Foreign aid sees higher utilisation

The use of foreign aid for development projects in Bangladesh jumped 49 per cent year-on-year in July, providing some relief to the government amid the ongoing pressure on the country's foreign exchange reserves.

Bangladesh's development partners provided $488 million in the first month of the current fiscal year, up from $328.66 million during the same month a year ago, as per data from the Economic Relations Division (ERD).

The government repaid foreign debts amounting to $179 million in the month, down 3.3 per cent year-on-year from $185.11 million.

The country's foreign exchange reserves stood at $39 billion on August 24, equivalent to 5.72 months of import payments, while it was $48 billion on the same day last year, Bangladesh Bank data showed.

According to the International Monetary Fund and the World Bank, a forex reserves worth about three months of import payments are a comfortable position for Bangladesh during normal situations, but the equivalent of 10 months is required for emergency situations.

The government had to spend more local currencies on foreign debt repayments in 2021-22 due to the taka's devaluation against the US dollar. As such, the government had to pay Tk 1,680 crore against $179 million in the current fiscal year, while it was Tk 1,570 crore against $185 million in the last fiscal year.

The government estimated the dollar exchange rate for repaying debts would be Tk 86 when preparing this year's national budget, but the official exchange rate has gone past Tk 95.

The taka has lost value against the American greenback at least by 13 per cent in August compared to a year ago on the interbank foreign exchange market, whereas importers have to count 25 per cent more to buy a dollar.

This is because abnormally high import bills, driven by escalated global commodity prices, have exceeded the combined receipts in the form of export earnings and remittance flow, creating a shortage of US dollars.

Among the country's development partners, Japan disbursed the highest amount of foreign aid with $200.14 million for a number of mega projects, including the Matarbari coal-fired power plant, Bangabandhu Sheikh Mujib Railway Bridge, and third terminal at the Hazrat Shahjalal International Airport.

China disbursed the second highest with $102 million, while the Asian Development Bank provided $64 million, India $58 million, the World Bank $22 million, and Russia $4 million.