The government has been forced to cut the annual foreign aid target by US$ 420 million to $2.95 billion this fiscal year (FY) due to poor disbursement of the assistance amid weak project execution performance, officials said Friday.
They said the Ministry of Finance (MoF) has already cut the external assistance target to $2.95 billion from its original target of $3.37 billion in the current FY 2013-14.
"We have been forced to slash the aid target through government channel as the government agencies have shown weak performance in project execution," said a senior MoF official.
When the project executing agencies fail to implement the foreign loan or grant-supported projects, the external assistance disbursement by the donors decreases automatically, he told the FE.
Economic Relations Division (ERD), the government's external aid mobiliser, has already cut the project aid by $420 million from the original estimate of $3.07 billion in the current national budget.
The ERD has not trimmed the expected budgetary support and the food aid as it has kept those as usual like their original targets.
The government expects $250 million worth of foreign funds as budgetary support and $50 million as food aid support, ERD officials said.
The government borrows loans and takes grants from the foreign development partners like the World Bank, Asian Development Bank, Japan, Islamic Development Bank, USAID and UK's Department for International Development (DfID) for developing its infrastructure and cutting poverty.
The development partners provide foreign assistance to the government in different forms including project assistance, food aid and budgetary support.
Since Bangladesh government has inadequate internal resources for developing its infrastructure and cutting hunger, it goes for borrowing loans or taking grants from the foreign donors.
In last FY 2013, the government received foreign loans and grants worth nearly $2.78 billion from all the development partners.
Since the external aid-supported project implementation rate is bleak, we have been forced to cut the target and sent it to the MoF for revising the national budget for FY 2014, another ERD official said.
Disbursement of foreign aid through the government channel remained almost static in July-November period of FY 2014 compared to the corresponding period in FY 2013.
According to ERD, the donors have disbursed $987.26 million in loans and grants during July-Nov period this fiscal year, only $18 million up from the same period in last FY.
The foreign aid commitment by donors has also plunged by 22 per cent as the donors have confirmed US$ 408 million less assistance in July-November period this fiscal year compared to the same period last FY, officials said Friday. ERD officials said the development partners working in Bangladesh have confirmed US$ 1.44 billion worth of loans and grants in the said period compared to $1.85 billion in the same period last FY 2013.
The ERD will not seek any commodity aid from the donors after top aid agencies such as World Bank, Asian Development Bank and the rich countries have expressed reservation about such assistance.
Officials said with the internal revenue falling short of expectations, the government banks on foreign aid to keep its budget deficit down to a manageable five per cent of the Gross Domestic Product (GDP).
