Snags in external resource flow

External resource flow is acquiring a great deal of more significance for Bangladesh in the backdrop of conditions for resource flow from external sources turning progressively unfavourable. Japan, as the reports said, has informed the government of Bangladesh (GOB) about the deferment of its pledged credit of $600 million until the next fiscal year. Out of this amount, $400 million was earmarked for the construction of the Padma bridge and the rest $200 million for a water treatment plant in Khulna. Thus, two major projects could face serious delays and uncertainty in their implementation schedule. Japan has been the biggest donor for Bangladesh for a long time and its deferment of aid to Bangladesh might not be limited to only these two projects alone. From the scale of the recent natural disaster in Japan and its need for diverting resources for reconstruction, it may not surprise if more cutting of Japanese aid resources to Bangladesh or for that matter any other recipient countries of its aid, or their deferment are progressively made known.

Meanwhile, a report in this paper last Thursday stated that the Asian Development Bank (ADB) will review dozens of its key infrastructure-related and development projects in Bangladesh. The financing from ADB for these projects is worth $3.8 billion and the review could lead to snags in the disbursement of ADB’s pledged credit on grounds of unsatisfactory implementation by GOB. And again, the latest developments over a $1.0 billion credit deal with the International Monetary Fund (IMF) are neither encouraging. The credit, as the reports said, was sought by GOB from IMF for the express reasons of shortfall of resources for its budget and to prop up its balance of payments position in the face of accelerated import activities and the likely pressure on foreign currency reserve caused by decrease in remittance receipts from expatriate workers. Whether this deal can go through smoothly is in doubt. Conditions that have been attached to finalisation of this IMF deal for the subsequent disbursement of the sum in trenches but only on fulfillment of conditions, as the reports appearing in a section of the media suggest, are being considered ‘too tough’ by the government for a variety of reasons. Whether such reasons are valid on a sound economic rationale are different issues here. On its part, GOB has reportedly been considering the conditions too difficult to implement in the context of its political and other priorities. Until such things are sorted out with IMF, the credit deal with that body is not likely to go through as smoothly as is needed to meet the situation that is emerging on the external front of the economy.

Already, the external aid disbursement scenario so far this fiscal is quite disconcerting. The recent statement by the finance minister on the aid situation to parliament would bear this out. The net receipt of aid resources (both loan and grant) in the first six months of the current fiscal was not even one fifth of what the country had received during the corresponding period of the last fiscal. The entire picture of the availability of external resources to Bangladesh is, thus, becoming a matter of serious concern. Even foreign direct investments (FDIs) into the country is trailing below the expectation. All such developments do have a strong bearing on the overall performance of the national economy, public sector development funding, investment and jobs creation. Notwithstanding all kinds of tall talks about mobilizing greater domestic resources, the same would not be easy and could invite backlashes from interest groups to be affected by the same. The government needs to take a hard look at the stark realities, while making unrelenting efforts for improving economic governance on all counts. Otherwise, the situation in the real sectors of the economy will be getting rougher and tougher, blighting the prospects for an early turnaround.