New commitments for foreign funding dropped by 2.14%, while disbursements also registered a 2.28% fall in FY21.
In the last fiscal year, development lenders disbursed $7106.41 million, which was $7271.97 million in FY20, according to an updated report on foreign funding by the Economic Relations Department (ERD).
The implementation of development projects was affected as many foreign experts were not available on project sites amid the pandemic. That was why foreign fund disbursements were comparatively low, according to ERD officials.
But the government availed a significant amount of funds in the form of budget support from many development partners to rejuvenate the economy.
The foreign fund disbursements still hit the $7 billion mark in the last fiscal year despite a slight year-on-year drop and it is a big achievement, the ERD says.
The World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank and the European Union have released their promised budget support to help Bangladesh recover its economy from Covid-19 shocks and purchase vaccine doses, eventually giving a rise to fund disbursements, sources said.
The disbursement of foreign funding for project assistance depends largely on the pace of project implementation. Budget support, on the other hand, is released within a few days after the signing of an agreement.
In FY21, loan disbursements amounted to $6772.17 million and grant disbursements were $334.23 million.
Dr Sayema Haque Bidisha, research director at South Asian Network on Economic Modeling (Sanem) and an economics professor at Dhaka University, told The Business Standard that there had been a change in the priorities of development partners in providing foreign funding in the pandemic situation.
They now give importance to health, education and social security sectors alongside economic recovery. So, the government should chalk up strategies to obtain more foreign assistance in health, education, and social security sectors in the future, she added.
To get disbursements of project assistance, the government will have to be more tactful too. Bureaucratic complexities should be removed to speed up project implementation, Dr Sayema said.
Development lenders also pledged to provide $9349.94 million for Bangladesh in FY21. The funding commitments include budget support. The government managed to avail loan commitments amounting to $8676.33 in the last fiscal year, which was $9554.42 in FY20.
The government paid back over $1909 million, including interests, to different development partners in the last fiscal year.
Meanwhile, the Implementation Monitoring and Evaluation Division (IMED) report also shows a slow pace in implementing projects amid the pandemic.
According to IMED data, most ministries and divisions could utilise less than 60% of foreign loans even in 11 months of the last fiscal year.
The industries ministry used 33% of its allocated foreign fund, the civil aviation and tourism ministry 39%, the primary and mass education ministry 45%, the housing and public works ministry 47% and the water resources ministry 52%.