Foreign aid to Bangladesh from India was the lowest among key development partners in the just-ended FY 2023-24, data shows. Moreover, the neighbouring country in its FY 2024-25 union budget trimmed the development allocation for Bangladesh by 40 per cent, according to Indian newspapers.
Analysts said the reduced aid flow and further budget cuts would affect India-funded projects in Bangladesh and eventually bilateral ties between the two South Asian nations.
Project implementers, in particular, expressed concern about completing the $6.862 billion Indian Line of Credit (LoC)-funded projects on time.
According to Indian newspapers on the Union Budget, Bangladesh will receive a maximum of INR 1.2 billion in FY 2024-25, down from INR 2 billion in FY 2023-24.
In the first 11 months of FY 2023-24, Bangladesh received $286.93 million in aid from India, according to Economic Relations Division (ERD) data. It was the lowest among Bangladesh's seven largest development partners in FY 2023-24.
Besides, India made no new aid commitments for projects or programmes during the past fiscal year.
During the July-May period in FY24, Japan provided the most, at $1.762 billion, followed by the Asian Development Bank (ADB) at $1.599 billion, the World Bank at $1.41 billion, Russia at $884.85 million, China at $361.71 million and the Asian Infrastructure Investment Bank (AIIB) at $100.64 million.
India committed a total of $6.862bn in loans to Bangladesh under three Lines of Credit (LoCs) agreed in 2010, 2016 and 2017.
India committed $862 million under LoC-I, $2 billion under LoC-II and $4.5 billion under LoC-III. The Bangladesh government is implementing several projects with this Indian funding.
Despite the $6.862bn in loans for numerous projects, India's year-on-year disbursements were lower than those of Bangladesh's six other major development partners.
In 2022, India disbursed $327.87 million, $142.46 million in 2021, $136.38 million in 2020, $137.796 million in 2019 and $50.072 million in 2018, according to ERD data.
An ERD official blamed project implementation failures by public agencies for the lower aid inflow.
However, project implementers cited complex approval processes for development project proposals (DPPs), tender documents and fund release as key delays.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur said the reduced Indian aid is affecting ongoing projects.
"This is a disappointment that the Bangladesh government has not become successful in its economic diplomacy as none of India, China and Saudi Arabia has confirmed any significant amount of assistance during this economic crisis," he added.
He said the government's failure to improve project implementation and reform priorities has also deterred development partners.
The government, according to Dr Ahsan H Mansur, has also failed to meet conditions set by partners, such as reforming the local fund-mobilisation system, financial sector and business climate.
"Many assured foreign loans are not being confirmed due to the government's failure to reform," he said.
He added that reforms could have secured higher loan and grant commitments and disbursements.
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