Mukti

Bangladesh’s aid dependence

Posted in development, economics, macro by jrahman on November 13, 2012

How often have you heard or read that Bangladesh is highly dependent on foreign aid?  Well, next time you read or hear that, remember this piece.

Over the fold are two charts that show that Bangladesh is not dependent on aid, and anyone who says that without qualifying it with something else has no idea what they are talking about.

This first chart shows foreign aid as a percentage of GDP.  Just for comparison, I’ve also plotted remittance as a share of GDP.  Two decades ago, foreign aid used to be about 6% of GDP, now it’s less than 2%.  Meanwhile, remittance jumped from about 2.5% of GDP to about 11% of GDP.  If remittances stopped flowing tomorrow, the economy would simply crash.  If foreign aid stopped, GDP growth would probably slow from 6% to 4% — an unwelcome development, but hardly catastrophic.

 

The next chart shows the ratio of project grants to development expenditure — that is, the proportion of development expenditure financed by foreign aid.  Under the current government, project grants have averaged  about 40 billion taka a year.  The government has spent about 360 billion taka a year on development expenditure.  Again, if foreign grants stopped, it would have an impact, but the impact would not be as big as one might think.

 

 

 

 

 

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5 Responses

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  1. Diganta said, on November 14, 2012 at 10:59 pm

    Could you clarify what is an “aid”? Is it the interest free money given with a promise that nothing has to be returned? Well, if that is the case, then “aid” might have been replaced by cheap loans.
    Also, you might see Bangladesh is clubbed with lowest possible aid category in wiki aid map.

    • Diganta said, on November 14, 2012 at 11:02 pm

      You can ignore the first part. I read the definition of aid and it includes cheap loans and even conditional money transferred!

  2. fugstar said, on November 14, 2012 at 11:05 pm

    thats an economic argument of sorts. BNP were saying that kind of this last but one government ago.

    If it were not for OECD countries plying the technocrat and NGO caste with money, Bangladesh would transform into something else, perhaps greater in the longer run, something more real and calibrated. Perhaps we might bruise eachother in the negotiation.

    The political status quo depends on a depoliticised Developmentia, no incentive to think and be anew, rehash the same old delusion.

    In state Bangladesh2, revenue collection and trust might be better linked. however Bangladesh2 is difficult to see politically reach as so much talent is lost in developmentia.

    The Remittance-trump-Aid argument becomes more interesting if you see them as relatively equivalent: NGO labour and manual labour. And when you consider work permits as political tools.

    • jrahman said, on November 15, 2012 at 9:35 am

      We probably differ on the meaning of development. But leaving that aside, where is the evidence that the political status quo depends on ‘depoliticised developmentia’? In 2007, the NGOs/civil society/international patrons tried to alter the status quo. At that time, they were charged with depoliticisation. And the process failed. NGOs can be blamed for many things, but I am not sure the political status quo is one of them.


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