The Effectiveness of Foreign Aid in Bangladesh

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SEATTLE — Located in South Asia, Bangladesh is a fairly young nation, as it achieved independence in 1971. It is also one of the poorest and most densely populated countries in the world. The country faces multiple challenges varying from extreme poverty, barriers to education, inadequate healthcare and corruption. Additionally, frequent droughts and floods plague the country.

As a result, foreign aid is crucial in the development of many sectors in Bangladesh. However, the effectiveness of foreign aid in Bangladesh has been contested many times over the years. People are usually skeptical about whether the aid reaches its rightful recipients. However, several recent studies and surveys have found that overall, foreign aid positively impacts the development of Bangladesh.

Foreign aid in Bangladesh is primarily used to reduce poverty. Hence, the effectiveness of foreign aid in Bangladesh must be measured in terms of improvement of this issue. While there are around 64 million people still below the international poverty line of $1.25 a day, the country has seen a notable drop of poverty by 19 percent in both urban and rural areas in the last decade and a half. In fact, the decline in extreme poverty rates has been steady over the last few years. For instance, in 2005, the poverty headcount ratio at $1.90 a day was at 24.5 percent, whereas in 2010, the number dropped to 18.5 percent.

This decline in poverty rates can be linked to the foreign aid Bangladesh has received over the years. For instance, according to the World Bank, the Bangladesh economy has grown remarkably over the past decade at nearly 6 percent per year, “despite frequent natural disasters and the fuel, food price and global financial crises.” In the meantime, poverty was reduced by nearly one-third. Life expectancy, literacy and per capita food production have increased significantly as well.

This growth has been possible for the country partly due to the foreign aid it has been receiving from the International Development Association (IDA) since 1972. Altogether, as of 2013, the IDA had provided $16 billion, accounting for more than one-quarter of all foreign aid to Bangladesh. The aid was given in support of policy reforms and investment projects, and more than $12.5 billion of the aid has been spent on health, education, rural infrastructure and policy dialogues that have contributed towards economic growth in the country.

The effectiveness of foreign aid in Bangladesh can also be noted in the social arena. For example, due to foreign aid that helped increase female participation in school and facilitate health and family planning education, the age of marriage and birth of the first child has been delayed. Additionally, a recent Millennium Development Goal assessment for Bangladesh found that support for rural infrastructure seems positively correlated with health and education results, in that better roads improve access to schools and healthcare clinics. In fact, Bangladesh has seen a notable improvement in girls’ education, with 98 percent of girls enrolled in primary school today. This shows that foreign aid investments in one sector can boost improvement in other sectors.

In short, the effectiveness of foreign aid in Bangladesh is promising. However, the country still needs different entities and programs in order to ensure that the foreign aid it receives continues to be properly used. In order to help the country in its goal to better manage foreign aid, the UNDP has launched the Aid Effectiveness project.

The main goal of the project is to “increase effectiveness, transparency, and accountability in the allocation, management and use of foreign assistance by strengthening national aid management capacities and systems.” Among its other accomplishments, the project has supported the Economic Relations Division in developing a homegrown online aid portal called Bangladesh Aid Information Management System that will help the country track and manage foreign aid flows. Bangladesh is one of the few countries that have a homegrown system.

The improvements in key sectors such as education, the economy and healthcare demonstrate that foreign aid is effective in Bangladesh. Projects such as the Aid Effectiveness Project that improve the management of foreign aid make it seem more promising that the aid will continue to be used efficiently and properly.

– Mehruba Chowdhury

Photo: Flickr

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