Imran Khan
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Foreign funds dip despite increase in loan repayments
It had increased in the past years due to pandemic-centric assistance by foreign donors
File Photo of Dollar Note Syed Zakir Hossain/Dhaka Tribune
Meraj Mavis
December 18, 2022 4:16 PM
Following a series of global crises, Bangladesh's government efficiently handled its foreign aid when it was predicted that it would start to drop from the end of the previous fiscal year.
However, the adverse effects of those crises are now quite evident from the current fiscal year FY23.
In the period from July to October, compared to the same time in FY22, Bangladesh's net receipts of foreign aid in the form of loans and grants decreased by 31.7% after deducting the paid principal amount.
According to experts, pandemic-focused aid helped increase the amount of total foreign aid last year.
However, now that the pandemic has ended, the country was actually witnessing continuous global economic instability.
Policy Research Institute (PRI) Executive Director Ahsan H Mansur said that foreign aid declined in 2022 as the country did not need support for tackling Covid-19 anymore. It had increased in the past year due to pandemic-centric assistance by foreign donors.
As the Bangladesh government has so many deals with the International Monetary Fund (IMF) and World Bank, he expects the assistance would increase in the coming year.
July-October period
Data from the Bangladesh Bank show that between July and October, net foreign aid fell from $2,077.45 million in the same months of the previous year to $1,419 million in FY23 after principal repayment.
Data analysis showed that the country's net receipts of foreign aid in the form of loans and grants decreased by 31.7% from July to October of FY22 to that of FY21
The principal payment for July-October was $551.56 million, which was $550.6 million in the past year.
Central Bank's data also shows that the total foreign aid and project aid was $1,958 million in July-October, 25.44% lower than that of $2,626 million in the same period of the past year.
Aid in the form of grants as a percentage of net foreign aid in the reported period was only 6.54%.
Dollar and reserve
The fact that the country's economy has been battling a number of problems recently, including the dollar crisis, exchange rate volatility, and dwindling reserves, are now causes for concern.
According to central bank officials, the main sources of income for banks are remittances, export revenues, and international aid.
Consequently, the country needs more aid from abroad to manage the ongoing economic burden. Otherwise, the reserve money will come under further strain.
In order to address the dollar shortfall in the financial industry from July to November 2022, Bangladesh Bank sold more than $6 billion to banks, which in turn removed comparable local currency from the banking system.
As a result, on December 7, Bangladesh's foreign exchange reserve fell to $33.92 billion.
FY22 and earlier fiscals
Development partners and donor countries have released more than $10 billion in loans and aid to Bangladesh in 2021-22, a record for a financial year in the country's history.
Analyzing the ERD data shows that in FY22, more than $9.81 billion came as a loan and the rest is various kinds of aid.
Bangladesh brought in the funds for development projects, which is 26% more than the preceding fiscal year.
Development partners and countries gave loans and aid worth $7.96 billion to Bangladesh in FY21, which was $7.27 billion in FY20.
A record $10bn foreign loans, aid came in FY22
During the last fiscal year, Bangladesh paid up to $2.01 billion in dues
