Foreign aid flow into BD falling headlong

Foreign-aid flow into Bangladesh is ebbing down drastically in recent months as the country received 62-percent less assistance confirmation in July-January period, officials said Saturday and aired despair about any early rebound.

Government's belt-tightening stance on public spending, lax reform initiatives, country's waning creditworthiness, and global economic shocks have shrunk the overseas development assistance (ODA) inflow to the country, analysts said.

Economists point out that reluctance in reform, lower local resource allocation for the foreign-funded development projects, and historically weak capacity in project implementation as the dampers on the ODA inflow.

The country's larger development partners, including the World Bank and Japan, confirmed the lowest amount of funds in the first seven months of the current fiscal year (FY) 2022-23.

The development partners made commitment of only US$1.76 billion worth of loans and grants during the July-January period for bankrolling Bangladesh's development recipe, which accounts for 62.42-percent lesser than that in the corresponding period last FY2022, Economic Relations Division (ERD) data showed.

In the corresponding period of FY2022, Bangladesh had got confirmation of $4.69 billion worth of foreign assistance.

The disbursement of ODA to Bangladesh also dropped by 9.41 per cent to $4.23 billion during this past July-January period.

In the same period last fiscal, the development partners released $4.69 billion in assistance.

Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur told the FE that since the government has been failing to improve its project-implementation capacity as well as reforming different priorities, the development partners are reluctant to provide assistance in recent months.

The government has so far failed to bring reforms in its local fund- mobilisation system and financial sector and improve business climate, which are also the conditions set by the development partners.

"Many assured foreign loans from the development partners are not being confirmed due to the failure of the government in reforms," he said.

Had the government done reforms, Bangladesh might have got higher loan and grant commitments and disbursement from the foreign lenders, Dr Mansur said.

Centre for Policy Dialogue (CPD) Research Director Dr Khandker Golam Moazzem sees the declining trend in the foreign-aid flow as a bad news for the country.

"Declining creditworthiness amid falling current-account balance and international payment complexities, diversion of aid to other destinations amid recent global scenario, and government's failure in adequate local resources mobilisation are the reasons behind the poor scenario," he says.

If the declining trend in the foreign- aid commitment continues, it will be dismal for the country in the future days amid the economic crisis, Dr Moazzem told the FE.

An analysis by The Financial Express has found that save the Asian Development Bank (ADB), the major development partners, including the WB, Japan, the Asian Infrastructure Investment Bank (AIIB), China and Russia, have almost not made fund commitment during the last seven months of the current FY2023.

China, India and Russia had not made any aid commitment for Bangladesh in the July-January period, while Japan had confirmed only $3.41 million, and the World Bank only $300 million.

During the same period last FY, all the major development partners had committed a good amount of ODA for Bangladesh, the analysis has found.

A senior ERD official said since the government had almost halted project approval over the year, the foreign-assistance commitment dropped significantly in the recent months.

"In addition, the belt-tightening approach in public expenditure and failure in timely project execution had prompted the negative growth in foreign-aid commitment and disbursement," he added.

Until expediting quality project implementation, the foreign-fund receipt will be coming down, the official added.

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