Most foreign aid spent on loan payback

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Finance

Saturday, 04 February 2012

Author / Source : bdnews24.com

Dhaka, Feb 3: More than half of the foreign aid received has been spent paying back interest and instalments of previous loans. Economists are attributing the fall in aid to various reasons, including the complication regarding World Bank’s funding of the Padma bridge and the failure to properly utilise the loans.
Meanwhile, interests on previous loans have grown as a result of which net foreign aid has fallen.
Economic Relations Department (ERD) statistics show that loans and aid worth $807.4 million have been injected into the country in the first half (July to December) of the 2011-12 fiscal. Of that amount, $415.3 million has been spent paying back instalments of previous loans.
As a result ,the net aid for the time period is $392 million, 35 per cent less than what it was in the same time frame of the previous fiscal (2010-11).
In the previous fiscal, the inflow of loans and aids stood at $984.5 million of which $388 million was spent in payback, making the net foreign aid $603.6 million.
”One of the biggest reasons for the economic crisis in our country is the fall in foreign aid,” former caretaker government adviser A B Mirza Azizul Islam told bdnews24.com
”Despite the ongoing global economic depression, our export income and remittance sent by non-resident Bangladeshis have maintained and are still showing a positive trend.”
”But the fall in foreign aid has put our foreign currency reserve under pressure leading to the continuous hike in the price of the dollar.
The implementation of the (Annual Development Programme) is also not good,” he added, advising the government to take necessary steps to hasten disbursement of aid in the pipeline. Finance minister Abul Maal Abdul Muhith also admitted that the inflow of foreign aid has decreased. However, he has blamed the related ministries for the fall.
Speaking at a discussion organised by the Federation of Bangladesh Chambers of Commerce and Industries on Wednesday, the finance minister refused to take responsibility for bad use of foreign aid.
”My job is to procure aid, and I did. It’s used by different ministries and it is their failure if they couldn’t (put them to good use),” he said.
However, another caretaker government adviser, Akbar Ali Khan, sees storms brewing in the horizon. “If the settlement of the conflict with World Bank over the Padma bridge funding is not respectable, then foreign loans and aid might fall further in future.”
He urged the government not to make ‘light’ of the World Bank’s graft accusation and resolve the matter quickly. “The policymakers of the government should consider the fact that if the World Bank does not fund the Padma bridge, there is enough doubt about whether they will lend for our other projects,” Khan said.
”The conflict regarding the World Bank funding has been hanging for a while. Other donors are also waiting for a resolution. If the matter is resolved well then they will extend their helping hand to Bangladesh. Otherwise dark days are waiting for us regarding foreign aid and loans.”
ERD data shows that a total of $1.77 billion of foreign aid flowed into the country in the 2010-11 fiscal, of which $727.5 million was spent in payback making the net aid stand at $1.05 billion dollars. In 2009-10 fiscal, the net aid stood at $1.48 billion after $2.16 billion aid flowed in and $687.4 million was spent in payback.
”As our loans have increase over the days, it is only natural that there will be a hike in our payback also. However, in recent times the amount of payback has increased more in comparison to our previous fiscals,” Mirza Aziz said about the increase in loan payback.
”Since we could not find any alternative to foreign aid yet, we will have to go on paying back these loans over the years,” he added.
Data analysis on foreign aid over the past few years shows that net aid was $1.18 billion in 1999-00 fiscal which fell to $ 952.3 million in 2000-01 before rising to $1.02 billion in 2001-02 and $1.13billion in 2002-03.
Another slump was recorded in 2003-04 with net aid amounting to 610.3 million. In 2004-05 it rose again to $1.02 billion, in 2005-06 it was $1.08 billion, in 2006-07 the net aid stood at $1.1 billion, 2007-08 at $1.38 billion and in 2008-09 at $1.02 billion.
Meanwhile, the current budget has targeted Tk 130.51 billion net aid from foreign sources, meaning that a total of Tk 186.85 billion has been targeted. Of the amount, Tk 56.27 billion have been aimed to be spent in payback. In the last budget, the government targeted Tk 159.68 billion in foreign aid which was lowered to Tk 109.2 billion in the budget amendment near the fiscal’s end.
The planning ministry records show that Tk 127.03 billion of the Tk 460 billion ADP has been spent in the first half of the current fiscal.
Export earnings have grown 14.72 per cent and remittance flow has increased 9.33 per cent.     bdnews24.com