Policy to make best use of aid money on way
The Economic Relations Division has finalised a foreign assistance policy that will make the government, development partners and NGOs accountable for not making the best use of aid money.
The final draft of the 'National Policy on Development Cooperation', which aims to cut debt risk and quick implementation of donors' soft money, was finalised last week at a meeting chaired by Finance Minister AMA Muhith.
The draft, which was unveiled yesterday, is now awaiting cabinet approval.
As of February, the amount of foreign aid in the pipeline is about $36 billion, and if it is disbursed at current pace the amount will cross $50 billion in ten years' time.
New commitment to the tune of $5 billion to $6 billion is made every year.
On the other hand, Bangladesh's debt sustainability is still much lower than the permissible international limit of 40 percent of gross domestic product. Last year, it stood at only 11.77 percent.
In January last year, the government's outstanding foreign debt stood at $24.78 billion.
The reason for drafting the policy is a matter of caution, said an ERD official.
“Bangladesh has undertaken many big projects and the government does not want the foreign debt to create a risk in the economy,” he added. Loans having grant element of at least 25 percent and other concessional elements may be considered as concessional loan, as per the draft policy.
The interest rate on concessional loan will be less than the market rate; the grace period and repayment period will be longer.
The draft policy discourages non-concessional loan, but if they must be taken it will be done after scrutiny.
To ensure transparency, the draft stipulates that all data regarding foreign assistance be made publicly accessible.
ERD's online Aid Informational Management System (AIMS), which is compliant with the International Aid Transparency Initiative standards, should serve as the primary means of data reporting, sharing and display.
On the basis of this, the ERD will publish an annual report on how effectively the flow is being managed by the development partners and the government.
The list of approved foreign-aided projects will be displayed on the ERD website and where appropriate.
The private sector and non-governmental organisations can receive funds from external sources to implement development programmes or projects in alignment with national priorities, the draft policy said.
The development partners must report their commitments and disbursements through non-state stakeholders to AIMS to ensure that the government is aware of their contribution and to avoid overlap or uncoordinated work.
The draft policy has also stipulated several steps for quick implementation of projects.
The line ministry or implementing agency must complete all preparatory works before signing the financing agreement of the project.
The government will develop a pool of potential project directors to ensure that project activities take off at the earliest and there is strong leadership in implementation.