Foreign aid release, commitment surge in July-Jan of FY22

Bangladesh witnessed jumps in both foreign aid disbursement and commitments for new loans and grants in the first seven months of the current 2021-22 fiscal year, mainly riding on Covid-related budget assistance and loans for purchasing vaccines.

The country received more than 90% higher aid commitments year-on-year in the July-January period of FY22, while the amount of assistance released by the development partners in the period was more than 39% higher compared to the same period a year ago, according to the Economic Relations Division's (ERD) latest data.

The ERD data show the development partners pledged $4.69 billion in grants and loans in the July-January period of the current fiscal year, which was $2.46 billion in the same period last fiscal year. During this period, they released $4.69 billion worth of assistance, higher than $3.35 billion in the corresponding period last year.

ERD officials have attributed the increased foreign aid receipts and aid commitments to post-Covid changes in aid priorities.

Loans given for development projects are released on the basis of project implementation – if the implementation rate is fast, money is also released fast, they said, adding loans for buying vaccines and Covid-related budget assistance, however, are released within a few days after an agreement is signed or commitment is given.

With $1.12 billion development promises, China tops the loan pledges in July-January period, they added.

In the seven months, Beijing-based Asian Infrastructure Investment Bank promised $515 million, the World Bank promised $795 million and Japan promised $382 million. 

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the government now needs money as revenue collection is slow because of the pandemic. 

This is why the government is taking more and more budget assistance, and the development partners do not take much time to release budget support, he maintained.

He also pointed out that receipts of project assistance are not growing that much.

In the first seven months of the fiscal year, the Asian Development Bank (ADB) promised the second-highest amount of aid for Bangladesh. The Manila-based development partner pledged for $822 million during the period.

In July-January period, ADB freed the highest $1.77 billion. Japan disbursed the second highest amount of foreign aid – $1 billion – during the period, followed by the World Bank, China and Russia.

Meanwhile, the rate of loan repayment by the government also saw an increase during the first seven months of the current financial year. During the period, the government paid the development partners $1.22 billion in principal and interest on loans. The volume of repayment was $900 million in July-January in the previous year.