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Foreign Aid Scenario in Bangladesh

Foreign aid plays an important role in Bangladesh's economic development, totaling $52.6 billion over 40 years since independence in 1971. Most aid has come as project aid (67%), with decreasing amounts of commodity aid (21%) and food aid (12%) as Bangladesh has developed. Loans have comprised over half (57%) of aid, while grants made up 43%, though grants were a majority (51%) in the first decade after independence. Aid averaged $1.3 billion annually and constitutes almost 50% of Bangladesh's annual development budget, though only about 2% of its GNI.

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52 views6 pages

Foreign Aid Scenario in Bangladesh

Foreign aid plays an important role in Bangladesh's economic development, totaling $52.6 billion over 40 years since independence in 1971. Most aid has come as project aid (67%), with decreasing amounts of commodity aid (21%) and food aid (12%) as Bangladesh has developed. Loans have comprised over half (57%) of aid, while grants made up 43%, though grants were a majority (51%) in the first decade after independence. Aid averaged $1.3 billion annually and constitutes almost 50% of Bangladesh's annual development budget, though only about 2% of its GNI.

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Md Mostafijur Rahman Mishuk
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Foreign aid scenario in Bangladesh

2.1.0 Aid Volume

Foreign aid plays an important role in the country’s economic development. The average
yearly aid totalled US$ 1.3 billion over the 40-year period. Although aid only accounts for
roughly 2 percent of GNI, it constitutes almost 50 percent of the country’s annual
development budget.

2.1.1 Aid Flow in Bangladesh

Since independence in 1971, Bangladesh has been striving hard for the development of the
country and for the economic emancipation of millions of poor people. In this endeavour,
the development partners have been playing a vital role by extending support and
cooperation in different forms. These assistances include food aid, commodity aid, project
aid and technical assistance.

Table 1 shows the flow of external assistance into Bangladesh during the last 40 years, from
1971 to 2010. During this period of almost four decades, the volume of foreign aid to talled
US$ 52.6 billion.1 From US$ 6.6 billion in the first decade of Bangladesh’s independence,
foreign aid more than doubled to US$ 14.1 billion in the second decade (1980-1990). In the
third decade (1990-2000), foreign aid increased slightly (by about 10%) to reach US$ 15.6
billion before falling by around 10% and reaching US$ 16.2 billion during 2000-2010. In
fiscal year (FY) 2009/10, according to figures computed by the Foreign Aid Budget and
Accounts (FABA) Branch of the Economic Relations Division (ERD), Ministry of Finance,the
amount of foreign aid disbursed was US$ 2.2 billion. 2

2.1.2 Food Aid, Commodity Aid and Project Aid


Most of the foreign aid received by Bangladesh comes in three forms: (a) food aid, (b)
commodity aid, and (c) project aid. Of the total aid of US $52.6 billion, about 67% was
disbursed in the form of project aid, 21% as commodity aid, and 12% as food aid. Table 2
shows how the shares of the three forms of aid have changed over time. Commodity aid
and food aid were the dominant forms of aid in the decade that followed the independence
of Bangladesh. These forms of aid constituted 42% and 32% respectively of the total aid
during 1971-1980. As the country developed, its reliance on these forms of aid gradually
decreased so much so that, in 2000-2010, food aid and commodity aid together accounted
for only 6% of total aid. The share of project aid, on the other hand, steadily grew over the
years, from 26% during 1971-1980 to 94% during 2000-2010. In FY 2009/10, according to the
figures computed by FABA, project aid constituted 96% of total foreign aid. 3
2.1.3 Loans and Grants
Loans and grants are the main types of external assistance. During the period under
review, loans constituted more than half (57%) of the total aid received by Bangladesh,
while grants made up around 43% of all foreign assistance (see Table 3). However, the
share of grants and loans in total aid changed over time. In the first decade after
Independence (1971-1980), grants constituted more than half (51%) of all foreign aid. This
share dropped consistently over the next three decades and constituted less than a third
(32%) of aid during 2000-2010. The share of loans in total aid correspondingly grew from
49% in 1971-1980 to 68% in 2000-2010.
Aid Flow in Bangladesh

Since independence in 1971, Bangladesh has been striving hard for the development of the
country and for the economic emancipation of millions of poor people. In this endeavour,
the development partners have been playing an important role by extending support and
cooperation in different forms. These assistances include food aid, commodity aid, project
aid and technical assistance. Table 1 shows the flow of external assistance into Bangladesh
during the last 41 years, from 1971 to 2011. During this period of almost four decades, the
volume of foreign aid totaled US$ 54.37 billion.1 From US$ 6.6 billion in the first decade of
Bangladesh’s independence, foreign aid increased more than doubled to US$ 14.1 billion in
the second decade (1980‐1990). In the third decade (1990‐2000), volume of foreign aid
increased slightly (by about 10%) to reach US$ 15.6 billion and reaching US$ 16.39 billion
during 2000‐2011. The average yearly aid totaled US$ 1.3 billion over the 41‐year period. In
fiscal year (FY) 2010/11, according to figures computed by the Foreign Aid Budget and
Accounts (FABA) Branch of the Economic Relations Division (ERD), Ministry of Finance,
the amount of foreign aid disbursed was US$ 1.77 billion.

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