Foreign grants on decline

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FE Report
The grant portions in foreign aid commitments has been declining while loan amounts have been soaring in recent years in the country, Economic Relations Division (ERD) sources said.
According to ERD, out of the total foreign aid in fiscal 2005-06 the grant portion declined to 31.9 per cent from 47.4 per cent in fiscal 1973-74 and 48.0 per cent in fiscal 1990-91.
With the shrinking of grant in the external aid in recent years, the volume of loans has been widening thus resulting in a progressive increase of per capita debt obligation in the country, a high official in the ERD said.
He said that the per capita debt obligation of Bangladesh has increased to US$139.91 in the last fiscal from $6.59 in the fiscal 1973-74.
The senior ERD official expressed the opinion that the country's large trade deficit, saving-investment gap, slow growth of revenue collection and rapid growth of current public expenditure contributed to the increase in public debt.
ERD sources said that Bangladesh received $831.5 million grant and $901.1 million loan in 1990-91 financial year, but the ratio of grant has decreased significantly in fiscal 2005-06. Last fiscal the donors disbursed grants worth only $500.5 million while loans stood at $1067.1 million.
Similarly, in fiscal 2000-01 the donors disbursed grants worth $504.1 million or 36.8 per cent of the total $1368.8 million aid, in 2001-02 disbursed grant was $478.8 million or 33.2 per cent of total aid of $1442.234 million and in 2002-03 disbursed grant was $510.1 million or 32.2 per cent of the total $1585.022 million aid.
A senior bureaucrat in the ERD told the FE that now-a-days the donors prefer providing credits and loans instead of grants.
"Huge trade deficit and weak revenue collection are primarily forcing the government to borrow from the bilateral and multilateral donors to maintain growing public expenditure in the country," he said.
Another official felt that decline in the share of food aid was the main reason for the reduction in grant flow to Bangladesh.
Bangladesh received food grants worth $268.554 million in 1990-01 financial year, which declined to $138.02 million in 1999-00 fiscal and $32.465 million in fiscal 2004-05.
However, the food grant recorded a modest increase in fiscal 2005-06 and stood at $97.23 million.
He also said the development partners had changed their aid pattern to Bangladesh for alleged corruption in grant utilisation by the government agencies.
"It is true that the monitoring authorities in the government did not monitor the utilisation of grants strictly in the previous years which enabled the executing agencies to indulge in corruption," he said.