External budget support soars in recent years

Annual budgetary support from the foreign lenders rose nearly four times in the last fiscal year (FY) than that of the amount Bangladesh received four FYs ago, widening the spending scope for the government, officials said on Saturday.
The country received more than US$1.51 billion worth of the external credit in FY 2022-23 as compared to around $400 million in FY 2018-19, they said.
The figure went up even higher at $2.59 billion in FY 2021-22 thanks to enhanced support from the development partners during the Covid-19 pandemic. However, the annual external support has never been more than $500 million in a decade before the period under review, according to official sources.
A senior official at the Ministry of Finance (MoF) said the higher budget support has created a room for the government to spend independently as the lenders disburse the loans directly to the state coffer.
"In most cases, the budget support is open for utilisation. The better side of such a loan is the fund is directly injected to the state coffer and could be utilised in priority areas or sectors," he said.
Usually, the budgetary support is a form of foreign assistance which a country injects the money to the national budget for minimising the income-expenditure gap and to spend for the priority sectors and areas of the nation.
According to the Economic Relations Division (ERD), the budget support increased to around $700 million in FY '20, followed by $1.10 billion in FY '21, and $2.59 billion in FY'22.
In the just concluded FY '23, the government received $1.51 billion from four development partners - Asian Development Bank (ADB) $400 million, Asian Infrastructure Investment Bank (AIIB) $400 million, Japan International Cooperation Agency (JICA) $230 million, and the International Monetary Fund (IMF) disbursed the remaining $476 million.
The IMF in January last made a commitment of $4.7 billion in loans as the Balance of Payment and the national budget support.
"In the FY '22, Bangladesh's fiscal management fell into deep trouble due to the impact of the Covid-19 and the newly emerged global economic challenge of the Russia-Ukraine war. So, the government had to move aggressively to mobilise budgetary support," said a senior ERD official.
He said the government also continued its effort to attain more budgetary support in the last FY.
During the current FY '24, the government is expecting to get the second tranche of $704 million released from the IMF package, he added.
Another ERD official said the government's effort to mobilise higher budget support would add a fiscal burden after 5-8 years as maturity and grace period of most of the loans are lower than the project aid.
So, the foreign debt repayment burden is likely to intensify in the coming years, he added.
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