners.
Dushni Weerakoon said excessive debt to China has put pressure on Sri Lanka's economy. The country now has foreign debt of more than 90% of its GDP, she said, adding that in this situation, special importance has been given to raising private sector loans instead of bonds.
Taking the floor, Puspa Sharma said expatriate income is the biggest force in Nepal's economy, which has been hit hard by corona.
Mirza Azizul Islam, a former adviser to the caretaker government of Bangladesh, said donor countries and agencies fix everything on their own when it comes to financing the development of poor countries.
Donors even do the project selection work, which does not reflect the priorities of the recipient country, he added, observing that budget support, grants and flexible loans are declining in Bangladesh.
Even if financing plays an important role, overall development with foreign assistance will not be ensured without implementation skills and bargaining power, said the former adviser.
Angel Gurría, Secretary-General of the Organisation for Economic Co-operation and Development (OECD), attended the virtual programme through a video messaging.
Angel Gurría said the importance of trust is growing between the people of any country and their government and also between the government and donor agencies, especially in the case of multinationalism.
The OECD secretary general added that despite the growing importance of multilateral agencies in foreign aid, many of them have come under pressure in recent times.
On Tuesday, the OECD released a report titled Multilateral Development Finance 2020. The report said the world now needs effective multilateral development economic measures.
The report called on developing countries to work together to recover from the coronavirus pandemic by 2030.