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Impact of Foreign Aid in Bangladesh.

Foreign Aid means any capital inflow or other assistance given to a country which would not generally have been provided by natural market forces. Foreign aid is a major means of financing the country's economic development. 

Foreign aid is essentially economic aid and is provided on a governmental basis to any  country by the Donor Countries. In Bangladesh the standard practice is to treat only the loans received on concessional terms and grants as foreign aid.

Bangladesh Aid Group was formed in October 1974, under the direct supervision of the World Bank, comprising 26 donor agencies as well as countries that made the commitment of providing US$551 million in aid in FY1974. Aid to Bangladesh has remained at a high level since the consortium came into existence, although with substantial fluctuations in new commitments from year to year.

Unfortunately, since the beginning, independent Bangladesh has been regarded as a test case for development by economists, policymakers, and program administrators of donor countries and international financial institutions.


Microeconomic Effects of Foreign Aid
Effect of Foreign Aid in Bangladesh
Foreign Aid and economic Growth
Foreign Aid and Economic Development
Development and the Role of Foreign Aid
Critical Perspectives on Aid in Bangladesh
Evaluation of Multi-Year Food Aid Program
Donor Support to Poverty Reduction in Bangladesh  
Policy Priorities for Foreign Aid in Bangladesh
Economics and Governance of NGOs in Bangladesh
NGO’s and Development in Bangladesh

Aid in Bangladesh can be categorized into four.

These are : Food aid, commodity aid, project aid, and technical assistance. Food aid is being provided either in kind or in loan or grants to procure food as well as to cover relevant food cost. Commodity aid includes programme credit, grants or credit for financing of the acquisition of raw materials and imports. Project aid, on the other hand, are grants or loan for project financing while technical assistance are grants meant for human resource development, institutional capacity building and technology transfer.

It is worth pointing out that a major portion of the aid provided earlier came in the form of food aid, followed by commodity aid, project aid and technical assistance, with the total process taking a u-turn within a decade. But since the national development programmes have been designed so far with a view to pleasing the donor groups, keeping peoples’ participation and say in these matters aside, a self-sufficient economic framework proper could not be built.


Trend of Foreign Aid.

Over the years, Bangladesh has been able to depend less on foreign aid which amounted to 5.95% of GDP in 1991 and only 2.8% in 2003 and onward. Also important to note is the fact that each year Bangladeshis working in different countries of the world send more than three times higher as the foreign aid as remittance. A reality is that the poor people for whom the aid is meant receive only one-fourth of it, with a considerable portion going back to the donor countries in the name of consultation fees and other relevant expenses, the rest being devoured by the middlemen.

Though the aid dependency in Bangladesh is decreasing, donors are putting much more conditions with the aid money.

Though the overall dependency on aid is decreasing, but some of the projects in different sectors dominantly dependent on foreign aid. The projects of health, population and family welfare sectors still bear the dependency rate of 74 per cent (approx.), public administration sector 73 per cent, oil, gas and natural resources sectors 46 per cent, and, media sector 43 percent.

Donors are more interested in providing loans than grants. Out of total foreign aid of the last 30 years, 52 percent were loans and 48 percent were grants. Comparatively the ratio of debt has increased over the period of time while the ratio of grant decreased. Not only that different types of conditionality and obligations have been imposing on Bangladesh to receive foreign loans.


World Bank and IMF presence.

Bangladesh, the third largest debtor country of the World Bank.The WB provides most of its loans for a specific project or for one which is based on one or another particular strategic policy such as Structural Adjustment Programmes or SAPs the main policies of which have been:
  • Massive privatization of industries and major utilities, e.g., water, electricity, gas, railway, ports, etc.;
  • The blanket application of the ‘free market policy’ which actually means a unilateral cancelling of all tariff and non-tariff restrictions by the country on the receiving end of the loans;
  • Withdrawal of all types of subsidies for the sake of ‘efficiency’; and
  • Drastic cuts in government spending in order to ensure so-called ‘macro-stability’ of the economy.

For Instance, in the mid-eighties, when Bangladesh was under a military regime, the SAPs started to be introduced, resulting in the disintegration of a number of industries including Adamji Jute Mills. Bangladesh Petroleum Corporation (BPC) has still been under tremendous pressure of being privatized, and so has been the Chittagong Port, the purpose of all this bein g putting the oil and gas sector of the country at the mercy of the large multinational companies.

The loans provided by the IMF, like those of WB, are accompanied by ‘conditions’ that often go against the debtor countries in question. In most of the cases, the conditions are not relevant to the causes or the management of the crisis that the countries face, with many of these conditions (privatization, trade liberalization, increasing bank interest rate as well as the price of fuel and electricity, tariff cuts and producing PRSPs, etc.) coming in conditionality package under the pressure of major IMF shareholders for their own interests. Between 1995 and 2000, IMF attached with each of its loans sanctioned, on an average, 41 conditions, which they reduced as a result of tremendous protests coming from different countries concerned. In 2002, IMF released a guideline of its conditionality policy, which was the modified version of its imposed conditions. Though the new guideline was dubbed ‘positive’ by IMF, different countries have been subjected to these conditions– particularly while availing Poverty Reduction and Growth facilities (PRGF) loans– that they view as ‘severe’ and ‘excessive’.........Click for details 

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