ERD tasked with accelerating foreign-funded projects

Instructions to ERD

• Enhance communication with multilateral lenders
• Ensure timely implementation of foreign-funded projects
• Appoint PD as soon as a dev project gets approval
• Send project proposals online to expedite approvals

A high-level committee, led by the prime minister's principal secretary, today asked the secretary of the Economic Relations Division to enhance communication with multilateral lenders to expedite fund disbursement and ensure timely implementation of foreign-funded projects, aiming to accelerate the utilisation of foreign funds.

The move comes amid Bangladesh's struggle to meet importers' demands for US dollars, with approximately $50 billion in foreign funds remaining dormant or in the pipeline. The amount is equivalent to nearly 2.5 times the country's foreign exchange reserves.

Planning Commission officials said the order was issued at the first meeting of the committee formed to review the implementation progress of foreign-funded projects on Wednesday.

During the meeting held at the National Economic Council with PM's Principal Secretary Tofazzel Hossain Miah, several challenges to accelerate disbursement for foreign-financed projects were discussed, along with guidelines.

Secretaries to the planning and finance divisions, ERD, and Implementation Monitoring and Evaluation Division (IMED) highlighted the problems encountered in the implementation of foreign financing projects.

Planning Commission and ERD officials said in many cases, foreign-funded projects require repeated approvals from development partners at various stages, including the tender process. It takes six months to one year to get a document approved.

There are instances where the approved 5-year period of some projects has expired due to the compliance complications of development partners. This is one of the main causes of non-disbursement or slow disbursement in foreign-funded projects, they added.

According to railway sources, the construction of the Khulna-Darshana railway line has been undertaken to increase capacity in the Dhaka-Khulna and Khulna-Chilahati corridors. A total of 126.25km of railway track will be constructed under the project, aiming to introduce broad-gauge containers for regional and international cargo transportation.

India has pledged a loan of $312.48 million for this project. However, as of last November, only $0.32 million has been disbursed.

Project Director Monirul Islam Firozi said, according to the initially approved proposal, the implementation was targeted to be completed by December 2022. "However, the approval process by Indian authorities at various stages has been delayed. It took more than three and a half years solely to obtain approval from Indian authorities for the recruitment documents of the Indian consulting firm," he added.

Furthermore, development partner organisations such as the Asian Infrastructure Investment Bank (AIIB) do not have any offices in Bangladesh, leading to additional delays in obtaining consent.

A report from the ERD last November indicated that, due to the absence of a regional office for AIIB, the disbursement of project funds takes longer.

Due to these complications, the implementation of 13 projects funded by AIIB is slow. AIIB is lending $2.07 billion to these 13 projects, and only 22%, or $458.45 million, was disbursed until last September.

ERD officials say this is the case with almost all development partners, including the World Bank, Asian Development Bank (ADB), and China.

Nurun Nahar, additional secretary at the Programming Division of the Planning Commission, says the ERD secretary has also been instructed to appoint a project director immediately after the approval of a development project.

Furthermore, there should be a proper action plan at the beginning of the financial year. The implementation of time-based action plans cannot be delayed.

She also said for foreign-funded projects, instructions have been given to send project proposals online to expedite the approval process.

Mohammad Emdad Ullah Mian, member (Secretary) of the Physical Infrastructure Division of the Planning Commission, said in order to quicken disbursements, it has been instructed to take efforts to address the problem by discussing with development partner organisations through ERD.

"The main purpose of this meeting is to ensure that the allocation provided from the foreign aid sector in the budget is effectively utilised. If loans are not utilised, we will not develop, and we will suffer economically," he said.

According to the report presented at the meeting, several challenges related to the utilisation of foreign loans have been identified. It also mentioned that foreign loans cannot be utilised on time due to lengthy tender processes.

According to sources present at the meeting, the second meeting of the committee will be held in the next one and a half to two months, where other issues will be discussed in detail.

The high-level committee was set up as per the decision made during the Planning Commission meeting chaired by the prime minister on 24 January

According to the report presented at the meeting, the size of the opening pipeline of foreign loans in the current financial year was $43.836 billion. In the first seven months of this fiscal year, $4.398 billion was disbursed, which is only 10% of the funds in the pipeline.

The Planning Commission report also stated that the annual development program (ADP) target was to utilise foreign aid of Tk94,000 crore in the current financial year. Only 34.22% of the foreign aid allocation has been utilised until January. The utilisation of foreign aid allocation was 36.33% and 37.17% during July-January of the fiscal years 2022-23 and 2021-22, respectively.

According to Planning Commission sources, in the proposed revised ADP for the current fiscal year, the foreign aid allocation has been reduced by 11.17% to Tk83,500 crore.