The release of foreign aid has experienced a 24% fall in the first two months of FY23 because implementing agencies usually go slow when it comes to spending on development projects in the initial months of a fiscal year.
In July-August, development lenders disbursed a little more than $864 million in contrast to 1.14 billion in the same time a year ago, according to the latest report of the Economic Relations Division (ERD).
On the other hand, Bangladesh secured new commitments amounting to nearly $305 million from only two development partners – the World Bank and the United Nations. The Washington-based multilateral lender alone committed $300 million, while the UN pledged around $5 million.
In the first two months of the last fiscal year, the new commitments stood at $73.32 million.
The government has set a target to get $12 billion in foreign assistance released in the current fiscal year. In FY22, foreign aid disbursements reached a record $10 billion, thanks to fast utilisation of external loans in some megaprojects that are nearing completion, more budget support from development lenders and funds for Covid-19 vaccines.
Besides, it has targeted $6.2 billion in new commitments for this fiscal year, down from $8.18 billion in FY22.
ERD officials said development spending usually stays low at the beginning of a fiscal year as 12 ministries and divisions could not spend a single penny from foreign funds allocated for them in July and August of the ongoing fiscal year, while nine used up less than 1%.
In the meantime, the government has continued talks with the World Bank, Asian Development Bank and International Monetary Fund to get budget support from them.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told The Business Standard that budget support and assistance for vaccine purchases played a big part in disbursements of foreign aid in the last few years.
But it will be difficult to get new budget support if necessary reforms are not carried out in different agencies, such as the Bangladesh Bank and the National Board of Revenue, in keeping with the conditions set by development partners, he said.
According to ERD data, budget support and vaccine purchases accounted for around $5.83 billion of the external funds released in the last three fiscal years.