Expediting utilisation of project aid

The country has a foreign exchange reserve of over $23 billion. The rise in reserve has been consistent in recent years, despite negative developments both on domestic and external fronts. The policymakers often tend to take credit for a stable reserve situation. But they have least reasons for taking comfort in another bulging bag containing concessional developmental assistance, committed by both bilateral and multilateral 'development' partners. The amount of unused project assistance accumulating over the years stood at nearly $19 billion until February last.

Inefficiencies on the part of the government agencies are largely blamed for slow utilisation of project assistance. Agencies concerned are found to be more interested in the utilisation of locally-funded projects where accountability and transparency factors are often alleged to be not having been properly adhered to. The foreign lending agencies are also often accused of being too rigid in matters of procurement, leading to slow disbursement of aid money. Only recently one of the major multilateral donors -- the World Bank (WB) -- has asked the government to refund soft loans amounting to $30 million it had earlier made available against nine projects for alleged irregularities in procurement.

 Overall a gross mismatch has emerged between the amount of funds committed by the donors and the utilisation of the same by the government agencies. In recent years, the average annual use of project aid hovers between 60 per cent and 70 per cent of the funds that are usually confirmed by donors annually. The amount of project aid now stuck in the pipeline is, in fact, enough to finance the annual development programme (ADP) for two years.  

The sloth in project implementation is an old issue. Volumes have been written about it. But the situation has not changed much on the ground. For instance, until February of this fiscal (2014-15), the rate of implementation of the ADP was around 37 per cent. Apparently by a magic wand, the implementation rate will, in all likelihood, cross 90 per cent at the end of the fiscal. That is what has been happening all these years. Questions have been raised about the quality of works when projects are implemented hastily, but none has ever bothered to care about the same.

The state of affairs with the utilisation of concessional foreign loans is not at all a happy sign. Notwithstanding the fact that the multilateral donors do ask too many questions and set too many conditions, their loans are much cheaper and flexible in nature than the hard loans that the government has, of late, been borrowing in substantial volume. Moreover, the scope for indulging in irregular practices involving the use of hard loans or supplier credit, is far greater than the case with soft loans. Some people in the government, for reasons not entirely unknown, seem to be more interested to avail the first one. The government should bring about a meaningful change in the situation and form a task force immediately to ensure expeditious use of project aid, particularly for infrastructure-building purposes.