Making proper use of project aid

It is indeed a paradox that the government is facing a severe foreign exchange crisis affecting its external trade as well as development activities at a time when the pipeline for the country's overseas development aid is literally chocked with unutilised foreign fund. Even in the current Annual Development Programme (ADP), the allocation from the project assistance has not shown any significant increase.The government, for reasons best known to it, appears rather cautious about allocating funds against different foreign-aided projects in the ADP. The natural outcome of being so parsimonious with foreign aid utilisation has been that the government is looking more to banks including central bank for funds to meet its development expenditures. As the Economic Relations Division (ERD) data show, until FY22, unused foreign aid worth over US$45 billion has accumulated in the pipeline.

Against this backdrop, the prime minister's recent directive to expedite formulation and implementation of government-to-government (G2G) projects bears special significance. But to expedite project implementation, the ministries concerned will be required to build their capacities for proper utililisation of project funds. It is the weakness of the implementing agencies that has been behind the poor record of project implementation over the years. As the Implementation Monitoring and Evaluation Division (IMED) data show, even in the first nine months of the of this fiscal year (FY23), the rate of ADP implementation was record low  at 41.65 per cent as the ministries and divisions concerned could not  spend the project money allocated for them at the expected levels. Worse yet, the rates of project execution by six ministries were below    40 per cent.  The story is more or less the same in case of the previous ADPs. In the period between July and March of FY22, for instance, the rate of project implementation was slightly over 45 per cent. A closer look at those partially executed projects would further make it evident that whatever the implementing agencies --- the ministries and the divisions concerned --- could spend was mostly from the domestic allocation (in taka) and not from the overseas project assistance (in US dollars).

Why are the government's project-implementing agencies so shy about using the aid money in the development projects? Experts would rather lay it at the door of the inefficiency and corruption on the part of the project implementing agencies. So far as inefficiency is concerned, the project officials in most cases lack the necessary initiative, if not the aptitude, for preparing documents that require transparency in the use of foreign fund. So, the process of exchanging documents between the local project-implementing agencies and their counterparts at the development partners' offices slows down. The release of foreign funds does not take place the way it should. The problem is mostly with low-interest project assistance funds from advanced democracies of the North America, Europe and Japan. Obviously, the  aid funds are not so amenable to procedural loopholes as it is in the case of domestic part of the project money. Thus, at a stage, the bureaucracy comes to a grinding halt when it comes to the use of foreign fund.  The problem is especially pronounced where international tenders are involved.

So, what happens at the end of the project period is that the project assistance (PA) funds remain mostly unutilised year after year. It is time the government employed people with required expertise and professional integrity at the key positions of its development projects for expeditious use of project aid, especially government-to-government funds.