FHM Humayan Kabir

The foreign aid component of the development budget for fiscal year (FY), 2012-13, is about to be sliced down by, at least, 14 per cent of the earlier estimated level, official sources indicated this on Monday.

The cutback in the aid fund, in terms of disbursement, to the tune of Tk 185 billion will follow the lacklustre performance so far this fiscal about the externally aided projects by the implementation agencies.

The ministry of finance (MoF) officials said the revised estimate of the project aid has been finalised after slashing the original projection at Tk 215 billion for the donor-supported projects under the Tk 550 billion Annual Development Programme (ADP) of the current fiscal.

The Economic Relations Division (ERD) has reallocated external aid funds for different ministries and divisions after a thorough review meeting with the project implementing agencies last month in efforts to finalise the revised ADP for the current fiscal.

Out of the total Tk 550 billion outlay in the original ADP, Tk 335 billion was allocated from the domestic resources and the rest, Tk 215 billion from the external resources as project aid, for a total of 1037 development projects.

"We will now send the downsized projects, supported by external aid, to the Planning Commission for finalising the revised ADP," a senior ERD official told the FE.

Since the project implementing agencies have not been able to spend the allocated amount of foreign assistance from the committed pipeline for different development projects in the ADP, there is no alternative but to cut the outlay in the revised development budget, he added.

Such agencies spent only Tk 43.0 billion or 20 per cent of the originally estimated Tk 215 billion as project aid in the development budget during the July-November period of the current fiscal.

However, all the implementation agencies could spend Tk 90.75 billion or 27 per cent of the total Tk 335 billion outlay as the domestic resource component of the ADP, during the same period this fiscal.

The ERD official said, "Agencies prefer to spend more of domestic resources than what is available as foreign aid allocations. This has put the country's fiscal management under further pressure."

Another ERD official said the major budget spenders including those involved in transport, communications, agriculture and water resource sectors have sought lower amount of funds under the revised ADP than their original budgetary allocations.

At the same time, the power, health and rural development sectors have sought increased funds under the revised development budget, he added.

Since the external donors monitor the utilisation of their funds for different development projects, most government agencies try to avoid spending the allocated amount of foreign aid fund, preferring instead the funds from the public exchequer under relatively flexible conditions, the official added.

The government usually takes external loans and grants from bilateral and multilateral donors to support the country's development activities and to ensure socio-economic development, as the local resource component cannot met the entire budgetary expenditure for different related projects.

"When the country needs more investment to upgrade its weak infrastructure and cut hunger, lower demand for project aid funds by the implementation agencies is very unfortunate," an ERD official said.

Besides, it will exert further pressure on the available domestic resources, he added.

The project implementing agencies should improve their capacity to spend the external aid for development projects under the ADP, the official said

In the last fiscal 2011-12 too, the government cut the project aid disbursement figure in the revised ADP by 20 per cent to Tk 150 billion from the original estimate of Tk 186.85 billion for the year.