Foreign funding: Disbursement up, commitment down

Aid commitments by development partners have seen a sharp fall although the disbursement of foreign funding has risen  – a trend which has been apparent since the beginning of the current fiscal year 2020-21 .

In the July-October period of FY21, the commitment to fresh loans and grants from development partners reduced by 45%.

But, the release of foreign funding increased by 19.35% over the same period of Fiscal Year 2019-20.

According to an updated report by the Economic Relations Department, in the first four months of FY21, the development partners pledged a total of $1,233.47 million.

Of this, $1,040.87 million would be financed through debt and $192.6 million through grants.

The pledged amount is $989 million less than what it was in the same period of the last fiscal year. The amount pledged in FY20 was $2,222.75 million.

Meanwhile, foreign aid released till October of the current financial year amounted to $1,711.16 million – which is $278 more than the same period in the last fiscal year. The last fiscal year's disbursement was $1,433.70 million.

Till October, the Japan International Cooperation Agency (JICA) released the most, $647.11 million, followed by the World Bank (WB) with $348.05 million, the Asian Development Bank (ADB) with $246.67 million and China with $246.38 million.

According to the authorities concerned, although aid commitment shrank at the beginning of FY21, it will increase by the end of the year as the work environment has somewhat returned to normal, and preliminary consent has already been obtained from development partners.

Meanwhile, large loans can be obtained from various development partners for budgetary support to revive the economy and buy Covid-19 vaccines.

The government is making an effort to get $500 million in financial assistance from the WB, ADB, JICA, and Asian Infrastructure Investment Bank to buy vaccines.

Additionally, France and Germany have been asked to provide $200 million in aid.

In addition, budgetary support of $250 million from the World Bank is likely in the current fiscal year.

Sources said negotiations with the WB are also under way for a further $250 million in assistance for the revival of the country's economy.

The Economic Relations Division hopes that $500 million more of budgetary support from the ADB will be available for FY21 – to recover the economy affected by the pandemic.

South Asian Network on Economic Modeling (SANEM) Research Director Sayema Haque Bidisha, also professor at Dhaka University, told The Business Standard that the priorities of development partners have changed in the wake of the pandemic.

"As a result, they are lending to the sectors on a priority basis, thus helping the economy recover," she said, adding that loan proposals need to be made for the sectors to which the development partners are interested in lending.