Review foreign finance carefully before taking: CPD

Experts said at a CPD held webinar on Sunday that multilateral development finance (MDF) often brings manifolds risks and challenges for receiving countries and there should be meticulous reviews for taking loans and facing those challenges.
"MDF is undergoing a significant number of challenges due to policy crisis, geopolitical shifts and ongoing global financial architecture reforms," said Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD) while releasing the global MDF report on September 5.
She was addressing the "Launching of the Multilateral Development Finance 2024 Report", jointly organised by the CPD and Organisation for Economic Co-operation and Development (OECD).
CPD recommended that while taking such loans the government must be focusing on fiscal space, prioritising expenditure, ensuring good governance and protecting vulnerable groups in public finance management for the next fiscal year.
For Bangladesh, as in many developing countries, external borrowing has played a crucial role in financing development projects, said Syed Yusuf Saadat, research fellow, CPD.
However, this reliance on external debt has also introduced significant vulnerabilities to the economy, he said.
In recent years, Bangladesh has accumulated more external debt than in the first few decades following its independence in 1971, raising concerns about the country's debt sustainability, he added.
Currently, around 75 percent to 80 percent of the official development assistance received by Nepal is in the form of loans, which must be repaid with interest, said Dikshya Singh, programme coordinator, South Asia Watch on Trade, Economics and Environment
She Fahmida Khatun said multilateral development finance is undergoing challenges due to policy crisis, geopolitical shifts and global financial architecture reforms, said an expert 
The OECD data shows MDF's share in Bangladesh's official development finance has grown from 45 percent in 2012 to 61 percent in 2022, said Fahmida.
She said donors influence and shape the system's priorities through their allocations, bringing risks for receiving countries, said Abdoulaye Fabregas, economist, architecture and analysis unit, OECD development co-operation directorate, in a presentation.
He suggested prioritising high impact funding mechanisms and emerging donors, safeguarding the system's capacity to support the poorest and ensuring adequate funding for core strategic functions.
Development funds should be designed for long term, with narrative description for utilisation and outcome, said Sabyasachi Saha, associate professor at think tank for Research and Information System for Developing Countries.
Advanced economies need new investments for major emerging markets, said Rishikesh Ram Bhandary, assistant director, Global Economic Governance Initiative, Boston University Global Development Policy Center.
Increased complexity in dealing with multiple institutions makes it harder for countries, especially those with limited administrative capacity, to manage reporting and evaluation, said Muhammad Asif Iqbal managing director, Social Policy and Development Centre.