After the interim government took office, there was a renewed expectation of an increase in foreign aid from various quarters.
However, new loan commitments decreased in the first eight months (July-February) of the current 2024-25 fiscal year by 68 per cent compared to the same period of the previous fiscal year as funding also decreased.
According to the Economic Relations Division (ERD), multilateral and bilateral loan commitments of only $2.3 billion were received in the first eight months of the current fiscal year.
However, aid commitments of $7.2 billion were received in the same period of the last fiscal year. So commitment of $5 billion decreased in the first eight months of the FY 25.
Total 41 aid agreements were signed in the eight months. It includes the highest commitment of $944 million from the World Bank. Later, a commitment of $700 million came from the Asian Development Bank (ADB) and a commitment of $252 million was received from Japan.
Analysts say without socio-political stability, there is no point in expecting new foreign aid commitments for development. Foreigners mainly provide long-term financing by analyzing the policies and priorities of the elected government. And if new projects cannot be developed, foreign commitments are not met. Donors may have adopted a policy of 'wait and see'.
Meanwhile, the previously promised foreign loan waivers have also decreased. In the last eight months, foreign loan waiver amounted to $4.1 billion while $4.9 billion was waived at the same time of the previous fiscal year.
During this period, foreign loan waivers have decreased by about $800 million and the ADB has given the most out of the waived funds, amounting to $1.1 billion.
The World Bank has given $959 million. Japan has given $728 million. Russia has given $536 million. China has released $267 million. However, there has been no significant release from India at this time. $364 million has come from other donor groups.
Dr. Mustafa K. Mujeri, former chief economist of Bangladesh Bank and executive director of the Institute of Inclusive Finance and Development (INM), said, "It would not be right to expect an increase in commitments until socio-political stability comes.
So, everything depends on the stability. It may depend on which government comes next and what their policies will be. For example, the IMF has stopped releasing its installments. It says it will be paid in July. But it is not possible to say what will happen.
Although donors loan commitments or release have decreased, the amount of loan repayments has increased in the last eight months. During this period $2.6 billion in foreign debt has been repaid. Of this, $1,692 billion was in principal and $944 million was in interest. A debt of $2 billion was repaid in the same period. Over $600 million more debt was repaid in the last eight months.
ERD officials say the government's debt repayment amount at the end of the current fiscal year may be one to one and a half billion dollars more than before. This pressure to repay debt will gradually increase in the coming years. The pressure to repay debt is mainly increasing as grace period of several mega projects is ending.
Development experts said that foreign loan commitments do not increase if projects are not implemented or new projects are not taken up. Again, even if there are no new programs from donors, funding may decrease. In this regard, Dr. Zahid Hossain, former chief economist of the World Bank's Dhaka office, said, "Project proposals must be prepared to receive project support.
How will commitments increase if new proposals cannot be prepared? Again, even if the quota of funds allocated by donors is exhausted, commitments decrease. However, if the situation normalizes in the next fiscal year, funding may increase. There is no sign of an increase this year. "
While scrutinizing and selecting projects in the past few months, Planning Adviser Wahiduddin Mahmud himself admitted that the pace of the project has slowed down somehow.
