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Huge flow of foreign loans

Govt is making best use of the funds, accelerating dev project work

Published : 26 Aug 2021 10:08 PM | Updated : 27 Aug 2021 12:46 AM

The release of a huge amount of foreign aid by development partners even during the coronavirus pandemic has helped the government accelerate work on development projects.

According to the Economic Relations Division (ERD), Bangladesh received $7.10 billion, equivalent to Tk 60,350 crore, in assistance from development partners in the outgoing 2020-21 fiscal year. 

Economists say it is a good sign for the Bangladesh economy that the disbursement of loans by development partners, including the World Bank and ADB, increased amid the pandemic, which affected economic activities across the globe.

 “Bangladesh got huge foreign loans from development partners that helped speed up the development work, including the mega projects,” said Dr Atiur Rahman, former governor of Bangladesh Bank, while talking to the Bangladesh Post.

The economists say development partners are providing additional loans to buy vaccines and other health equipment to cope with the pandemic.

The country managed loans at low interest rates with a long grace period which will bring good to the country, Atiar said.

“Bangladesh's public debt-to-GDP ratio is below 40. This is not bad,” he added.

ERD says that of the total foreign aid, $ 6.59 billion (Tk 56,000 crore) came as loan and the rest as grants.

Bangladesh received the highest amount of foreign aid in the 2019-20 FY, when the figure reached $7.38 billion (Tk 62,730 crore) -- $280 million higher than the just-concluded year’s receipt.

According to ERD, most loans were received from the World Bank in the last FY -- $2.70 billion (Tk 22,950 crore). 

The Asian Development Bank (ADB) disbursed the second highest of $1.70 billion (Tk 14,450 crore.

Reviewing the data of the last six fiscal years, it has been seen that the trend of foreign debt relief in Bangladesh has been increasing from the 2017-18 fiscal year. 

In the same year, the foreign loans increased to $6.37 billion from $3 billion in the previous fiscal. 

Then in the fiscal year 2018-19, it came to $6.54 billion.

However, in the last two fiscal years, more than $7 billion in foreign loans have been received. 

Multinational corporations including the World Bank, ADB and other partner agencies are providing additional loans to buy vaccines and other health equipment.

Pear Mohammad, ERD Additional Secretary, said good loans are being released from development partners due to corona. 

In addition, the pace of various development projects has also increased, he said, adding that Bangladesh's relationship with development partners is better than ever. 

Due to these reasons, foreign debt relief is increasing day by day, he mentioned.

Meanwhile, according to the National Board of Revenue (NBR), in the outgoing fiscal year 2020-21, there has been a deficit of about Tk 41,000 crore in the collection of duties and taxes. 

This is a deficit compared to the revised target. The NBR's revenue shortfall is being offset to some extent by loans given by development partners.

According to ERD, Corona has come forward to help in lending to Bangladesh at this time by various development partners including the World Bank, ADB, Asian Infrastructure Investment Bank (AIIB), International Monetary Fund (IMF). 

Of this, the World Bank is lending $1.20 billion or Tk 10,200 crore with budget assistance, while the IMF is lending $500 million or Tk 4,250 crore for budget assistance. 

AIIB, established at the initiative of China, is giving $500 million. And ADB is lending $1 billion as part of budget support, and it is lending another $250 million for health equipment purchases and social security. 

The government has set a target of getting foreign loans of Tk 89,000 crore in the current 2021-22 financial year.