Foreign aid release, commitment surge in H1 of FY22

Bangladesh witnessed marked jumps in both foreign aid disbursal and commitments for new loans and grants in the first six months of the current 2021-22 fiscal year, mainly riding on Covid-related budget assistance and loans for purchasing vaccines.

The country received 83% higher aid commitments year-on-year in the July-December period of FY22, while the amount of assistance released by the development partners in the period was $1.2 billion higher compared to the same period a year ago, according to the Economic Relations Division's latest data.

The ERD data show the development partners pledged $4.4 billion in grants and loans in the July-December period of the current fiscal year, which was $2.4 billion in the same period last fiscal year. During this period, they released $4.2 billion worth of assistance.

ERD officials have attributed the increased foreign aid receipts and aid commitments to post-Covid changes in aid priorities.

Loans given for development projects are released on the basis of project implementation – if the implementation rate is fast, money is also released fast, they said, adding loans for buying vaccines and Covid-related budget assistance, however, are released within a few days after an agreement is signed or commitment is given.

The development partners have released more than $1.5 billion in Covid budget support and loans for buying vaccines in the first half of this fiscal year, they added.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the government now needs money as revenue collection is slow because of the pandemic. This is why the government is taking more and more budget assistance, and the development partners do not take much time to release budget support, he maintained.

He also pointed out that receipts of project assistance are not growing that much.

ERD officials said various ministries and divisions have thus far spent only 37% of the foreign aid allocation on various development projects in the Annual Development Programme (ADP) for the current financial year.

The amount of foreign aid allocation in this year's ADP is Tk88,024 crore. Because the pace of implementation is slow, the ministries and divisions have proposed to reduce the allocation of foreign aid by Tk17,774 crore in the revised ADP, the officials added.

In the first six months of the financial year, the ADB released the highest amount of aid for Bangladesh. The Manila-based development partner freed more than $1.5 billion during the period.

Japan disbursed the second highest amount of foreign aid – $817 million – during the period, followed by the World Bank, and China.

On the other hand, the highest aid commitments were received from China. After a long wait, the government has signed a loan agreement with the country for the Dhaka-Ashulia Expressway project. China has pledged $1.1 billion in aid for this project.

The second highest aid commitments, to the tune of $819 million, were received from the Asian Development Bank, followed by the Asian Infrastructure Investment Bank (AIIB) with $515 million and the World Bank with $500 million.

Meanwhile, the rate of loan repayment by the government also saw an increase during the first six months of the current financial year. During the period, the government paid the development partners $1 billion in principle and interest on loans. The volume of repayment was 900 million in July-December last year.