When Bangladesh is struggling with its fast-depleting foreign-exchange reserves, a whopping $46.5 billion in foreign aid remains stuck in the pipeline thanks to project-execution failure by different public agencies, said officials.
"We are aware of foreign assistance releases every year," a senior Economic Relations Division (ERD) official said. "However, it is unfortunate that the situation has not improved, resulting in a large amount of confirmed foreign currency being stuck in the pipeline."
"All the funds in the pipeline are committed to various projects approved in the past," the ERD official told The Financial Express. "When public agencies fail to implement their foreign-aided projects on time, aid disbursement is blocked or suspended by the respective donors."
Foreign donors usually commit loans or grants to various government agency projects for developing infrastructure and reducing hunger.
When project work begins, development partners start disbursing their committed aid based on work progress. If agencies fail to make adequate progress on their projects in time or fail to implement the entire project, some funds go unspent, inflating the unutilised aid in the pipeline.
The implementation failure not only delays the project outputs but also could hurt the overall economy, particularly for a nation whose dollar stocks are dwindling and who still needs more dollars to bring in food and fuel.
According to central bank reports, the country's foreign exchange reserves have hovered around $20 billion for the past five to six months. On March 13, the Bangladesh Bank recorded the country's total foreign exchange reserves at $19.97 billion.
According to the ERD, external development partners have committed billions of dollars in project aid over the past years. Of this, $46.47 billion in assistance remains unused as of January this fiscal year (FY) 2023-24.
The foreign aid in the pipeline had been decreasing until the last fiscal year (FY2023), when the unutilised amount stood at $44.70 billion.
Subsequently, it began to increase in the current fiscal year, as some $2.77 billion of a total of $7.17 billion in confirmed loans has not been used by local project execution agencies.
During the July-January period of the current fiscal year, development partners including the World Bank, Asian Development Bank, Japan, Asian Infrastructure Investment Bank (AIIB), Russia, China and others disbursed $4.39 billion of their $7.17 billion in confirmed aid, according to ERD data.
Another ERD official said all confirmed foreign loans are supposed to be spent within five to six years -- the tenure of the projects. "In most cases, this is not happening, leading to a rise in foreign aid in the pipeline."
Meanwhile, the ERD's latest aid flow report estimates the amount of foreign assistance in the pipeline became roughly around $44.70 billion at the end of FY 2022-23.
According to the ERD, $48.11 billion has been added to the foreign assistance commitment pipeline in the last five fiscal years, from FY2019 to FY2023.
The ERD official said if these funds are not spent properly within the next five to six years, or if disbursement is not completed due to weak project execution, aid in the pipeline will exceed $50 billion.
Policy Exchange Bangladesh Chairman Dr Masrur Reaz told the FE that the government should take steps to release the pipeline foreign aid, which would reduce pressure on the country's balance of payments (BoP).
"Since Bangladesh has been struggling with foreign exchange reserves for more than a year," Dr Masrur Reaz said, "the government should streamline the project work of public agencies."
"Foreign aid is one of the better tools for our development work, so we must prioritise their requirements and take steps to use them effectively promptly," he added.
© 2024 - All Rights with The Financial Express
