Foreign aid commitments fall 43%, disbursement 21%

The year-on-year disbursements and commitments of foreign loans from development partners have decreased in the first nine months of the current fiscal year, which may intensify pressure on the country's foreign exchange reserves.

According to the Economic Relations Division (ERD) of finance ministry data, foreign aid disbursement has decreased to $5.36 billion in the July-March period of FY23, registering a 21% fall compared to $6.79 billion in the same period of FY22.

In addition, commitments of foreign aid declined by 43% to $3.07 billion in the nine months of this fiscal year, down from $5.43 billion in the corresponding period of the last fiscal year.

However, the government's loan repayments increased by 29% in this period of the current fiscal compared to the same period last fiscal.

According to ERD officials, the disbursement did not see a rise due to the lack of capacity to implement the ongoing development project. In addition, the development partners released funds for budget support and vaccine purchase in the last financial year. Only $250 million in budgetary support has been received from the Asian Infrastructure Investment Bank (AIIB) till March of the current fiscal year.

ERD data shows that Japan's International Development Cooperation Agency (Jica) made the largest disbursement in the July-March period, releasing $1.3 billion.

Among other development partners, the World Bank has released $854.29 million, the Asian Development Bank $801.93 million, Russia $747.2 million, and China $637.67 million.

ERD sources said commitments in the first nine months of the current fiscal fell by $2.35 billion compared to the same period last year.

Regarding the drop in commitments from development partners, ERD officials said the government is taking fewer loans due to the higher Secured Overnight Financing Rate (SOFR) in the international market and because of this, the commitment has decreased.

Currently, the SOFR rate is above 4%.

According to ERD data, the highest commitment received was from Jica — around $1.29 billion in the July-March period of FY23. In addition, commitments of $844.75 million from the Asian Development Bank (ADB), $300 million from the World Bank and $253.5 million from AIIB have been received.

The total debt repayments by the government increased in March as $329 million (principal and interest) against the Rooppur power project loan was paid.

Including Rooppur debt repayment, the government has paid a total of $2.059 billion in foreign loans during July-March of the current financial year, which was $1.595 billion in the same period of the previous year.