Net annual inflow of foreign aid falls

FE Team | Published: July 07, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FHM Humayan Kabir
The country's net annual inflow of foreign assistance has fallen due to higher repayment of debt and shrinking overseas aid disbursement putting pressure on external balance, official sources said.
They said the government spent US$620.54 million on debt servicing in the first 11 months of the just concluded fiscal 2006-07 against aid disbursement of about $1107.44 million during the period leaving a net receipt of only $ 486.90 million.
Out of the total $620.54 million, the government paid $464.18 million as the principal amount of the loan and $156.36 million as interest.
A senior Economic Relations Division (ERD) official said that the amount of total loan repayment would be much higher if the expenditure on debt servicing for borrowing from the International Monetary Fund (IMF) and some special borrowing by the Ministry of Food, Bangladesh Shipping Corporation, Bangladesh Biman, Bangladesh Petroleum Corporation and defense and private sector were considered.
The ERD does not consider the loan from the IMF and some special borrowing by some ministries and private sectors while calculating debt servicing, he said.
Meanwhile, economists said that if the government could attract more aid, mainly in the form of grant, the net external assistance for the country would increase and lessen pressure on balance of payment.
According to ERD sources, the net foreign loan flow to Bangladesh from bilateral and multilateral development partners was $389 million in 2005-06 after spending $678.1 million on debt repayment, including the principal and interest. During the 2005-06 period the government received a total of $1.067 billion loan from the donors.
Similarly, in fiscal 2004-05, Bangladesh's net aid flow was lower than the amount of repayment. During the period, the government repaid $588.9 million while its net aid flow was only $106.3 million.
Economist Quazi Kholiquazzaman Ahmad told the FE that the amount of foreign loan repayment is not much in terms of the country's total gross domestic product (GDP) that can affect the overall economy.
Nevertheless, if the government could attract more foreign aid including grants the net aid inflow will be higher and it would be able to lessen pressure a little bit on the overall balance of payment, he opined.
According to ERD, Bangladesh's total foreign debt was worth $19.42 billion until fiscal 2005-06. The per capita debt obligation rose to $139.1 in 2005-06 from $6.59 in 1973-74.
About the debt servicing, another ERD official said, "The total debt servicing in fiscal 2005-06 accounted for 13.99 per cent of Bangladesh's total merchandise exports, 8.8 per cent of exports of goods and services (including workers' remittances) and 2.3 per cent of the GDP."
The official said the higher debt repayment has resulted from expiry of grace period and appreciation of US currency.