The Financial Express

Govt sets ambitious soft aid flow target this fiscal

| Updated: October 25, 2017 04:25:14

Picture used for representational purpose Picture used for representational purpose

The government eyes disbursement of nearly US$7.0-billion concessional foreign assistance this financial year, an ambitious 35 per cent rise over last fiscal, to meet huge fund needs.

Even, officials said Friday, the government's desired aid receipts overshoot the current fiscal's commitment level at US$6.0 billion.

According to the Economic Relations Division (ERD), the target of disbursement of medium-and long-term (MLT) foreign aid, including loans and grants, in the last FY, 2016-17, was US$5.20 billion for financing country's infrastructure development and budget deficit.

The target of foreign-aid commitment in the last FY was $6.0 billion.

Farida Nasreen, an Additional Secretary at the ERD, said: "We have a plan to mobilise a record $7.0 billion loans and grants from different bilateral and multilateral donors in the current FY2018 to implement development works and finance revenue deficit in the budget."

Different development partners, including the World Bank (WB), the Asian Development Bank (ADB), Japan, the Islamic Development Bank, and China, provide MLT loans and grants for bankrolling Bangladesh's development works.

According to the proposed foreign-assistance target, the government is expecting around $7.0 billion worth of external funds in the FY 2017-18 for implementing the development projects directly (as project aid).

The government this year has not taken any fund target as budgetary support from the external sources.

In the last fiscal year, Bangladesh had an original $5.20 billion worth of foreign-aid target: some $5.0 billion for implementing the development projects directly (as project aid), $100 million as budgetary support and the rest $50 million as food aid.

ERD Secretary Kazi Shofiqul Azam told the FE that the foreign-aid target was not ambitious one at all as the development budget alone would require almost the entire sum of $7.0 billion in external funds in the current fiscal.

"Since some big projects, including the Russia-supported multibillion-dollar Rooppur nuclear power plant, China-supported Karnaphuli tunnel construction and Padma Bridge rail-link project, Japan-supported MRT and Matarbari power plant, are expected to receive a big chunk of disbursements, the foreign-aid target will be achieved," he added.

Meanwhile, aid utilisation still remained a challenge for government agencies as they fail to utilise the external assistance in time and the funds bubble up in the pipeline.

The government every year cuts the preliminary project-aid target in the development budget in the last half of the fiscal owing to poor utilisation of the available assistance in the pipeline.

ERD statistics show the government ministries and agencies utilised only $3.5 billion or 78 per cent of concessional loans and grants, disbursed by the development partners during last FY2017 against the confirmed aid of about $4.5 billion.

Besides, the country's unused total concessional foreign aid has swelled to nearly $36 billion in the pipeline until the last FY as the government agencies failed to use the resources for their alleged inefficiencies.

Foreign aid (loans and grants) is one of the key components of the country's national budget ever since 1972.

Although the country has over the years cut its dependence on external aid, it still needs substantial amounts to execute major basic and social- infrastructure projects such as bridges, power plants, education stipends etc.

A senior ERD official said the ERD would not seek any commodity aid from the donors after the World Bank, the Asian Development Bank and rich countries expressed reservation about such assistance.

He said total foreign-aid target this year had to be fulfilled as the government has undertaken an ambitious development recipe that requires a significant amount of external assistance.

He said total foreign aid this year was expected to be fulfilled as the government has undertaken an ambitious Tk 1.56 trillion development programme where Tk 604.16 billion has been earmarked as project aid (to be financed from external resources).

Development analysts said with the internal revenue falling short of expectations, the government banks on foreign aid to keep its budget deficit down to a manageable 5.0 per cent of the gross domestic product (GDP).

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