Foreign-aid budget to see cuts for slow project execution

The government cuts foreign-aid component of Bangladesh development budget by 9.0 per cent or Tk 49.50 billion for project-implementation backlog, officials said.

They said Tuesday the upcoming revised development budget for the current fiscal would see such cut following bleak project-execution performance by some public agencies.

Economic Relations Division (ERD) officials said they had already subtracted Tk 49.50 billion from the allocation of external resources to lower the amount to Tk 520.50 billion in the upcoming Revised Annual Development Programme (RADP) for the financial year (FY) 2017-18.

The lower development-budget-execution rate is causing the unspent external resources in the pipeline to be piled up, sources said.

The idle foreign funds now ballooned over US$28 billion, ERD officials said.

According to ERD, it has recently cut the project-aid allocations by 8.68 per cent to Tk 520.50 billion from the original outlay of Tk 570 billion in the RADP of the current FY.

"Many ministries have sought lower funds than their allocations. So we have been forced to slash the project assistance by nearly 9.0 per cent for the proposed RADP," Farida Nasreen, an Additional Secretary at the ERD, told the FE.

Complex procurement system in the country and approval procedure from the development partners are cited as cardinal reasons for the delays in spending from foreign aid by some ministries and agencies.

Ms Nasreen said: "We had already consulted the ministries and agencies of government more than a month ago. They had sought lower funds than the original estimation. Now it has stood at Tk 520.50 billion."

They have sent the revised project-aid proposal to the Planning Commission (PC) before finalization of the RADP.

Meanwhile, the PC has got down to revising the original Tk 1.164-trillion ADP following underperformance of the ministries and agencies concerned in development spending.

In the current original ADP, the government allocated Tk 955.15 billion worth of funds from internal resources, or 59 per cent of the total outlay, Tk 570 billion from external resources as project aid (PA), accounting for 35 per cent of total allocations, and Tk 81.54 billion from own funds of the autonomous and semi-autonomous government agencies, or 5.0 per cent of the total outlay.

Different bilateral and multilateral development partners offer Bangladesh foreign aid -- loans and grants -- for bankrolling development projects every year. The government allocates the money against many development projects in addition to its own funds for bearing the costs.

Another ERD official said the project aid had already been confirmed by the development partners for disbursement against different development projects under the current ADP. "But poor utilisation capacity of the public agencies would only cause the foreign aid in the pipeline to swell further."

The unused concessional foreign assistance has already crossed US$28- billion mark, ERD data showed.

According to the official data, the government ministries and agencies have spent only 27 per cent of the Tk 1.64 trillion worth of ADP outlay in the first six months (July-December) of the current FY2018. The rate of ADP spending was similar as that of last FY2017.

The ERD finalised the allocations for the ministries and divisions after a thorough review in meetings with the project-implementing agencies a month ago to cobble up the updates in the RADP for the current fiscal, the senior ERD official said.

The PC is also working to cut the outlay from the internal resources, too, alongside the trimming down of allocations from the external resources, officials said.

In the last FY2017, the government was forced to cut foreign aid by 17.5 per cent to Tk 330 billion in the RADP from the original Tk 400 billion outlay following a bleak project-execution performance by some of the public agencies.

Another ERD official said: "Agencies prefer spending money from the government's own exchequer to using the available foreign-aid allocations. It has put country's fiscal management under further pressure."

He said the major budget-spenders like energy and power, road transport and bridges, agriculture, education, health, railway and water resources ministries placed lower fund demand in the proposed RADP than their allocations in the original one.

Since the donors monitor utilisation of their committed assistance for the development projects, most government agencies shy away from spending the allocated foreign assistance, preferring instead the money in the flexible government exchequer, the official added.

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