Foreign loan disbursement tied to project readiness

The government from now on will not allow the disbursement of any foreign funds to implementing agencies without prior project approvals and the appointment of project directors and necessary staff.

In addition, agencies must complete the required land acquisition before obtaining confirmation of external loans (project aid) and assistance, according to a circular issued by the Economic Relations Division (ERD) dated July 27.

These are among seven pre-conditions imposed by the ERD for confirming loans or signing agreements with any development partners (DPs) of Bangladesh.

The conditions aim to address the ongoing issues of unusual execution delays, as well as cost and time overruns.

In many cases, ministries and agencies have reportedly exerted pressure on the ERD to sign loan agreements with foreign DPs without securing project approvals or completing the minimum required processes. This often delays project execution and leads to time and cost overruns.

A senior ERD official said the conditions have been made mandatory from the initial preparation phase to preserve the time value of money and prevent cost overruns.

According to the circular, project implementing agencies must prepare and approve the Development Project Proposal (DPP) or Technical Assistance Project Proposal (TAPP) in accordance with Planning Commission guidelines.

The appointment of project directors (PDs) and necessary staff must be completed prior to any loan agreement with foreign DPs.

Land acquisition must be confirmed in advance, along with submission of a rehabilitation plan for people affected by the acquisition.

Project executing agencies will also be required to estimate the costs for service, goods, and works procurement, prepare draft tender documents, and complete all relevant processes from tendering to contract awarding if necessary.

Consent must also be obtained from the Finance Division regarding the terms of the subsidiary loan agreement, where applicable, following negotiation with the development partner.

The ERD has made it mandatory for implementing agencies to reach agreements with relevant utility service providers for the relocation of utility lines such as gas, electricity, and water.

ERD officials said the conditions will apply not only to pipeline projects but also to those currently undergoing the approval process.