Foreign aid crosses record $8 billion in May

Bangladesh has registered a 47% jump in disbursements of foreign assistance that have surpassed the $8 billion mark in 11 months of the current fiscal year for the first time.

In July-May, development partners released $8.42 billion in contrast to $5.72 billion in the same time a year ago, according to the latest report of the Economic Relations Division (ERD).

The government expects that the amount will reach $9 billion after the end of FY22.

ERD officials put such a record foreign fund release down to increased use of external loans in some megaprojects that are nearing completion, more budget support provided by different development partners and funds for purchasing Covid-19 vaccines.

The foreign assistance disbursal will continue to grow after the end of June as the government has a target to use $10.8 billion in the current fiscal year, they said. 

The foreign fund disbursements amounted to $7.95 billion in FY21 and $7.38 billion in FY20. The external assistance release always remained below $7 billion in all the previous years, according to the ERD.

ERD officials said last week they signed a deal with the Asian Development Bank (ADB) for a budget support of $250 million. Such a fund gets released shortly after the agreement is signed.

Moreover, large sums of foreign loans will be spent on several development projects, which will bring the foreign aid disbursements closer to the target, they added.

In the meantime, according to the ADP progress report as of May by the Implementation Monitoring and Evaluation Division (IMED), the use of foreign loans for development projects is on the rise towards the end of the current fiscal year, with Tk9230 crore spent in May alone.

The IMED expects that the same amount or more of foreign loans will be spent on various development projects in June.
The utilisation of foreign aid stood at Tk50,575 crore during July-May, up from Tk39,498 crore during the same period last fiscal year, according to data from the IMED.

ERD officials said $1.14 billion in budget support and $956 million for vaccine purchases were released as of May this fiscal year. 

The funds came from the World Bank, ADB, Asian Infrastructure Investment Bank, Jica, Korea and the OPEC Fund for International Development.

Ahsan H Mansur, executive director at the Policy Research Institute, told The Business Standard that the government is getting Covid-related budget support and loans for purchasing Covid-19 vaccines, which contributed to the overall rise in foreign aid disbursements.

But excluding such funds, the foreign aid for development projects have not increased much. A large part of the foreign aid has remained stuck in the pipeline as ministries and divisions cannot spend such loans at an expected pace, he noted. 

According to the ERD, foreign aid in the pipeline stood at $47 47.84 billion as of May of the current fiscal year.

Meanwhile, in the first 11 months of the current fiscal year, ADB has released the most funds. The country received $2.07 billion from this development partner as of May. The government expects to receive $2.45 billion from it by June.

Some $2.37 billion of loans from Japan are being used in the current fiscal year. The disbursement as of May stood at $1.77 billion, while the disbursal from the World Bank amounted to $1.53 billion against the target of $1.63 billion.

Besides, the fund release from Russia stood at $1.15 billion in July-May of the current fiscal year.

According to the ERD report, loan commitments from development partners have also increased slightly to $5.9 billion in the 11 months, up from $5.36 billion in the same time a year ago.

The World Bank, ADB and China have made commitments of over $1 billion each. 

In the meantime, the government's loan repayments also increased till May of the current fiscal year. In the 11 months, payments of interest plus principal stood at $1.88 billion, which was $1.7 billion during the same period last fiscal year.