Waning grant flow creating pressure on budget financing

BD's graduation to MIC

Jasim Uddin Haroon

The availability of foreign grant has been declining over the past few years, putting the government's budget financing under pressure.

Development partners now view that Bangladesh's gross national income (GNI) has increased, and that's why the country can get less grant or the aid which need not be repaid.

The government had received Tk 58.71 billion in fiscal year (FY), 2013-14 as grant. It dropped by nearly 58 per cent in FY 2014-15.

In FY 2015-16, the foreign grant fell by Tk 3.15 billion to Tk 21.69 billion, according to official statistics.

In FY 2016-17, the decline was Tk 7.01 billion at a time when the country's GNI rose to US$ 1,610 (per capita), up by $145 per capita from the previous FY.

In the last FY, 2017-18, the foreign grant flow was recorded Tk 7.51 billion, according to the government's estimate.

The fall was much lower than the government's expectation of Tk 40.0 billion a year on an average.

Bangladesh's per capita GNI in FY 2017-18 stood at $1,752, in FY 2016-17 at $1,610, in FY 2015-16 at $1,465, in FY 2014-15 at $1,316, and in FY 2013-14 at $1,184.

The Finance Division officials told the FE that the foreign grant flow has been gradually waning, as the country has become a lower middle-income country (MIC).

They said such type of fall hits hard the government's budget financing.

"This fall means the government has to raise domestic financing or borrow from external sources at higher cost," said an official concerned.

"If the present declining trend continues, the grant will drop to zero at one time," he opined.

In the meantime, the development partners said the grant inflow might rise to some extent in this FY, 2018-19, following Rohingya influx to Bangladesh, where they are funding in different infrastructure, shelter and other humanitarian projects.

However, an official said the grant pertaining to the Rohingya people is not meant for budget financing.

"World Bank (WB) and Asian Development Bank (ADB) have two big projects for the Rohingya people, but these are not part of the budget," he added.

ADB board of directors has approved grant assistance amounting to $100 million, the first of an envisaged package totaling $200 million to help Bangladesh develop basic infrastructure and services for the displaced Rohingyas.

WB has announced $480 million grant-based support to help Bangladesh address the needs of Rohingya refugees in health, education, water and sanitation, disaster risk management, and social protection.

Dr Zahid Hussain, lead economist at WB Dhaka office, told the FE that Bangladesh's GNI has increased in recent years, and for this many development partners are cutting their aid flow to the country.

The grant should go to the poor people across the globe for developing human skills through education, healthcare and disaster management, he added.

• Courtesy: The Financial Express /Sep 24, 2018