Foreign Aid: A Review

Annesha Zeheen

Introduction
When a new child comes to your

family, All of you are happy, we want to present her/him something But the child is not happy, because S/he comes with a debt burden of USD156 (Tk. 12500) A burden that makes his/her future dark.

Receipts of Foreign Aid (USD mio): History

Steps to Foreign Aid

Opening Pipeline
Pledges Commitment Disbursement Closing Pipeline

There is always gap between Commitment and Disbursement

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Commitment Disbursement

FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Reasons for the Gap

Problems with donor countries
Local currency issue Less Utilization Conditionalities Other poverty stricken countries urgency

Geo-political

Types of Foreign Aid

According to Source
Bilateral Multilateral (Suppliers Credit) Explanation of the sources Characteristics of Bilateral Multilateral

Sources of Aid

Important Bilateral Donors

Types of Foreign Aid

According to Grant
Conditional Non-conditional

Loans
Concessional Non Concessional (What is grant element?)

Percentage Share of Grants to Total

90 80 70 60 50 40 30 20 10 0 Grant Loans (concessional)

Types of Foreign Aid

According to Purpose Food Aid Commodity Aid Project Aid (Budget Support)

Characteristics of Food Aid

Counterpart Funds
Weather Hazards Competitive Recipients

Food Aid: Historical

Commodity and Project Aid

Stories of Commodity Aid and

conditionalities Our preference is for Project Aid Utilization of Project Aid

500 Commodity Project

1000

1500

2000

2500

Disbursement of Commodity and Project Aid

0 1971/72 1973/74 1975/76 1977/78 1979/80 1981/82 1983/84 1985/86 1987/88 1989/90 1991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2003/04 2005/06 2007/08 2009/10 2011/12

Debt Servicing
Bangladesh has no debt crisis
Bangladesh never but once failed to service

debt. Debt and services are still at manageable level.

Debt and Debt Service

25000 20000 Debt Outstanding Total Debt Service 3000 2500 2000

15000 10000 5000

0

1500
1000 500 0
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Debt Service Ratio

Debt Service % of Exports

35 30

25
20 15 10 5 0
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Growth and Aid in Bangladesh

Study by Rehman Sobhan
When there is 1% decline in aid, domestic

resource mobilization increases by about 1 percent.