Foreign aid piles up, use of funds slows
A huge amount of foreign aid has piled up in recent times, due to higher commitments by development partners but low utilisation of funds by the government.
Over the last three fiscal years, the situation has worsened, much to the government's embarrassment.
Till March 31, the total unused foreign aid in the pipeline was $16.61 billion of which the government could spend only 8.47 percent.
However, the government has identified some reasons behind the situation, and the reasons have been the same over the years.
The causes on the government's part include delays and allegation in bidding process, faulty project documents, unrealistic requisition for fund allocation and delays in land acquisition.
And on the development partners' side, the causes are delayed appointment of consultant and delayed approval to contract awarding.
Traditionally, the unused foreign aid in the pipeline remains between $5 billion and $6 billion.
But from fiscal 2008-09, such amount started to increase, and at the beginning of the current fiscal year the amount crossed $13 billion.
When the country's balance of payments (BoP) remains under heavy pressure due to a dearth of foreign currency, a huge amount of foreign aid has been piling up as the ministries could not spend it.
An official of the Economic Relations Division (ERD) said, usually the disbursement period for the commitment made by the donors against a project is four to five years.
The official said, as a result, if the government can use 20-25 percent of the amount in the opening pipeline every year, it is satisfactory.
In fiscal 2010-11, the disbursement of foreign aid was 19 percent of the amount in the opening pipeline. But, till March of the current fiscal year, only 10 percent of the opening pipeline has been disbursed, according to ERD statistics.
At the beginning of the current fiscal year, the foreign aid in the opening pipeline was $13.86 billion. Till March $1.41 billion was disbursed.
If the ERD projection for disbursement in the entire year is realised, only 15 percent of the opening pipeline would get disbursed.
But the ERD officials said they are not sure about realising the projection at $2.18 billion for the entire fiscal year.
From fiscal 2006 to fiscal 2010, disbursement against opening pipeline was between 21 percent and 27.32 percent.
In the last two decades, the highest disbursement of 27.32 percent was in fiscal 2008 during the immediate past caretaker government.
The ERD official said, in the last two to three years Bangladesh received a handsome commitment of foreign aid. But the absorption capacity of the ministries and divisions did not improve, causing a huge amount of unused foreign aid to pile up.
According to ERD statistics, before fiscal 2009-10 Bangladesh received commitment worth $2 billion on an average every fiscal year.
But in fiscal 2009-10, the commitment rose to $2.98 billion and in fiscal 2010-11 the total commitment was $5.9 billion.
Till March of the current fiscal year the donors have already committed $4.15 billion. The ERD official said, at the end of June the amount may reach $6 billion.
The ERD in March reviewed 58 slow projects that were running with foreign aid, and identified the causes of delays on both the government and the donors' sides.
The ERD official said they have taken a new move to increase utilisation of foreign aid.
Major multilateral and bilateral donors will hold face-to-face review meetings with the project directors of the ministries and development partners concerned from time to time.
Already, a two-day review meeting was held this month on 34 World Bank projects. The process will continue, the ERD official said.
Adviser to a former caretaker government Mirza Azizul Islam told The Daily Star that project utilisation is delayed due to weaknesses of the public administration. However, he said, if the public administration is not reformed and their capacity not improved, the problem will not go away.
He said it is a long process and any tangible improvement in the next one year is unlikely.
The ERD and donors have taken initiative to speed up the disbursement of foreign aid. In March, the ERD, the line ministries and development partners including the World Bank and Asian Development Bank sat in a review meeting to identify problems in foreign aid utilisation.
The Daily Star/ Bangladesh/ 24-May-2012