Aid, in the case of Bangladesh, has put an end to the possibility for sustained economic growth by driving local producers, particularly farmers, out of business. Instead of providing assistance, aid cotributes to the rise of corruption. As a result, in Bangladesh, despite receiving almost 20 billion US dollars in aid since its independence in 1971, the country remains one of the poorest and most corrupt nations of the world.

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$551 million in aid in FY1974. Aid to Bangladesh has remained at a high level since the consortium came into existence, although with substantial fluctuations in new commitments from year to year. After the high initial commitments, the figure fell to US$ 964 million in FY 1976 and to US$ 744 million the following year, before turning upward again. Fiscal year 1979 was another breakthrough period, with new commitments of nearly US$1.8 billion, a figure surpassed 3 years later when the level reached US$1.9 billion, the all-time high through FY 1987.

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.

Forms of aid

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.

Aid trend

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.

Aid is now in decreasing trend from the national budget. A report published in June 2005 shows that foreign aid to Bangladesh decreased from 1585 million dollar to 1033.4 million dollar in 2003. In 2004-05 fiscal year, donors were committed to donate 715.2 million dollar which is less than 21.7% from past fiscal year.

Though the aid dependency in Bangladesh is decreasing, donors are putting much more conditions with the aid money. According to finance ministry, the amount of foreign aid Bangladesh got in 1991 equals to 5.9 per cent of the GDP. In 2003 it becomes 2.8 per cent of GDP. In 1972 the per capita debt burden was only Taka 67, while in 2004 it reaches to Taka 7200. In 1991 per capita overseas loan was 119 dollars that now stands at 122 dollars. 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, public administration sector 73 per cent, oil, gas and natural resources sectors 46 per cent, and, media sector 43 percent. The aid dependency on our ADP is decreasing gradually. The dependency rate of our ADP on aid in 1991 was 87 per cent, but in the financial year 2003-2004 it is only 42 per cent.

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. During the fiscal year 1971/72, total foreign debt was about 10 percent and foreign grant was about 90 percent, however, in the fiscal year 1998/99, foreign debt became 57 percent. Such a trend clearly shows that although the foreign donors started providing support through grant they were more interested in loans afterwards. Not only that different types of conditionality and obligations have been imposing on Bangladesh to receive foreign loans.

World Bank and IMF presence in Bangladesh

Bangladesh, the third largest debtor country of the World Bank (WB), has been provided with credit assistance totaling nearly $20 billion by the International Development Assitance (IDA) since 1973, the year the country joined the WB. 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 canceling 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.

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’.

In June, 2003, Bangladesh has been provided by IMF with a loan worth US$501,500,000 which was to be released in three years in three installments, some of the conditions being the renovation of government Banks, privatization of Rupali Bank, reducing the interest rate of Sanchay Patras (savings scheme), raising the price of gas and oil, among others. It is the IMF that has been imposing structural adjustment programmes on different countries; and in the macro economic level Bangladesh has got the IMF as its main consultant the directives of which played a major role in fixing the national salary structure (article 4 mission). This raised the exchange rates of the dollar against taka, led to increases in the price of gas, fuel, and electricity resulting in the tragedy of Kansat in Chanpainababganj, Rajshahi that claimed this year the lives of 19 farmers who, along with many others, protested against the price hike.

Aid conditionality

According to the donors, the conditionalities that come along the aid programmes are meant to ensure the effective use of the aid money for the stated purposes. And these stipulations have now grown more important than they were in any previous time, with IMF imposing two types of policy conditions, namely quantitative and structural. Quantitative conditions are imposed at the macroeconomic level of the poor countries, while the structural ones are for institutional and legislative policy reforms. All of these prove to be unfair, undemocratic, ineffective, and inappropriate mainly because they undermine democratic accountability within countries and deprive the poor of the access to the services (education, health, etc) at a low cost. And what is alarming, the WB instruction to stop appointing to different vacant posts resulted in raising the unemployment rate to 40% in Bangladesh in the year 2005.

Bangladesh Government has already started bank sector reform. The project name is “Industry Development and Bank Modernization”. Another project also in hand is named “Central Bank Strengthening Project”. The loan amount is estimated as 38 crore 83 lacks 90 thousand USD and 4 crore 61 lacks 30 thousand respectively, for the above projects. Donors have imposed a tag of bank privatization with these loans. A lion’s share of this project money is ready to be spent as consultancy fee. According to ERD, more than 15 to 20 percent money had always been spent for consultants.

Some of the conditions commonly implemented are:

• Cutting social expenditures, also known as austerity;
• Implementing user fees in basic services such as education and health;
• Focusing economic output on direct export and resource extraction;
• Devaluation of overvalued currencies;
• Trade liberalization, or lifting import and export restrictions;
• Increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets);
• Balancing budgets and not overspending;
• Removing price controls and state subsidies;
• Privatization, or divestiture of all or part of state-owned enterprises; and
• Enhancing the rights of foreign investors vis-a-vis national laws.

Conclusion

Aid programmes are in need of restructuring in order to be more effective. A good account keeping, effective administration and determining the exact volume of loan and aid, and coordination among the donors are the measures to be adapted to this end. Most importantly, donors need to realize that they have moral obligations to help poor nations, but have no right to attach conditions to the aid that they provide.

The people demands honesty and transparency, i.e., donors and government should provide the following data for every project funded: the percentage of project funds which are believed to have been lost due to corruption at different levels, a breakdown of which groups are the immediate recipients of the funds (e.g. donor country citizens, local consultants, different income groups in Bangladesh, an independently conducted benefit incidence analysis giving a breakdown of who are the ultimate beneficiaries of the project, a clear statement of the specific conditionalities for the project, a signed declaration stating whether disbursement of the project funds may be used as leverage for other concessions or favours from the Government of Bangladesh and others.

Therefore, for aid to be effective, no conditions are acceptable at all - be it in aid, loans or grants. As committed, discussion in parliament on overseas assistance is necessary for public participation. Non-interventions of the IMF and WB in the allocation of financial and technical assistance, cancellation of PRSP, domestic resource mobilization and preparation of a central plan to make the donor agencies and government accountable to be accountable to the people are the prerequisites to ensure aid effectiveness.