Review underway to identify priority, unnecessary foreign-funded projects

The interim government has embarked on a review of all foreign-funded projects – whether ongoing, proposed, or under negotiation – to identify priority projects, initiate their implementation, and discontinue those deemed unnecessary.

As part of this effort, the Economic Relations Division (ERD) has already issued letters to government agencies that are implementing foreign-funded projects.

The letter asks agencies to submit a priority list, along with information on project rationale, feasibility, and progress, by the end of this month.

At the end of last month, letters were sent to the relevant ministries and departments regarding proposed and ongoing projects funded by China. For the projects financed by the Asian Development Bank and the World Bank, separate letters were issued by each ERD wing in the first week of this month.

According to ERD officials, the priority list is being sought to assess the significance of foreign-funded projects, cancel those deemed non-essential, and prioritise the allocation of foreign loans.

ERD Secretary Shahriar Kader Siddiky told The Business Standard, "In the first phase of the review of all foreign-funded projects, letters have been sent to the ministries and departments.

"The ERD will further review the priority list proposals from the ministries and departments. Priorities will then be set through tripartite meetings with development partners and implementing agencies."

ERD officials stated that they will exercise greater caution when reviewing proposed projects, those in the negotiation stage, and projects that have not yet been tendered. This approach aims to ensure that foreign loans are not used for projects deemed non-essential.

The officials also mentioned that development partners have expressed interest in the priority list, noting that it will facilitate the allocation of loans for development projects and expedite large-scale development work.

ERD officials cited examples of less critical projects, such as a plan initiated during the previous government to establish full-fledged television centres in six divisions outside Dhaka and Chattogram.

The Chinese loan scheme for this project was approved by the Executive Committee of the National Economic Council in March 2017. At the time, the project cost was estimated at Tk1,319 crore, with China's loan portion estimated at Tk988.55 crore.

Officials say the ERD was not keen on implementing this relatively insignificant project with foreign loans, leading to a suspension of the loan process for nearly eight years. Nevertheless, Beijing remained very interested in the loan aspect of the project. Additionally, ERD officials noted that the then information minister applied various pressures in this regard.

According to ERD officials, there are currently two full-fledged TV centres in Dhaka and Chattogram, which require government subsidies to operate. The ERD was not interested in expanding this network by establishing six additional TV stations in other divisions, as it would necessitate a significant increase in manpower and government subsidies.

The project remains on China's proposed financing list, but ERD officials stated that such non-critical projects will now be reviewed and potentially discarded.

Additionally, there was pressure on the ERD to secure foreign loans for establishing a railway line from Chattogram to Kaptai Lake in Rangamati.

However, the ERD was reluctant to pursue this project with foreign loans, considering it less critical compared to the conversion of the Dhaka-Chattogram metre gauge railway line to broad gauge. The conversion project, costing Tk8,926 crore, is deemed more important because it will enhance key railway lines, such as Laksam-Chattogram and Tongi-Akhaura, into dual gauge systems.

As a result, the ERD prioritises projects that offer quick returns and make significant contributions to the economy and public services. The focus is on implementing high-priority projects first.

ERD officials also said often project proposals are made without completing all the preparations. But after loan agreements, it has been seen that the project cannot be implemented due to various complications. A commitment fee has to be paid to development partners. Ultimately, the government suffers financially. In this regard, priority should be given to projects that have all kinds of preparations.

ERD officials said several projects, including the Rooppur Nuclear Power Project, Metro Rail, Karnaphuli Tunnel, and Padma Rail Link, have been or are being implemented with foreign loans. Again, due to Covid and Russia-Ukraine war-related situations, Bangladesh has taken massive budget support in the macroeconomic situation and the pressure of foreign debt repayment is gradually increasing.

The officials said priority should now be given to projects that will contribute quickly to the economy, generate quick benefits, and generate employment.

At the end of the recently concluded fiscal 2023-24, the external debt liability of the public sector has increased to $69.66 billion, which is an outstanding increase of 11.6% over the previous fiscal year.

According to ERD data, the government has taken out more than $8.5 billion in budgetary support in the last five years. In the case of budget assistance loans, the money is disbursed as soon as the loan agreement is signed. As a result, the external debt liability has also increased due to budget support. ERD officials think that Bangladesh should be strategic in taking new foreign loans in this situation.

Since liberation, the country has received more than $13 billion in budget assistance from development partners, more than 60% of which has been taken to address the economic crisis caused by Covid and the Ukraine war.

The ERD officials said due to the increase in foreign debt outstanding, the pressure of debt repayment will also increase. The government repaid foreign debt of $3.36 billion in the last financial year. Of this, more than $2 billion has been paid out in principals

ERD expects foreign debt repayments to reach $5 billion in the next two years.

Meanwhile, ERD officials said loan agreements have already been signed for the projects. And while there is some progress in implementation, it is difficult to discontinue these unimportant projects. However, the government will also decide to exclude projects where construction work has not yet started or the tender process has not been completed.

Instructions to ensure safety in development projects 

The ERD has sent a letter to the home ministry ensuring the safety of foreign contractors, consultants, and foreigners involved in ongoing development projects funded by foreign sources. The letter also requests the protection of project materials.

ERD Secretary Shahriar Kader Siddiky confirmed that the letter was sent yesterday. A copy has also been forwarded to the Cabinet Division to inform deputy commissioners of the matter.

According to ERD sources, following the students' movement in July, several development workers, including those from India, left the country.

This initiative aims to facilitate their return. Additionally, various development aid agencies have urged the government to enhance security.