Despite the promise of receiving $6.03 billion in loans and grants from four prominent development partners since March last year after the beginning of the Covid-19 outbreak, only $1.79 billion was disbursed, which was only 29.78% of the commitment.
Four partners – the World Bank, International Monetary Fund (IMF), the Asian Infrastructure Investment Bank (AIIB) and Asian Development Bank (ADB) – disbursed $1.75 billion as budget support since the pandemic began.
In June last year, the World Bank approved three loan proposals to lend $1,045 million to Bangladesh. Of these, $250 million in the form of budget support was disbursed that month. But the government has yet to sign loan agreements for two projects worth $795 million, which would help revive the economy from Covid-19 shocks by creating around 2.5 lakh jobs.
Several ministries and divisions of the government utilised aid worth $44.7 million, excluding the budget support. The disbursement of project support is only 1.05% of the total commitment of $4.28 billion by the four lenders.
Economic Relations Division (ERD) officials say the money pledged by various agencies for budget support is being disbursed quickly. But as extra time was spent on preparing project proposals, getting approvals of the Executive Committee of the National Economic Council (Ecnec), and conducting final negotiations with donor agencies, money promised by donors for project support remains stuck.
They also blamed the slow implementation of projects for the low disbursement of aid. They said the delay in implementation leads to time and cost overrun, which negatively impacts the balance of payments leading to increased borrowing from domestic sources.
Experts and economists said the government and the people of the country are facing a serious cash crunch due to Covid-19 to meet emergency medical costs, to create medical facilities for both Covid-19 and non-Covid-19 patients and maintain livelihoods.
They also said it was high time to utilise the foreign funds to save the lives of people and revive the economy.
According to ERD sources, the World Bank has so far approved approximately $2.82 billion in assistance for new projects, including $800 million directly in the health sector, since the pandemic began in March last year.
Of this, there have been loan agreements of $1.07 billion in six projects. Loan deals of $1.87 billion in six projects are still stuck due to various issues.
According to the World Bank's Dhaka office, the global lender announced disbursed $287.47 so far while $250 million as budget support and $37.47 million from $100 million of the emergency assistance for a health sector project.
The project was the first foreign aided project after the coronavirus outbreak had begun, and had provision to get a 20-bed isolation centre and a five-bed critical care unit in each district hospital. Moreover, there was a plan to set up a 50-bed isolation centre and a 10-bed intensive care unit at each of the 17 medical college hospitals.
Faster implementation of the project would reduce the current ICU crisis.
The World Bank committed further to lend another $500 million to buy vaccines under the same project. The disbursement of the amount is yet to start due to delay in signing agreement with the lender.
As a result, even though the government has started the vaccination drive, the money for the project is unspent.
Officials said there have been three project directors (PD) for the project since the beginning.
DR Azizur Rahman Siddique, current PD of the project told The Business Standard, three-four project officials had been deployed to look into corruption allegations, and that delayed the implementation.
He also said, progress of the project was stalled previously. Although some initiatives have been taken recently to accelerate progress, enquiry and audit of some government agencies and lenders are slowing down the project.
He also said, the nationally important project is staffed by only three or four people. Significant progress and disbursement of the amount is difficult with so few people, he added.
Another project with support of the ADB worth $100 million has been taken at same time, but it has achieved no progress.
The World Bank approved $500 million for the Bangladesh Economic Zones Authority's (Beza) Private Investment and Digital Entrepreneurship (PRIDE) project in June last year.
The project initiated to create about 1.5 lakh jobs is yet to come under effect as the loan agreement has not been signed following the approval of the Ecnec.
Paban Ahmed, executive Chairman of the Beza, refused to make any comment over the issue.
Another $295 million for the Bangladesh Computer Council's Enhancing Digital Government and Economy (EDGE) project is also facing the same situation.
The ADB has pledged $607.23 million in loans and grants directly for the health sector to address the pandemic impacts, according to the agency's Dhaka office sources. Of this, $7.23 million will come in grants.
The ADB's $500 million budget support has been added to government funds. No money has been disbursed as there is no progress on the $100 million loan project.
Since the beginning of the pandemic, China-based development agency AIIB has so far approved $850 million to address the coronavirus crisis. Of this, $250 million in budget assistance approved in May last year has been disbursed.
Money from the three other packages worth $600 million was not disbursed as the project has not reached the implementation stage.
Abdul Baki, additional secretary to the ERD and head of the World Bank wing, told The Business Standard it was true that loan agreements of some projects were taking longer due to delays in project approval and final negotiations.
He added that it had been a long time since the loan proposals for the two projects of Beza and Bangladesh Computer Council were approved. "During this period, the projects also received Ecnec approvals. Hopefully, the loan agreements would be finalised this month after final negotiations."
He also expressed hope that the $500 million loan agreement pledged by the World Bank to buy Covid-19 vaccines would be signed this month.
He said it was much easier to spend budget support as there was no specific sector mentioned. "It takes extra time to get project support as it is related to implementation."
Economist Dr Ahsan H Mansur said a large sum is needed to buy intensive care units, ventilators, and medicine for the treatment of coronavirus patients. "Foreign aid is essential as the government does not have the capacity to invest in the treatment of non-Covid-19 patients, maintaining the purchasing power of the people, and reviving the economy.
He said there was no scope to wait on the promise of foreign aid. "Apart from that, the foreign aid announced by donors as project assistance may be returned if it is delayed for a long time."
The economist added that more foreign aid was needed at this moment than any other time in the past.
He advised to disburse the money fast after taking the project to the implementation stage.
$2.91 billion expected for vaccine purchase
The health ministry is expecting about $2.91 billion in foreign aid from various donors for the development of the health sector, including purchasing Covid-19 vaccines.
An official of the ministry's Health Services Division said a $500 million proposal had been approved by the World Bank's board. "After a meeting with the prime minister, the ADB country director pledged to give $940 million in assistance and the loan agreement is expected to be signed this month."
He said there would be no crisis of funds for vaccines. "Discussions are underway with various countries and organisations on financing. There are doubts about how much of the money can be used in time."
Officials said negotiations are underway for $500 million in assistance for the health sector to tackle the pandemic with the AIIB, $295 million with the European Investment Bank, and $176 million with the French donor AFD.
Mirza Ashfaqur Rahman, joint secretary to the ERD (Europe branch), said all possible sources in Europe had been contacted to obtain financial assistance for purchasing vaccines.
"The European Investment Bank has initially agreed to give $295 million, and the French AFD, $176 million. The two sides are in discussion on the matter. The loan agreements will be finalised if the final decision is made within the next few days."
No substantial progress has yet been made on the $500 million aid proposal sent to Japan International Cooperation Agency (Jica).
Muhammad Ashraf Ali Faruk, joint secretary to the ERD (Japan branch), said there had been no final discussions with Jica on vaccine assistance.
The government is still optimistic about $100 million in assistance from the Islamic Development Bank (IDB) to buy vaccines.
KM Shahabuddin, joint secretary to the ERD (Middle East branch), told The Business Standard a verbal proposal had been sent to the IDB.
"They are reviewing it," he added.
Reasons behind delay in disbursements
The ERD identified some reasons behind the delay in the disbursement of foreign aid. A report titled "Flow of external resources in Bangladesh" published recently said the slow implementation of projects results in slow disbursement of aid, which leads to time and cost overrun.
It also said projects are often designed without proper planning or feasibility studies. Also, people engaged in project preparations are not properly trained. In many cases, a faulty design of the project leads to a revision to the development project proposal (DPP) even before the project is commenced.
Due to the lengthy approval process of project proposals, it takes longer to start projects. Sometimes, projects are not adequately staffed with the right kind of people.
Moreover, in many cases, project personnel are transferred or moved to another job.
Procurement-related bottlenecks and challenges in the land acquisition process also slow down the speed of project implementation, the ERD report added.