Dhaka lets billions of aid dollars
lie unused By Syed Tashfin
Chowdhury
DHAKA - The amount of committed
but unused foreign aid for Bangladesh, one of the
world's poorest countries, has bulged to US$16.32
billion as of June 30, 2012. Blaming public
department inefficiencies and other factors for
the aid bulge, local economists claim the trend is
hindering development of numerous projects in a
number of sectors, especially infrastructure.
Most of the committed but undisbursed
funds are from the World Bank, yet the bank's
International Finance Corporation (IFC) last month
announced plans to increase investment in
Bangladesh.
Unutilized foreign assistance
increased 28.42% in the fiscal year to June 30,
from $13.86 billion previously. according to data
from the Economic Relations Division (ERD), one of
the four divisions of the Ministry of Finance in
Bangladesh. The funds are not being
used even though the
World Bank ranks Bangladesh 151st out of 180
countries in terms of per capital gross domestic
product.
Bangladesh government ministries
and agencies used only $2.03 billion, roughly 45%
of the total external assistance of $4.497
billion, committed by multilateral and bilateral
donors during the 2011-2012 fiscal year, ERD
statistics show.
The Washington-based
World Bank had the highest amount of undisbursed
but committed funds among donor agencies, with
funds allocatable by the International Development
Association (IDA), through which Bangladesh
receives soft loans from the World Bank,
increasing to nearly $4.30 billion as of June 30.
During the last financial year, the
Manila-based Asian Development Bank (ADB) had the
second-largest unutilized but committed funds
available for Bangladesh, standing at about $3.10
billion. The third highest amount was from the
Japan International Cooperation Agency (JICA) at
$2.4 billion.
The three donors had all
committed funds for the $ 2.9 billion Padma
Bridge, the most important infrastructure project
in Bangladesh's history. The 6.15 kilometer bridge
is intended to connect the southwest part of the
country, where a fourth of the total population
resides, to other parts of the nation and is
considered an important plank in improving
transportation and logistics within the Indian
subcontinent.
The World Bank on June 29,
pulled their IDA credit, worth $1.2 billion, for
the project, alleging corruption at the
Bangladeshi end.
Dhaka initially protested
against the withdrawal of funds for the project,
claiming that the ministers and high officials of
the concerned communications ministry were not
engaged in any corruption. Even so, Syed Abul
Hossain, against whom the bank had made the
corruption charges, resigned from his position as
information and communications technology minister
on July 25.
The bank had also alleged
corruption by former Bridges Division Secretary
Mosharraf Hossain Bhuiyan, who was sent on leave
around the end of July.
The ADB and JICA,
co-financiers of the project who had committed
$615 million and $400 million respectively, have
extended their deadlines for the project. ADB
extended its deadline for the fourth time on
August 31 by another month. JICA extended the loan
by three weeks on September 1. The two donors and
the Bangladesh government are now waiting for the
World Bank to recommit funds to the project.
"The undisbursed Padma Bridge funds have
most likely added to the foreign aid pipeline
bulge," Dr Mustafizur Rahman, executive director
of the Centre for Policy Dialogue (CPD), a civil
society think-tank in Bangladesh, told Asia Times
Online.
The amount of undisbursed foreign
aid is ballooning every year because "the
implementation agencies are failing to execute in
time the donor-assisted projects", Rahman said.
Recent reports mentioned that government
inefficiency and lack of transparency in project
implementation are further affecting aid
disbursement.
Some projects require
Bangladesh to pay certain portion of the funds,
which it does so in taka. Due to pressure on
Bangladesh's treasury, the government often cannot
pay these funds on time. This stops the funds flow
for the development projects thus delaying the
time required to implement the said project.
"Most projects have local-currency
components that contribute to the overall funds of
the project. Most projects are stalled when the
taka [Bangladeshi currency] components cannot be
sequenced properly," said Rahman. Projects that
are implemented in tranches also tend to become
stuck at the very last stages due to such
hindrances, thus increasing costs for the
government, he said.
An ERD official was
quoted in a recent Financial Express article as
saying that most projects "are often designed
without proper planning or feasibility studies".
The "people engaged in the project preparation are
not properly trained".
A senior Bangladesh
Planning Commission official in the same article
noted other impediments, such as "bottlenecks in
procurement, contradictory procurement guidelines
of the government and the donors, and complex
approval procedures by the donors before fund
disbursement".
The consequence of
undisbursed funds is that "economic development is
not occurring, as most of the high-profile
infrastructure projects are held up," Rahman said.
Economists also noted that slow
disbursement of foreign aid leads to "cost
over-runs" and adversely affects efforts "for
mobilizing fresh external assistance". Poor aid
disbursement also affects the country's balance of
payments, driving the government to borrow more
from domestic sources.
Despite the foreign
aid bulge, the International Finance Corporation,
the private sector lending arm of the World Bank,
plans to increase investment to between $400
million and $600 million from $250 million during
the fiscal year ending next June.
Acting
IFC executive vice-president and CEO Rashad
Kaldany told bdnews24.com during a three-day
regional trip to Bangladesh on August 12 that
improved economic conditions and government
support for IFC projects have prompted the
organization to increase investment in Bangladesh.
Kaldany said the IFC plans to undertake 12
to 14 financing projects during this fiscal year,
most of which will be focused on infrastructure,
power, banking, textiles and agricultural business
sectors. The organization undertook nine projects
during last fiscal year and seven projects during
the 2011-2012 fiscal year.
Syed
Tashfin Chowdhury is the Editor of Xtra, the
weekend magazine of New Age, in Bangladesh.
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