Aid commitments drop by 38 per cent until May

A fall in foreign aid commitment by the development partners in recent months, coupled with a less-than-expected level of utilisation of such assistance, is set to affect Bangladesh's infrastructure, social development and fiscal management, experts and officials said Friday.
Economic Relations Division (ERD) officials said foreign aid commitment maintained a declining trend over the past few months. It dipped by 38 per cent until May of the current fiscal, compared to the same period last fiscal.
On the other hand, aid in the pipeline hit a record high at US$17.5 billion until last month of the outgoing fiscal due to failure to utilise the same up to the expected level by the project implementing agencies.
According to the ERD data, the development partners confirmed US$3.46 billion assistance in first 11 months of the current financial year (FY) 2013-14 compared to that of $5.56 billion in the same period last fiscal.
Development experts and officials said since a large amount of foreign assistance is stuck up in the pipeline due
to the utilisation-failure, the donors might take cautious approach in making aid commitment in the future.  
Besides, some bilateral donors might still be very cautious in providing assistance to Bangladesh due to the last non-participatory January 5 election which many of them had opposed, they said.
Development researcher Dr Zaid Bakht said if aid commitment does not increase, many planned development projects would be affected and the government will lose soft loan.
"I think, the government has failed to take up mega projects with the help of development partners. This has affected aid commitment in the current fiscal," he told the FE.
Dr Bakht said: "The huge unutilised external assistance in the pipeline due to lack of capacity of the government agencies has already affected execution of many projects. If aid commitment falls further, the government will receive lower concessional funds. This will result in negative impact on the socio-economic development."
"The government should undertake big projects like building of Dhaka-Chittagong expressway to boost aid inflow into the country. Besides, it has to increase the utilisation of aid in the pipeline," Mr Bakht, researcher at the Bangladesh Institute of the Development Studies said.
He said some bilateral donors might not be happy with the present government for the one-sided national election, held on January 5. This will lead to lower aid commitment in the current fiscal.
According to ERD statistics, of the $3.46 billion aid committed during the July-May period of the outgoing fiscal, the development partners provided only $81.54 million grants.
Usually grants are provided by some major bilateral donors including the USAID, the DFID, Germany, and the United Nations to facilitate development of socio-economic conditions and infrastructure.
A senior official at the ERD said if aid commitment shrinks, its adverse impact on project implementation and social development would be felt in the next few years.
When donors make commitment of aid, it means they confirm loan or grant for a specific project. If aid is not confirmed, a development project will lose soft fund and its execution will ultimately be hampered, he added.
Another senior ERD official said: "If aid commitment does not rise, development projects in the coming years will be affected. The government would lose soft loan resulting in higher borrowing from internal resources and negative impact on fiscal management."
"Although political turmoil has been overcome, commitment of loans and grants by the donors has not risen. We are anxious about it," he said requesting anonymity.
Whether lack of confidence among the donors on the newly elected government is the reason behind lesser aid commitment by the development partners has to be found out, he told the FE.
ERD statistics showed that development partners including the World Bank, the Asian Development Bank and the United Nations have made commitment of $3.46 billion assistance -- $2.97 billion in loans and only $81.54 million in grants during July-May period this fiscal.
In the same period of last FY2013, the donors made commitment of $5.56 billion assistance -- $5.0 billion in loans and $561.64 million in grants.
Yet, disbursement of foreign assistance has increased by 14 per cent to $2.61 billion during July-May period of the current fiscal, compared to the same period last FY2013.
The foreign aid disbursement against different development projects rose in July-May period of the FY2013-14 as the donors disbursed $2.62 billion -- $1.96 billion in loans and $654.58 million in grants.
In the same period of last FY2013, the donors disbursed total $2.29 billion --$1.71 billion in loans and $589.38 million in grants, ERD data showed.
Meanwhile, the government has repaid $1.03 billion as principal and interest for the outstanding public sector loans to the bilateral and multilateral lenders during July-May period this fiscal.
In the corresponding period of last FY2013, the government made $1.03 billion payment to the lenders, ERD data showed.
The government in the last FY2013 had received a total of $2.78 billion external assistance from all the multilateral and bilateral donors.
The ERD official said lower growth of aid inflow into the country would not only affect development work, but also it would impede higher economic growth of the country.