Business Report :
The Economic Relations Division (ERD) of the Ministry of Finance has issued a new circular requiring ministries and divisions to fulfill seven conditions before signing any loan agreement for foreign-funded development projects, in a move aimed at ensuring timely progress and effective cost control.
The ERD’s Foreign Aid Budget and Accounts wing issued the circular on Tuesday, with wing Chief Syed Ashrafuzzaman signing it.
According to the circular, these mandatory conditions must be followed from the initial preparation phase to safeguard the time value of money and improve project execution.
Experts say the move will make foreign fund utilization more effective and help avoid cost overruns and delays. They consider this a timely and pragmatic reform in the country’s development project implementation process.
The first condition requires the preparation and approval of the project’s Development Project Proposal (DPP) and Technical Assistance Project Proforma (T-APP) in line with Planning Commission guidelines.
Secondly, the appointment of the project director and required personnel must be completed before the loan agreement is signed.
The third condition mandates that land acquisition must be secured in advance, followed by submission of a rehabilitation plan for those affected by the acquisition, as the fourth condition.
The fifth condition involves preparing cost estimates and draft tender documents for civil works, goods, or services, and completing all processes from tendering to contract award.
The sixth condition requires obtaining consent from the Finance Division regarding the terms of the subsidiary loan agreement, where applicable, following the negotiated agreement with the development partner.
Finally, the seventh condition states that a time-bound understanding must be reached between the relevant service agencies and the implementing agency for the relocation of project-related utilities.
The ERD clarified that these conditions will apply not only to ongoing projects but also to all projects currently in the pipeline. Ministries, divisions, and their subordinate agencies will now be required to engage more actively from the early stages of project planning.
The circular concludes that loan agreements will only be approved after the necessary structural and administrative preparations are properly completed.
ERD officials say most foreign-funded development projects in Bangladesh suffer from significant delays and cost overruns, primarily due to poor preparatory work and implementation bottlenecks.
