Govt to speed up foreign aid utilisation

As foreign aid in the pipeline reached nearly $46 billion at the start of this fiscal year, the interim government will take initiatives to utilise those funds to bolster the country’s foreign currency reserves.
Foreign aid is considered to be in the pipeline as soon as a loan agreement is signed between authorities and a development partner.
On his first day at the planning ministry, Planning and Education Adviser Wahiduddin Mahmud directed the planning commission officials to speed up the implementation of the foreign-funded projects.
He also instructed the officials to sit with their counterparts from the Economic Relations Division (ERD) to identify problems in projects and take immediate steps to resolve them, ensuring that projects can be implemented in the shortest possible time.
After the meeting, Wahiduddin told reporters that one of his priorities as planning adviser is to make the most of foreign funds that development partners have already committed to providing.
“If we could release those funds, the existing problem over the foreign currency reserves may be resolved to some extent.”
According to ERD statistics, foreign aid amounting to $45.88 billion was in the pipeline on July 1 this year.
ERD officials said it takes about five years on average to complete a foreign-funded project. Therefore, utilising 20 percent of the foreign funds in the pipeline each fiscal year is considered satisfactory.
In 2023-2024, Bangladesh utilised $9.89 billion of foreign funds, which accounted for about 21.95 percent of the funds in the pipeline.
The utilisation rate was 22.11 percent in the previous fiscal year.
An ERD official said Bangladesh’s utilisation of foreign funds increased in the last three fiscal years because large chunks of budgetary support had arrived.
Historically, however, Bangladesh’s record in utilising foreign aid in the pipeline is unsatisfactory.
It has hovered around 14 to 15 percent, contributing to a pile-up in the unutilised total.
In the past four to five years, Bangladesh took big loans from non-traditional sources like Russia, China and India, which combinedly have more than $12.5 billion in the pipeline.
For the country’s biggest-ever project, the Rooppur Nuclear Power Plant, Bangladesh took $12.21 billion from Russia. Around $8.07 billion was utilised till June 2024, leaving over $4 billion in the pipeline.
However, Russia does not disburse money while offering loans for projects in a foreign country. Instead, necessary equipment is provided and the costs are calculated later as the loan amount.
As a result, although fund utilisation for the project increased, it did not contribute to boosting foreign currency reserves.
China committed $12.20 billion to Bangladesh, of which $8.87 billion was utilised till June this year, leaving $3.33 billion in the pipeline.
Besides, after 2009, India committed $7.73 billion under three special agreements. Bangladesh has utilised $2.18 billion so far, leaving more than $5 billion in the pipeline.
The World Bank, Asian Development Bank, and Japan have committed to providing a majority of the funds in the pipeline, accounting for over $32 billion.
An official of one of Bangladesh’s development partners said they would take immediate steps to release at least $3 billion to $4 billion from the pipeline.
The official added that there are slow-moving foreign-funded projects, in which the total committed funds might not be utilised. Funds from such projects could be diverted to other projects.
Both the World Bank and ADB have a soft stance in this regard, the official further said.