Foreign aid release, increase in commitments in the first half of FY22

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Bangladesh has seen marked increases in both foreign aid disbursements and commitments for new loans and grants in the first six months of the current fiscal year 2021-22, driven mainly by budget support tied to Covid and loans for the purchase of vaccines.

The country received 83% more aid commitments year-on-year in the July-December period of FY22, while the amount of aid released by development partners in during the period was $1.2 billion higher than the same period a year ago, according to the latest data from the Economic Relations Department.

ERD data shows that development partners pledged $4.4 billion in grants and loans in the July-December period of the current fiscal year, or $2.4 billion in the same period of the previous year. During this period, they released $4.2 billion in aid.

DRE officials attributed the increase in foreign aid receipts and aid commitments to post-Covid shifts in aid priorities.

Loans for development projects are released based on the implementation of the project – if the rate of implementation is fast, the money is also released quickly, they said, adding loans for development. Vaccine purchases and Covid-related budget support, however, are released within days of an agreement being signed or a commitment given.

Development partners have released more than $1.5 billion in Covid budget support and loans for the purchase of vaccines in the first half of this fiscal year, they added.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the government now needed the money as revenue collection was slow due to the pandemic. That is why the government is taking more and more budget support, and development partners are quick to release budget support, he said.

He also pointed out that project aid revenue is not increasing much.

DRE officials said various ministries and divisions had so far only spent 37% of the foreign aid allocation on various development projects in the Annual Development Program (ADP) for the fiscal year. In progress.

The amount of foreign aid allocation in this year’s ADP is Tk 88,024 crore. Because the pace of implementation is slow, ministries and divisions have proposed to cut the foreign aid allocation by Tk 17,774 crore in the revised ADP, the officials added.

During the first six months of the fiscal year, the AfDB released the highest amount of aid for Bangladesh. The Manila-based development partner released over $1.5 billion during the period.

Japan disbursed the second highest amount of foreign aid – $817 million – during the period, followed by the World Bank and China.

By contrast, the highest aid pledges have been received from China. After a long wait, the government has signed a loan agreement with the country for the Dhaka-Ashulia Expressway project. China has pledged $1.1 billion in aid for this project.

The second largest aid commitments, at $819 million, were received from the Asian Development Bank, followed by the Asian Infrastructure Investment Bank (AIIB) with $515 million and the World Bank with $500 million.

Meanwhile, the government’s loan repayment rate has also seen an increase in the first six months of the current fiscal year. During the period, the government disbursed development partners $1 billion in principal and interest on loans. The redemption volume was 900 million in July-December last year.

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