Dhaka’s dependence on foreign aid to continue

July 12th, 2008 - 12:42 pm ICT by IANS  

Dhaka, July 12 (IANS) Bangladesh will remain dependent on foreign aid to finance its development projects for at least three more years, according to both official and independent reports. Besides slow development and charges of mismanagement of development funds, the country has to face a volatile global commodity market, fuel price hike, natural calamities and climate change prospects that cause food shortages.

The recent per capita debt is $151, or more than 10,000 taka, the Equity and Justice Working Group, an NGO, said its recent study titled “Drowning with Debt or Development”.

The group has proposed the constitution of a public audit commission to ensure that the use of all official development assistance is transparent, the New Age newspaper reported Saturday.

Of every $100 that came to Bangladesh as aid, 25 percent went back to donors or lenders, 30 percent went to bureaucrats, contractors, politicians and commissioning agents, 20 percent to rural and urban elite and only 25 percent to the poor, noted rights campaigner Ahmed Swapan Mahmud said in a paper titled “Aid Conditionality and Democratic Ownership”.

Medium-term fiscal policy documents suggest the government will continue to pursue the policy of seeking external assistance for funding development projects and meeting budget deficits during the next three years.

Soaring prices of food and energy worldwide and Bangladesh’s vulnerability to climate change may also strengthen the country’s claim over international financing from lending agencies and countries, fiscal planners believe.

The government acknowledges in its policy documents that budgetary costs of contingent liabilities such as fuel subsidies and additional requirement of resources to protect vulnerable groups are likely to affect the primary budget balance adversely, forcing higher levels of borrowings and interest payment in future years.

Foreign policy analysts, economists and rights activists have strong reservations about the term ‘foreign aid’ and called for a thorough investigation to detect where the billions of dollar of overseas fund have gone since the country’s independence.

“Despite tall talks of lessening aid dependency, we have never had a government which pursued policy of self-reliance with ideology, commitment and necessary programmes,” Akmal Hossain, a foreign policy analyst, told the New Age.

Hossain considers aid as a misnomer in view of conditional lending and said Bangladesh should be entitled to external assistance “as a matter of right” and as reparation to damage caused by past colonial rule and climate change effects.

“Although overall levels of debt and debt servicing are low, interest payments still pose a substantial burden on the budget as it shows an increasing trend,” says the budget framework for 2008-09 to 2010-11 in a chapter on “Deficit Financing and Debt Management”.

Finance officials say they have made the aid and other projections on the basis of a number of considerations such as global food and energy price hikes, climate change and environmental concerns, the government’s commitment to poverty reduction and human development, including women’s advancement in society, in line with the UN Millennium Development Goals.

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