Foreign aid pledges see sharp rise in Q1 on nuclear power plant credit deal with Russia

The development partners have committed over $12.03 billion to Bangladesh as assistance in the first quarter (Q1) of Fiscal Year 2016-17, official data shows. In the same period of last fiscal year, the country received $53 million aid pledge from its development partners. Economic Relations Division (ERD) data showed that out of the figure pledged during the July-September of  this fiscal year, development partners committed $12 billion as concessional loans and about $28 million as grants. In FY ‘16, the amount of loans was $408 million and grants $94 million. “Foreign aid commitment jumped because of Russian credit,” said an official at the ERD. In July last, Bangladesh signed its biggest ever intergovernmental credit agreement of $11.38 billion in Moscow to implement the 2400MW Rooppur nuclear power plant project. However, the aid commitment usually in the beginning of every fiscal year reflects a poor scenario, but its flow would ultimately rise in the second half of fiscal year. During the July-September period of this fiscal year, foreign loan disbursement also increased insignificantly to $500 million from $503 million last year. Of the total credit disbursement, the development partners had disbursed concessional loans worth over $427 million and grants worth $ 72 million. Bangladesh has paid over $232 million to the lenders against its total outstanding external loans during the period. Of the amount, $181.19 million was paid as principle amount and $558 million as interest. In FY17, the country set a target of getting loans and grants worth $5.7 billion from development partners. The target was $4.36 billion in the last fiscal year. However, aid utilisation has still remained a challenge for the government agencies as they fail to utilise the external assistance timely. The slowdown caused the unused foreign assistance to bubble up in the pipeline. As a result, the total unutilised concessional foreign aid swelled to more than $23 billion  until May this year as the government agencies failed to use the resources due to their perceived inefficiencies. Foreign aid — in the forms of loans and grants — has been one of the key components of the country’s national budget since 1972. Although the country has over the years cut its dependence on external aid, it still needs a substantial amount to execute major basic and social infrastructure projects such as construction of bridges and power plants, providing education stipends and health services. Development analysts said with the internal revenue falling short of expectations, the government banks rely on foreign aid to keep its budget deficit down to a manageable 5% of gross domestic product. World Bank, Asian Development Bank, Japan International Cooperation Agency, Russia, Chinese government, Islamic Development Bank and India are Bangladesh’s top development partners.