Utilise dev funds better, avoid ‘debt trap’

Economists on Tuesday said the South Asian economies, including Bangladesh, should utilise their resources earmarked for development activities to the maximum possible extent.
Doing so has become imperative as the dependency on multilateral external funds on the part of these economies seems has been on the rise, they observed.
The countries in the region have not been able to manage funds required for achieving the SDGs (sustainable development goals) and the Covid-19 pandemic has made the fund mobilisation even more difficult now, they said.
The suggestions came at a virtual discussion titled 'Multilateral Response to Covid-19-Perspective from South Asia'.
The Centre for Policy Dialogue (CPD) and the Organisation for Economic Co-operation and Development (OECD) jointly organised the online discussion where think-tanks from India, Pakistan, Sri Lanka and Nepal joined.
The experts from home and abroad recommended conducting comparative assessment while selecting one donor over another and strengthening negotiation skills alongside establishing control in choosing development priorities to avert the possibilities of falling into 'debt trap'.
In the virtual discussion, the OECD shared multilateral finance report-2020 where it showed that such development funds are steadily growing and reached an all-time high at US$71.9 billion in 2018.
The report mentioned that the United Nations and the World Bank Group accounted for more than three quarters of the multilateral fund while the regional development banks and vertical funds are slowly gaining ground in the multilateral funding landscape.
Taking part in the online discussion, CPD chairman Professor RehmanSobhan said the countries in the South Asia needed to make their own plan, policies and development priorities, and retain control over both their policies for proper management of the fund sources.
"We could, actually, then have our own-managed consortium formed by the countries of South Asia. Then you would be identifying the type of fund you need from which category of donors and how would you use the funds," he said.
In the case of Bangladesh, he said, multilateral finance looked a big overhang for Bangladesh. "It's not about debt, it's lack of utilisation of ODA, which is in fact overhang here," he said.
Mr.Sobhan suggested increasing utilisation capacity of the external development finance along with prioritising of development initiatives.
"You (South Asian countries) must be in a better position to dictate external donors by strengthening the relevant institutions," he added.
As special guest, former finance adviser to a caretaker government in Bangladesh, ABM Azizul Islam said there are some conditions in getting development fund that do not make any sense.
He said the country needs to enhance domestic capacities in various areas. "Funding is important but that's not enough," he said.
Because of having not enough capacity, the bureaucracy in some cases could not properly identify needs of the aid money in various areas. So, the projects are actually chosen by the donors rather than the home country agencies, he said.
"Some of the projects are good but not necessarily delivering the country's best interest," Mr Islam added.
Talking about debt overhang issue, CPD distinguished fellow Dr Debapriya Bhattacharya said most of the loans in the country are not subjected to rigorous scrutiny before it is accessed or negotiated.
"We really do not have a structured assessment framework in the process to make choices," he said, suggesting rigorous comparative assessment needs to be carried out while choosing loan from one source over other sources.
"Let us not confuse between debt write off with debt suspension. Debt suspension does not mean that you do not need to pay. You have to pay but later," he said.
Till to date, there is no universal debt exemption even from the G20, he said. "We are looking for this," Bhattacharya added.
OECD director general Angel Gurria also sent a video message for the discussion.
Professor SachinChatturvedi of Research for Information System for Developing Countries (RIS) in India, AbidSuleri of Sustainable Development Policy Institute (SDPI) in Pakistan, Puspa Sharma of South Asia Watch on Trade, Economics and Environment (SAWTEE) in Nepal, among others, also spoke at the discussion.

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