JBS Vol 20. Num 1. 2018 - Concessional Financing for Development in Bangladesh

On July 1, 2015, the World Bank re-classified Bangladesh as a lower-middle income country. Hence, Bangladesh is expected to graduate from the World Bank’s International Development Association (IDA) in the next few years and will then lose access to concessional financing from IDA and subsequently from other donors as well. This article examines the impact of this loss to concessional financing on Bangladesh to finance development, especially related to poverty reduction and social sector development. Following a brief review of the aid literature, it reviews the evolution of concessional aid to Bangladesh. The analysis moves then to a forward-looking impact assessment of losing access to concessional aid. The article also examines how well Bangladesh is prepared to replace foreign aid with domestic financing. The findings provide recommendations to donors and the Government of Bangladesh.