Case for overcoming aid-dependence

A western diplomat who was based in Dhaka until recently is reported to have said that Bangladesh can now afford to free itself from aid-dependence. Many people believe that there are strong elements of truth in the statement. If one analyses the budget adopted for the current year, one finds that foreign grants and net loans make some Taka 10,500 crore in the Taka-87,137 crore total outlay, or roughly little more than one-eighth of the total budget. While the amount is not very large, it is also not insignificant. But knowledgeable people believe that through efficient revenue generation by checking duty and tax evasion more than this amount can be added to the national exchequer every year to minimise the requirement of foreign loan.

The flow of foreign aid has been consistently coming down for the last one decade and a half. Changes in the geopolitical situation since the collapse of the Soviet Union has led to shift in preferences of bilateral donors in respect of disbursement of their grants and loans. The quality of the grants and loans that are coming now are again often open to question - because donor preferences sometimes do not reflect national preferences and utilisation of donor money is also not under strict control of the audit and accounts departments. While some donor-aided projects yield good results, some others do not. Informed sources say that managers of the economy sometimes go for aid and grants and even loans without doing adequate cost-benefit analysis.

There are thus allegations of widespread corruption in the implementation of foreign-funded projects.

Foreign loans are not all unmixed blessings, because they have to be repaid with interests the rates of which are often quite high. Foreign debt servicing again is increasingly becoming a burden on the economy. This year Taka 4,098 crore has been earmarked for foreign debt servicing and this will be paid in foreign currency. Last year Taka 3,762 crore was earmarked for foreign debt servicing, according to official figures.

Highly placed sources believe that Bangladesh would be able to do without foreign aid if wastages in different sectors of the economy can be avoided or minimised. Dependence on indigenous resources would help reduce extravagant spending and also corruption. There thus appears to be a good case for managers of the economy to give serious thoughts on overcoming dependence on external aid.