$52b stuck in foreign aid pipeline

The amount of foreign aid stuck in the pipeline has reached around $52 billion due to the slow implementation of the projects funded by international lenders, according to officials.

The pipeline is made up of yet-to-be-disbursed loans and grants meant for different projects, as well as budget support commitments from development partners, said Economic Relations Division (ERD) officials.

At present, the foreign aid pipeline is much larger than the country’s current foreign exchange reserve of $32.30 billion. Some $12.38 billion is expected to be released in the rest of the ongoing fiscal year.

“Slow project implementation, irregularities in implementation and terms of different loan conditions hamper fund release and that’s why the amount stuck in the pipeline is increasing,” a senior ERD official said.

ERD is always talking to the lenders for releasing the loans and grants as the progress of the projects depends on them, the official added.

Compared with the $52 billion aid pipeline, the country’s balance of payments was $5.27 billion in negative territory in the first six months of FY2022-23, with a $12.3 billion trade deficit.

“International lenders’ committed funds may not be released timely due to slow project implementation progress. If a project is not implemented, then there is no scope for fund release,” former lead economist of World Bank Dhaka Office Zahid Hussain told The Business Post.

He said the implementing agencies should finish the projects on time and ensure the quality to have foreign funds released at regular intervals.

The government’s monitoring agency should increase their activities to expedite foreign aid-funded projects, he said, adding the government should also take initiative to release the committed budget support.

However, the country has seen only 28.16 per cent implementation of the Annual Development Programme (ADP) in the first seven months (Jul-Jan) of FY23, which is the lowest during the same period in seven years.

The implementation rate was 30.21 per cent in the same period of FY2021-22 and 32.41 per cent in FY2016-17, according to the Implementation Monitoring and Evaluation Division. Planning Division Secretary Satyajit Karmakar said that the funds stuck in the pipeline would be released as soon as possible. “The Planning Ministry will sit and discuss this with ERD.”