Govt to expedite project approval for $3.3b WB, Jica funds for 8 projects

In a bid to overcome the chronic problem of Bangladesh not being able to utilise foreign aid in the pipeline, the government has finally stepped in and taken the initiative to expedite projects stuck in the approval process for a long time, according to planning ministry officials.

These aid packages were approved by various development partners, including the World Bank, the Asian Development Bank and the Japan International Cooperation Agency. But Bangladesh could not utilise these funds because those being subject to strict oversight and accountability measures to ensure that it is used effectively and transparently.

"In the pipeline," means that the projects have been approved but not yet been disbursed or fully utilised. This can be due to a variety of factors, including delays in project approval or implementation, challenges with compliance or oversight, or bureaucratic obstacles.

As part of this initiative, the Planning Commission has scheduled an inter-ministerial meeting tomorrow, Monday to discuss how to speed up the approval process for eight projects involving $3.3 billion of concessional loans.

The move comes at a critical time when the country is facing a forex crunch amid high inflation.

Satyajit Karmaker, secretary of the Planning Division, said there are five projects in the pipeline in the World Bank's funding scheme, involving over $2 billion.

"One of these projects has already been approved in an Ecnec meeting. The approval process for the remaining four projects will be completed within the next couple of months," Satyajit told The Business Standard.

He also said ministries and departments concerned have been instructed to expedite the reorganisation of these project proposals.

Among the five projects being planned under World Bank funding is the Higher Education Acceleration and Transformation Project, for which the global lender approved a $191 million loan on 24 June 2021. However, Bangladesh has been unable to utilise the loan even though almost two years have passed since its approval.

The World Bank initially gave Bangladesh 18 months to utilise the loan, but now Bangladesh has requested a three-month extension from the World Bank.

In addition to this project, Bangladesh has also been unable to utilise loans for four other World Bank-funded projects at a time when it needs foreign currency more urgently than ever before.

'Delay may harm country reputation'

Zahid Hussain, a former lead economist of the World Bank's Dhaka office, has termed the delay as "disappointing".

Zahid Hussain also stated that previously, it took one to two years to appoint a project director and contractor(s) following the approval of a project. However, it now takes two years to sign a loan agreement.

He expressed concerns that Bangladesh's reputation would be harmed for not being able to ink deals on time after development partners approve a loan.

He said the World Bank provides three-year IDA package loans, and the allocation for IDA countries is also announced in the package. If the principal portion of the allocation is available in the first year, there is a chance of getting more loans than the allocation at the end because many countries can use up the entire amount of loan allocated to them.

Jica requests fast project approval

Meanwhile, Japan International Cooperation Agency – the largest bilateral development partner for Bangladesh and third largest lender to the country among all foreign aid agencies – has requested the Bangladesh government to complete the approval process of new projects and revised projects that will be implemented with Jica funding.

Chief Representative of the JICA Bangladesh Office Ichiguchi Tomohide visited the Planning Commission earlier this month and gave a list to the planning secretary in this regard.

Jica's total outstanding loans to Bangladesh stand at $9 billion as of June 2022.

Govt to forego loans at floating rate

The World Bank with total outstanding loans of some $18 billion is the largest development partner of Bangladesh, followed by the Asian Development Bank with over $13 billion.

Officials of the Economic Relations Division told TBS that the interest rates on floating-rate loans are currently high due to the Ukraine-Russia war. Specifically, the six-month SOFR interest rate is more than 4%.

As a result, the government has decided not to take out loans at floating rates.

However, the government cannot take fixed-rate soft loans because the approval process for the development project has not been completed. This delay has affected the commitment of development partners.

According to ERD data, foreign aid commitments dropped 63.19% to $1.78 billion year-on-year in the July-February period of this fiscal year.

The ERD officials noted that Bangladesh receives the highest amount of soft loans from the World Bank and Jica.

In the current global situation, flexible loans have become the most important, they said, adding, "Despite this, we are unable to take the loans on time."

Main reason for approval delay

A senior Planning Commission official said the process of approving development projects should be completed within 55 days of getting the project proposal.

But ministries and divisions were unable to send the reconstituted DPP to the Planning Commission because the feasibility studies of the projects were not done properly.

These can delay projects by three years, he added.

WB-funded projects

The World Bank approved $191 million for the Higher Education Acceleration and Transformation project, $358 million for a road safety project, $753.45 million for the Accelerating Transport and Trade Connectivity in Eastern South Asia-Bangladesh Phase 1 project, $500 million for Resilient Infrastructure for Adaptation and Vulnerability Reduction, and $250 million for a project on environmental sustainability and transformation.

The projects were approved between June 2021 and December 2022.

Of them, only the Resilient Infrastructure for Adaptation and Vulnerability Reduction project got Ecnec nod earlier this month.

Jica-funded projects

The loan agreements for three Jica-financed projects are expected to be signed this month.

But, the approval process for these projects involving $1.3 billion Jica loans is yet to be completed.

The projects are Matarbari port development, Chattogram-Cox's Bazar highway improvement, ‍and the construction of a dual gauge line between Joydebpur and Ishwardi.

Under the 43rd loan package, Jica will provide $800.75 million for the Matarbari port development project in Maheshkhali, Cox's Bazar.

The project will strengthen the cargo handling capacity of Bangladesh by constructing a multipurpose deep-sea port for containers and general cargo. It will help boost the flow of goods domestically and with neighbouring countries.

With Jica funding, the Roads and Highways Department is going to construct four outer roads and one elevated bypass for Chattogram-Cox's Bazar highway, aiming at a smooth and congestion-free traffic flow on the route and better cargo access to Matarbari port.

Under the 43rd loan package, Japan will provide $423.54 million to the Chattogram-Cox's Bazar transport work.

Besides, Japan is funding the survey and design of the Joydebpur-Ishwardi dual gauge rail line project as China pulled out of the project halfway. The Japanese development partner will initially lend $32.13 million to this project as it agreed to finance the main construction work as well.