The commitment of foreign funds and the release of funds by development partners have increased significantly in the first five months of the current fiscal year, as the government pays more money as principal and interest on foreign funds by compared to last year.
During the July-November period of fiscal years 2021-22, the commitment of foreign funds increased by 129% and the release of funds by 49.4%, according to the latest data from the Economic Relations Division (ERD).
The ERD report indicates that development partners have pledged $ 3.9 billion, or $ 1.7 billion compared to the corresponding period of the previous fiscal year.
On the other hand, the release of funds increased for some projects as their execution rate increased.
During July-November, a total of $ 3.08 billion was released against $ 2.06 billion in the same period of the previous fiscal year.
The government paid an additional 16% to development partners in principal and interest on foreign loans. In the first five months, the government contributed $ 868 million, up from $ 747 million in the corresponding period last fiscal year.
ERD officials said the commitment of foreign funds by development partners was lower at the start of the current fiscal year. Recently, the 42nd loan agreement with the Japan International Cooperation Agency (JICA) was signed. This loan package includes infrastructure development funds as well as budget support.
In addition, an agreement to finance infrastructure projects of a significant amount has been signed with China. This also contributed to the increase in the amount of commitments of foreign funds.
ERD sources have said development partners are committed to providing extra-budgetary support to some Covid-focused projects. At the start of the pandemic, they made this type of commitment during the last fiscal year. But the recovery of the amount committed decreased at the end of the previous fiscal year and at the beginning of the current fiscal year. Engagement has started to rise again, the source said.
Zahid Hussain, former chief economist at the World Bank’s Dhaka office, told TBS that budget support for Covid-focused projects alongside the commitment to project assistance has increased. Project assistance depends on the rate of project implementation while budget support is released soon after the signing of the agreement, he added.