Foreign aid also follows remittance and export earnings in a fall in tandem and such low dollar inflows increase pressure on Bangladesh's falling foreign-exchange reserves, sources say.
The foreign-aid inflow in July-August period of the current fiscal year (FY) 2023-24 marked a substantial fall, officials said Monday, while debt-servicing liability is rising.
In the same period of initial two months of this fiscal, foreign-loan repayment swelled significantly, over 34 per cent, they said.
Official figure shows the development partners disbursed 14.5-percent less loans and grants to Bangladesh during the two months compared to the same period of the past FY2023.
They released US$739.06 million worth of medium-to long-term loans (MLTs) and grants in the first two months of the current fiscal compared to $864.29 million in the previous corresponding period, according to the Economic Relations Division (ERD) provisional data.
On the other side of the external financing, the government repaid $400.50 million against the outstanding debts, the official count shows. In the same period in FY2023, payment amounted to $289.78 million in interest and principal to different overseas lenders.
Meanwhile, the merchandise exports to overseas market in September declined by 9.83 per cent to US$ 4.31 billion compared to that of the previous month.
The September remittance income declined by around 16 per cent from the August total of $1.60 billion and it dropped by 13 per cent year on year, with the volume being $1.54 billion in the corresponding month a year ago, the Bangladesh Bank data showed.
The sharp fall in month-on-month remittance and export earnings came out as a matter of serious concern for Bangladesh's macro-economy that has been under stress due to declining foreign-currency reserves.
Economists fear macroeconomic hardship within next few months as the government is busy managing political issues rather than economic-recovery means.
According to the ERD, the development partners, including the World Bank (WB), the Asian Development Bank (ADB) and Japan released $727.24 million worth of loans and $11.83 million in grants during the period under consideration.
In the same period last FY, they disbursed $832.88 million in MLTs and $31.41 million in grants.
Out of the $400.50-million debt servicing during the first two months, the government repaid $254.11 million in principal and $146.39 million interest for the outstanding MLTs.
In the previous July-August period, the government had repaid $196.98 million in principal of the outstanding loans and $92.80 million as interest, the official data showed.
Meanwhile, foreign-aid commitment to Bangladesh rose to $1.14 billion during the July-August period of FY2024 from $304.92 million in the same period last FY2023, the ERD statistics showed.
Executive Director of SANEM and Dhaka University Economics Professor Selim Raihan says it is bad news for the country that foreign aid has been depleting after the unpleasant news of the remittance-and export-earning drops.
"The balance of payments (BoP) could deteriorate further amid the falling trend in foreign-exchange inflows to Bangladesh through the above-mentioned three mechanisms," he told the FE writer.
"Since government's first priority at this moment is election, therefore, the economic fragility might be ignored and the coming months will be more flimsy," he says.
Meanwhile, the ERD data showed that Japan disbursed the highest $308.87 million worth of assistance out of the total $739.06 million while the World Bank $132.97 million, the ADB $157.47 million and Russia $42.53 million during the Jul-Aug period.
A senior ERD official says since the project-implementing agencies of the government have failed to execute their target works in time, the overall foreign-aid disbursement declined a bit.
"We are hopeful of recovering from the situation in the second half (January-June) of the current FY2024," he says on a note of optimism about possible turning of the corner.
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