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PLAN FOR FY23

Foreign aid use target to remain unchanged
The government’s foreign aid spending target is $12.86 billion for the next fiscal year, according to the finance ministry’s initial plan. Of the sum, Tk 96,000 crore, or $11.16 billion, will come from project aid.
PHOTO: STAR/FILE
REJAUL KARIM BYRON and MAHMUDUL HASAN
The government plans to keep its foreign aid use target unchanged in the next fiscal year compared to the current fiscal year owing to lower utilisation of development allocations and projected reduced spending related to the pandemic, especially for vaccination.
According to the finance ministry’s initial plan, foreign aid spending target is $12.86 billion. Of the sum, Tk 96,000 crore, or $11.16 billion, will come from project aid and the rest from budget support.
The borrowing plans of the Economic Relations Division (ERD) for the current fiscal is $12.89 billion. Of the amount, $10.38 billion is project aid.
In the current fiscal year of 2021-22, the government initially hoped to use a record amount of foreign funds to help Bangladesh weather the pandemic.
A finance ministry official said one of the biggest chunks of budget support was for vaccination plans. The Asian Development Bank alone provided almost $1 billion for vaccine purchase.
But the chances of receiving robust budget support from development partners are very slim in the next fiscal year, since there has already been much progress regarding vaccine procurement.
However, the International Monetary Fund pledged $3 billion in the next three fiscal years as budget support. Bangladesh could receive $1 billion in FY23, according to the official.
In FY22, the government’s target was to increase foreign aid use in development spending by 25 per cent compared to that in the previous fiscal year.
The target for foreign aid utilisation is only up by 9 per cent in FY23 compared to the current fiscal year.
“The target of foreign aid use in the next fiscal year is not great,” Towfiqul Islam Khan, a senior research fellow of the Centre for Policy Dialogue, told The Daily Star.
“And much will depend on how much support we are getting to recover from the pandemic.”
The project aid use under the Annual Development Programme (ADP) is low this fiscal year in spite of a bigger allocation.
According to the Implementation Monitoring and Evaluation Division, foreign aid spending amounted to only 16.23 per cent of the allocation in the first five months of FY22, which was 16.57 per cent during the same period last fiscal year.
For example, the health service division used 4.47 per cent of the foreign aid allocated between July and November.
The utilisation rate is also low for many other ministries and is similar to the level of the health service division.
According to the ERD’s latest report, the government was able to disburse only $3.08 billion in foreign assistance during the five-month period, less than a fourth of the target set for the entire fiscal year.
This prompted the government to cut the foreign aid portion in the ADP by Tk 10,000 crore in the revised budget.
Foreign funding in the pipeline stood at around $50 billion as of November.
In the last few years, Bangladesh was able to spend 12 per cent to 14 per cent of the total foreign fund in the pipeline, much less than the standard utilisation rate of 20 per cent.
However, according to an ERD official, the utilisation is rising gradually.
Foreign funding in the pipeline stood at around $50 billion as of November. In the last few years, Bangladesh was able to spend 12 per cent to 14 per cent of the total foreign fund in the pipeline, much less than the standard utilisation rate of 20 per cent