Loan and grant disbursement by international development partners rose in the first three months of the current fiscal year but commitments for new ones declined by more than 88% year on year, thanks to post-Covid changes in aid budget priorities.
A report of the Economic Relations Division (ERD) shows foreign aid disbursement surging by 34% to $1,938 million in July-September this year, which was $1,444.62 million in the corresponding period last year.
During the period this year, Bangladesh received $94.03 million aid commitments, which was $797.46 million in the first three months last year.
On condition of anonymity, a top ERD official said they were expecting more aid commitments during the remaining period of the fiscal year as there have been preparations for loan agreements in some foreign-funded projects.
Dr Pear Mohammad, additional secretary at the ERD, said Bangladesh is supposed to sign loan agreements to the tune of a total of $1.2 billion with the Asian Development Bank (ADB) this year.
"Of that, a commitment of $650 million has already been signed with the ADB. Therefore, we hope the aid commitments will surpass the target at the end of the fiscal year," he noted.
Besides, ERD officials said an agreement has been signed with the World Bank this year for $1.5 billion aid. On top of that, there will be loan agreements for about $3 billion for six projects funded by the Japan International Cooperation Agency (Jica).
When a loan agreement is signed with a development partner, it is considered a commitment, meaning the fund is ready for utilisation. At the end of the last fiscal year, the government had $9.3 billion loan commitments from its development partners.
Dr Sayema Haque Bidisha, research director at the South Asian Network on Economic Modeling (Sanem), said the development partners have changed their priorities due to the pandemic.
"They will not lend more to projects that they used to do earlier. The government has to negotiate for the loans, keeping their priorities in mind now," she said.
Dr Sayema Haque noted that the foreign donors are currently attaching great importance to poverty-prone countries in terms of loans and assistance. Aid commitments by development partners will be further reduced if Bangladesh fails to present its exact economic position before the international community.
ERD officials said loan disbursement increased slightly at the beginning of the fiscal 2021-22, thanks to improvements in the virus situation. They hope loan disbursement will gain further pace riding on better implementation during the remaining period of this fiscal year.
With more than $1 billion fund released, the Asian Development Bank played the key role in the disbursement outlook in the first quarter this year. Besides, the World Bank freed $212 million, Jica $186 million and China $224 million in the July-September period.
In the first quarter, the government repaid $593.86 million to the development partners. The amount was $508.23 million during the corresponding period last year.