Backlog in aid utilisation
According to a leading English daily on February 18, the government has lying idle USD 35 billion in unutilised foreign aid money. The debt-servicing costs for such a huge amount are becoming a burden for the national exchequer. Beyond that, there are multiple repercussions for the economy that occurs as the various development projects fall behind schedule. That undisbursed aid money had increased by more than USD 10 billion over the course of a year (the figure stood at USD 21.95 for FY 2015-16) points to our inability to implement programmes on time.
Economists and experts alike have been pointing out the need for the government to increase its capacity to utilise these billions of dollars for some years now, but apparently such advice has fallen on deaf ears at policy level. As the government undertakes more and more mega projects, it is natural that financial assistance from bilateral and multilateral agencies is sought for capital expenditure. What we know from data furnished by the External Relations Division (ERD), ongoing foreign assistance has increased by 17.44 percent to USD 21.95 billion from USD 18.69 billion in FY2015. This huge jump, albeit welcome, has not been matched by performance of the State agencies. But then this is hardly news. Inefficiency at personnel level has been a nagging problem for some time and now that we have a whopping USD 35 billion sitting idle, it can no longer be ignored.
So, precisely what is the government doing to alleviate this crippling lack of progress? As reported in the media, we are informed that a task force led by the finance minister has been working for the last one year to "expedite the pace of foreign-aid utilisation". A laudable effort, but let us be realistic here. Today, Bangladesh is set on a course that will effectively transform the infrastructure landscape of the country. We are looking at multi-billion dollar projects, finance for which has been obtained through development partners and financial institutions like the World Bank (WB), Asian Development Bank (ADB), the Islamic Development Bank (IDB), etc.
To compound the problem further, China has come on board with USD 40+ billion in foreign investments and loans to finance many of these projects. Add the Indian line of credit for upgrading railway, and we have a situation on our hands. As highlighted many times before, today, for Bangladesh, it is no longer a question of finding the requisite finance but the capacity to implement projects either undertaken or envisaged. The worrying sign for both the ministry of finance and economists is that grants constitute a miniscule percentage of the aid basket. Yes, we have been able to obtain soft loans that carry a decent 'grace' period before we have to start making repayments. However, the Chinese credit line is not so gracious and the terms are certainly far above what the WB, ADB, or JICA for that matter, have or will offer. Hence, putting this matter off for "posterity" is not really an option for a government that hopes to do another term in office.
Getting back to ERD data, we are informed that government agencies and ministries have utilised a paltry USD 1.32 billion of external aid from the available USD 14.26 billion in the current fiscal year. Now this brings forth the question of planning. Precisely, why are we committing ourselves to projects which we have no hope to get off the ground (within stated time frames) given our obvious lack of capacity in the present? The Financial Express recently reported, quoting the ERD secretary, "Actually our year-on-year aid utilisation is not that bad. If you look over the last few years, you will notice utilisation growth was over 15 percent." Little solace there because the problems of underutilisation remains a basic reality and yet, the annual development programme budget keeps getting inflated every fiscal year to include projects that do not get off the ground, but for which the government keeps asking for external finance. As pointed out by development analyst Dr. Zaid Bakht, "Due to the inefficiencies of the government agencies and sometimes tougher fund-release procedures of the development, partners slow down the implementation of the project."
The different viewpoints expressed by policymakers and development analysts clearly present different areas of concern and opinion. We witness the inclusion of many new projects in the annual national budget every year despite the doldrums State agencies find themselves in with ongoing projects. There is concern about the manner in which foreign agencies disburse funds; the conditions that are given do not necessarily help set the pace for on-time disbursement of resources. And when this happens, the government ends up paying commitment fees to lenders of these monies that remain unutilised, which is a burden for the national exchequer.
Obviously, things cannot go on like this indefinitely. Is it not time, we got our act together on certain basic realities? It is very easy for people in power to put the whole burden of fault on lending agencies, but is it also not a fact that our agencies have not been able to utilise funds that have been cleared by those same lending agencies? The time has come for the various agencies, both domestic and foreign, to sit down and streamline the procedures for lending of funds and their proper utilisation on time. It is natural for lending agencies to set tough parameters for fund utilisation which have everything to do with transparency and act as a guard against attempted graft.
To put it in a nutshell, there is a sea of disagreement between the government and its foreign partners that revolve around procurement procedures, bottlenecks at policy level and fund disbursement procedures; and it is up to the government to negotiate on the set rules of business to get things moving in the right direction. At the same time, we need to get our house in order, and that means putting the right man for the right job in the right place if we really want meaningful progress on the rate of implementation.
The writer is Assistant Editor, The Daily Star.