JBS Vol 12. Num 1. 2010 - Aid, Debt, and Development in Bangladesh: Synergies or Contradictions

This paper examines past and future aid allocations to Bangladesh and her debt sustainability, paying special attention to recent international debt relief initiatives and the possible fast-tracking of Bangladesh’s poverty reduction strategy to achieve the Millennium Development Goals (MDGs). It shows that aid allocations as well as the donors’ influence increased sharply during the 1970s, leading to criticism of aid in Bangladesh that largely remains today even though aid allocations to Bangladesh decreased in relative terms at least since 1987. Among countries with similar income per capita levels, Bangladesh currently receives the second lowest amount of aid per capita amounting to $9. This is about one fifth of what comparable African countries receive in terms of per capita aid. While lower levels of aid imply lower external debt levels, as aid has mostly been provided via external loans, Bangladesh also substituted external borrowing with domestic borrowing and is therefore today one of the most indebted low-income countries today in terms of public debt service to government revenues.