Introduction

The concept of foreign aid is a common phenomenon all over world that is now widely used and

accepted, therefore, is one that encompasses all official grants and concessional loans, in

currency or in kind that are broadly aimed at transferring resources from developed to less

developed nation on development or income distribution grounds. Unfortunately, there often is a

thin line separating purely development grants and loans from sources ultimately motivated by

security or commercial interests. However, The role and effects of foreign aid in the

economic development of developing countries have been and are controversial issues. The

central purpose of this paper is to undertake an inquiry into the effectiveness of the foreign aid

inflow into the economy of Bangladesh, given that the country is largely dependent on foreign

aid for its development activities. Although the dependence of Bangladesh on foreign aid has

eased to some extent recently, the flow of aid has remained a critical factor in sustaining its

development activities, and donors are thoroughly integrated into the decision-making process of

the country. Much of the article on foreign aid suggests that under such circumstances, donors

are capable of influencing the development endeavours of the country in such a way that it seems

decisive for the country’s economic future. This paper attempts experience of Bangladesh a

majority aid recipient in term of the effectiveness and efficiency with which aid has been used in

the country’s effort to develop and examines the role of donors countries and the impact of

foreign aid on Bangladesh and the inability of foreign aid to lay the foundations for the country’s

solid economic growth.

What is foreign aid?

Before understanding the foreign aid we have first an attempt to define exactly what is meant by

the term "Aid".

Aid

Aid is money, equipment, or services that are provided for people, countries, or organizations

who need them but cannot provide them for themselves regular flights carrying humanitarian.

-According to Collins dictionary

Definition of foreign aid

Foreign aid refers to transfer of real resources from governments or public institutions of

the richer countries to governments of less developed countries (LDCs) in the third

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world. The flows of foreign resources can be of many types and it is important to know

the different elements. Foreign capital flows are generally divided into two broad streams

– official and private. The official capital flows are in turn subdivided into bilateral and

multilateral flows. Official bilateral flows consist of capital provided by government of

donor to government of recipient countries. Multilateral flows consist of capital flows

from multilateral organizations such as the World Bank, the United Nations, the IMF.

Both types of the official flow can take the form of grants, loans or grant-like

contributions. Grants should be considered as the most desirable type of foreign aid since

the represent a net addition to the resources available for development proposes. Some loans

are given by the international lending agencies (i. e. World Bank) at interest rate which are

lower than those in the capital markets. Where the loans are granted to the LDC’s at a

concessionary rate for very long periods, say for 40-50 years, the inflow of foreign

resources take the character of foreign aid as foreign private investment in the LDC’s are

not exactly foreign aid because of they are made on commercial terms.

Development Assistance Committee (DAC) defines foreign aid as official development

assistance (ODA) and technical aid. The term excludes military assistance.1 ODA flows must

satisfy all three of the following criteria;

- their primary objective must be developmental, thus it excludes military aid and

private investment,

- they must be concessional that is the terms and conditions of the financial

package must be softer than those available on a commercial basis. DAC defines

as

Official Development Assistance (ODA) official flows with a grant element of

greater than 25%at a 10% discount rate.

- the flows should come from governmental agencies and go to developing country

governments. Official Development Finance comprises ODA plus international flows

satisfying only the first and third criteria. Flows from voluntary agencies may also

counted as aid, but do not satisfy the third criterion.

1 Foreign aid in the Turkey context, unless otherwise specified, follows the DAC definitions.

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Economists have defined foreign aid, therefore as any flow of capital to LDC,s that meets two

criteria:

1. Its objective should be noncommercial from the point of view of the donor and

2. It should be characterized by concessional terms that is the interest rate and repayment

period for borrowed capital should be softer ( less strength) than commercial terms.

Features of foreign aid in the perspective developing countries

Unremittingly helping recipent countries buildup their self – development capacity.

Imposing no political condition respect recipent countries rights to select their won path

and model of development.

Adhering to equality, mutual benefit and common development.

Remaining realistic while striving for the best.

Keeping pace with the time and paying attention to reform and innovation.

Conditions of donors’ organization

(1)Increased government income and decreased government expenditure.

(2) Privatization.

(3)Government will be decreased bank loan interest.

(4)Government subsidies will be reduced in education, health and food sector.

(5)Open marketing.

(6) Government only maintains law and order.

Aid conditionality

According to the donors, the conditionality’s that come along the aid programmes are meant to

ensure the effective use of the aid money for the stated purposes. And these stipulations have

now grown more important than they were in any previous time, with IMF imposing two types

of policy conditions, namely quantitative and structural. Quantitative conditions are imposed at

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the macroeconomic level of the poor countries, while the structural ones are for institutional and

legislative policy reforms. All of these prove to be unfair, undemocratic, ineffective, and

inappropriate mainly because they undermine democratic accountability within countries and

deprive the poor of the access to the services (education, health, etc) at a low cost. And what is

alarming, the WB instruction to stop appointing to different vacant posts resulted in raising the

unemployment rate to 40% in Bangladesh in the year 2005. Bangladesh Government has already

started bank sector reform. The project name is “Industry Development and Bank

Modernization”. Another project also in hand is named “Central Bank Strengthening Project”.

The loan amount is estimated as 38 crore 83 lacks 90 thousand USD and 4 crore 61 lacks 30

thousand respectively, for the above projects. Donors have imposed a tag of bank privatization

with these loans. A lion’s share of this project money is ready to be spent as consultancy fee.

According to ERD, more than 15 to 20 percent money had always been spent for consultants.

Some of the conditions commonly implemented are:

Cutting social expenditures, also known as austerity;

Implementing user fees in basic services such as education and health;

Focusing economic output on direct export and resource extraction;

Devaluation of overvalued currencies;

Trade liberalization, or lifting import and export restrictions;

Increasing the stability of investment (by supplementing foreign direct investment with

the opening of domestic stock markets);

Balancing budgets and not overspending;

Removing price controls and state subsidies;

Privatization, or divestiture of all or part of state-owned enterprises; and

Enhancing the rights of foreign investors vis-a-vis national laws.

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Types of foreign Aid

Foreign aid can be classified on the basis of these categorize which is shown in below

Foreign Aid

Figure: types of foreign aid

Functionality

Functionality foreign aid can be classified into following types

Food aid

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Food Aid

Functionaly Debt burden Perchese obligation Time Frame

Grants/Transfer

Soft Loan

Monetary HelpTechnical

Assistence

Commodity Aid

Project Aid

Hard Loan Short Time

Untied Loan

Tied Loan

Long Time

Medium Time

It is given by the donors to the 3rd world developing countries in their crisis situation. Like flood,

disaster, cyclone etc.

Commodity aid

Donor countries agencies are based on their circumstantial need. This commodities are the

surplus of donor countries. Food, Rice, Wheat, Medicine, Machineries etc. Given as

commodities

Project aid

Donor countries give project aid to the developing countries based on different types of

development project. They provide machinery row materials as project aid. It is of two types.

Technical assistance

Various technology and technical expertise are given under this project which creates long term

technology dependency of third world countries on donors.

Monetary help

Direct money is given here to implement the project.

On the basis of debt burden

On the basis of dept burden foreign aid can be classified as.

Hard loan

It is rigidly tied on conditional aid. The recipient country has to pay a higher at commercial rate

within a stipulated time frame in case of hard loan.

Soft loan

Normal interest at the rate of 2% or less than that in case of soft loan financing institution.

Transfer payment

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It is unconditional aid. Grants means low interest credit provided by the donors. We always

accept these types of grants. It is another name is transfer payment. Here the recipient not to

return the credit to the donors.

On the basis of purchase obligation

On the basis of purchase obligation foreign aid can be classified as

Tied aid

Here the recipient countries are bound to buy or procure the necessary materials related to the

project prom donor countries.

Untied loan

Here the recipient is free to procure the purchase from any country at a competitive price.

On the basis of time

On the basis of time foreign aid can be classified as-

Short term

Medium term

Long term

Patterns of foreign aid

The process of foreign aid can be done bi-laterally or multi-laterally through specialized

international agencies.

Bi-lateral aid

This is direct country to country aid on the basis of clear cut and written agreement. The source

of this aid is one country and agreement is done between donor and recipient. As a result the

donor can take any political interest whatever have been achieved.

Example

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Bangladesh government makes treaty with china government. Here china is bi-lateral donor. Bi-

lateral agencies are US-Aid, DANIDA, CIDA.

Multi-lateral aid

This consists of aid channeled through an international agency like World Bank. Many countries

involve here. These countries provide aid to the recipient with some condition through different

international agencies like WB, IMF, ADB, OPEC, OCED, EEC etc. The funds of multi-lateral

donors are used to alleviate poverty. Normal interest at the rate of 2% or less than that in case of

soft loan financing institution.

Transfer payment

It is unconditional aid. Grants means low interest credit provided by the donors. We always

accept these types of grants. It is another name is transfer payment. Here the recipient not to

return the credit to the donor.

Who Gives Aid?

Historically most aid has been given as bilateral assistance directly from one country to

another. Donors also provide aid indirectly as multilateral assistance, which pools resources

together from many donors. The major multilateral institutions include the World Bank; the

International Monetary Fund; the African, Asian, and Inter-American Development Banks, and

various United Nations agencies such as the United Nations Development Programme.

Who Receives Aid?

150 countries and territories around the world received aid in 2004. Table 1 shows the largest ten

recipients, each of which received more than $1.4 billion. Iraq and Afghanistan together received

nearly $7 billion. These amounts are unprecedented for two countries and account for about 7.5

percent of the global total. The amounts provided to other countries shown in the table are

historically more typical for large recipients.

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Major Aid Recipients, 2004 Total ODA (millions US$)

1. Iraq 4,658

2. Afghanistan 2,190

3. Viet Nam 1,830

4. Ethiopia 1,823

5. Congo, Dem. Rep. 1,815

6. Tanzania 1,746

7. China 1,661

8. Egypt 1,458

9. Pakistan 1,421

10. Bangladesh 1,404

(Source: OECD 2005 Development Cooperation Report)

Why do Donors Give Aid?

Donors have a variety of motivations for providing aid, only some of which are directly related

to economic development. There is little question that foreign policy and political relationships

are the most important determinants of aid flows. During the Cold War, both the United States

and the Soviet Union used aid to vie for the support of developing countries with little regard as

to whether the aid actually was used to support development. The two largest recipients of U.S.

foreign aid (including both OA and ODA) from 1980 until very recently were Israel and Egypt,

as the U.S. provided financial support to back the 1979 Camp David peace agreement. Beginning

in 2002 Iraq became the largest aid recipient in the world, and its reconstruction is likely to

become among the largest single foreign aid program ever recorded. Taiwan and China have

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used aid (among other policy tools) to try to gain support and recognition for their governments

from countries around the world. Many donors provide significant aid to their former colonies as

a means of retaining some political influence (Alesina and Dollar, 2000).

Many people see the main rationale for aid as fighting poverty, and although this is less

important than political considerations in donor allocation decisions, it still plays an important

role. Donors generally provide their most concessional aid to the poorest countries, and some aid

programs are designed explicitly with this objective in mind. For example, the World Bank's

concessional financing arm – the International Development Association (IDA) -- has an income

ceiling ($965 per capita in 2004). Once countries reach that ceiling, in most cases they

"graduate" from IDA to non-concessional IBRD loans. Other programs have less formal

graduation rules, but still tend to provide less aid as incomes grow.

Country size matters as well. Large countries, such as Bangladesh, Indonesia, Nigeria,

and Pakistan receive relatively small amounts of aid on a per capita basis, even though hundreds

of millions of people live in poverty in these countries. By contrast, some small countries receive

very large amounts. For political reasons, donors generally want to influence as many countries

as possible, which tends to lead to a disproportionate amount of aid going to small countries.

Donor country government give and primarily because it is in their political strategic or

economic self-interest to do so. Some development assistance may be motivated by moral and

humanitarian desires to assist the less future. Example: Emergency food relief programs. But

there is no historical evidence to suggest that over longer periods of time, donor nations assist

others without expecting some corresponding benefits (political, economic, military etc.) in

return. We can therefore characterize the foreign aid motivations of donor’s nations into two

broad, but often interrelated, categories political and economic.

Donor Motives for Giving Foreign Aid

1. Political motivations

2. Economic motivation: Two Gap-models and other Criteria

3. Foreign exchange Constraints

4. Growth and Savings

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5. Technical Assistance

6. Absorptive Capacity

7. Economic Motivations and self-interest

Role of Foreign Aid

In the perspective of the development doctrine during the 1950s

1. Aggregate large scale resource transfer

2. Bias towards industrialization and large project

3. Belief in government capacity to use aid efficiently and to plan.

In the perspective of the development doctrine during the 1960s

1. two-gap model provides allocation criteria: Investment saving s or import-export gaps may be

binding

2. Contribution to ‘balanced growth’

3. Beginning of sector (e.g. Agriculture and education) and program lending

4. Enhanced role of technical assistance to help build human capital

Besides these-

1. Economic development

2. Political motivation

3. Technical assistance

4. Reduce poverty

5. Create employment opportunity

6. Socio-cultural development

7. Reduce investment gap

8. Reduce export-import gap

9. Reduce foreign exchange

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10. Reduce international trade gap

11. Capital formulation

12. Industrialization

13. Reduce inflation

14. Environmental production

The role of Multinational Corporation and private foreign direct investment

Few developments have played as critical a role in the extraordinary growth of international

development trade and capital flows during the past few decades as the rise of the multinational

corporation (MNC).An MNC is most simply defined as corporation or enterprise that conducts

and controls productive activities in more than one country. These huge firms, mostly from

North America, Europe and Japan (but also increasingly from newly industrialize countries like

South Korea, Taiwan and Brazil) present a unique opportunity but many pose serious problems

for the many developing countries in they operates.

The growth of private foreign direct investment (FDI) in the developing world was extremely

rapid during the first decades. It rose from an annual rate of $2.4 billion in 1962 to $11 billion

in1980 and $35 billion in 1990 before surging to over $185 billion in 1999. Almost 60% of this

goes to Asia.

We must recognize that multinational corporations are not in the development business; their

ejective is to maximize their return on capital. This is way over 90% of global FDI goes to other

industrial countries and the fasted growing LDC,s. MNC,s seek out the best profit opportunities

and are largely unconcerned with issues such as poverty, inequality and unemployment

alleviation.

Multinational Corporation: Size, Pattern and trends

Two central characteristics of multinational corporations are their large size and that fact their

worldwide operations and activities tend to be centrally controlled by parent companies. They

are the major force in the rapid globalization of world trade. The 350 large corporations now

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control more than 49% oh that trade and dominate the production and sales of many goods from

developing countries (e.g., tobacco, electronics, footwear and clothing).

Most poorer countries are simply dwarfed in size by any of the, major MNCs. This large scale of

operation, combined with limited competition, conveys great bargaining power. Ownership of

the large MNCs is overwhelmingly concentrated in the developed countries. The developing

countries tend to believe rightly or wrongly, that these corporations operate with the blessing of

their home government and national resources at their disposal in the event of significant dispute.

Historically, multinational corporations , especially those operating the developing nation,

focused on extractive and primary industries, mainly petroleum, nonfuel minerals and plantation

activities where a few “agribusiness” MNCs became involved in export-oriented agriculture and

local food processing.

Private Foreign Investment : Some Pros and Cons for Development

Few areas in the economic development arouse so much controversy and are subject to such

varying interpretation as the issue of the benefits and costs of private foreign investment.

The controversy over the role and impact of foreign private investment often has its basis a

fundamental disagreement about the nature, style and character of desirable development

process. The basic arguments for and against the development impact foreign investment in the

context of the type of development it tends to foster can be summarized.

Traditional Economic Arguments in Support of Private Investment: Filling savings,

foreign-exchange, revenue and management gaps

The pro foreign investment arguments grow largely out of the traditional new classical and new

growth theory analysis of the determinates of economic growth. Foreign private investment (as

well as foreign aid) is typically seen as way of filling in the gaps between the domestically

available supplies of savings, foreign exchange, government revenue and human capital skills

and desired level of these resources necessary to achieve growth and development targets. For

example- of the “savings-investment gape” analysis recall that the basic Harrod Domar growth

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model postulates a direct relationship between a countries rate of net savings, s and its rate of

output growth, g, via

The equation g=s/k

Where,

g=rate of output growth

s= rate of net savings

k= is the national capital output ratio.

Role and impact of Multinational Corporation in Developing countries

1. International capital movements(income flows and balance of payments)

2. Displacement of indigenous production

3. Extent of technology transfer

4. Appropriateness of technology transfer

5. Patterns of corruption

6. Social structure and stratification

7. Income distribution and dualistic development

Impact of foreign aid in developing country like Bangladesh

Since independence in 1971, Bangladesh has been striving hard for the development of the

country and for the economic emancipation of millions of poor people. In this endeavour, the

development partners have been playing an important role by extending support and cooperation

in different forms. These assistances include food aid, commodity aid, project aid and technical

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assistance. The life time of Bangladesh is dependent on foreign aid provided by international

agencies.

According to Rahman Sobhan, “Bangladeshi policy maker has continue to wait upon the

decision of Washington, London, Tokio, Barn and Paris before they formulate their annual

development budget, announce and important policy formulate a good policy.

This comment will be clear to us through the following diagram

Planning Duration Contribution of FA%

1st year plan 1973-78 40%

2nd year plan 1978-80 64%

2nd 5 year plan 1980-85 56%

3rd 5 year plan 1985-90 54.47%

4th 5 year plan 1990-95 52%

5th 5 year plan 1997-2002 22%

(Source: The crisis of external dependency published by Rahman Sobhan)

(1)Create more dependency

Bangladesh is inheritably dependent on foreign aid for the needs and development of the

country. After 1975 the dependency syndrome of the economic system of Bangladesh has gained

a new dimension. She reoriented her economic to the western capitalist system without least

attempt to build up and independent and self-sufficient economy. Now days a new born baby

internal debt of 150 U$.

Selim jahan said, “It the donor countries give one taka they take 1.76 taka from the recipient

countries.” At the present time Bangladesh takes some assistance which creates more

dependency.

Types From 1999-2000 U$ million

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Food aid 402.8 million

Commodity aid 687.9 million

Project aid 347.2 million

(Source: The donor consurtion-2001)

(2)Weaken public sector accountability

Internal resources utilization and mobilization are the two key factors of development. But

Bangladesh government never depends on the tax and revenue from the general people. Because

government thought that if the taxes are collected roundly the people will oppose the next

election. So the government depends on foreign aid instead of tax and revenue. So, primarily

he/she is accountable to the donors not to the general people.

(3) Undermine institutional quality

Donors give us project aid and other various aid to establish rural institution, which help the

donors rather than domestic people.

For example: Various donors-aided N.G.Os are working in the rural area in the name of

development. But they serve the donors interest in plan and their functions aver-lop with local

government institutional quality.

(4) Increased political influence

Former U.S.A president Nixon said, “We should keep in mind that the objective of foreign aid is

not help others but it is an attempt to help ourselves.”

Providing different conditions the donors try to influence our policy making process we depend

on geo-political forces and external forces.

(5)Discourage private sector investment and national resource mobilization

Foreign aid is given only the government for subsidizing the public sector enterprises not to the

private investors. On the other hand, food aid acts as the substitute domestic production which

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discourages the internal resource mobilization and makes us dependent on foreign aid. Besides

foreign aid breaks down our economic structure which is quickly ineffective for ensuring good

governance.

(6)Export-import gap

Foreign aid leads to import based country 60% of our foreign import lie in foreign aid. So, our

domestic resources remain unexplored and unused and government cannot serve the customer

(general people).

It is shown as-

Duration Export income Import expenditure

1998-99 5334 million $ 8018 million $

1999-2000 5752million $ 8403 million $

2000-2001 4781million $ 5776 million $

(Source: World development report-2001)

(7)Poor become poorer

Aid is given in such way which will help only o the elite class. As the government capacity of

government is broken down by donors through hiring efficient civil servants from Bangladesh

and imposing condition to import expertise from donor countries as well as purchase obligation

our government cannot properly use these foreign aid so, poor become more poor. It is shown as

–

Areas Rate of poverty

Local/rural 39.8%

Urban 14.3%

National 35.6%

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World Bank and IMF presence in Bangladesh

Bangladesh, the third largest debtor country of the World Bank (WB), has been provided with

credit assistance totaling nearly $20 billion by the International Development Assitance (IDA)

since 1973, the year the country joined the WB. The WB provides most of its loans for a specific

project or for one which is based on one or another particular strategic policy such as Structural

Adjustment Programmes or SAPs the main policies of which have been:

Massive privatization of industries and major utilities, e.g., water, electricity, gas,

railway, ports, etc.;

The blanket application of the ‘free market policy’ which actually means a unilateral

canceling of all tariff and non-tariff restrictions by the country on the receiving end of the

loans;

Withdrawal of all types of subsidies for the sake of ‘efficiency’; and

Drastic cuts in government spending in order to ensure so-called ‘macro-stability’ of the

economy.

In the mid-eighties, when Bangladesh was under a military regime, the SAPs started to be

introduced, resulting in the disintegration of a number of industries including Adamji Jute Mills.

Bangladesh Petroleum Corporation (BPC) has still been under tremendous pressure of being

privatized, and so has been the Chittagong Port, the purpose of all this being putting the oil and

gas sector of the country at the mercy of the large multinational companies.

The loans provided by the IMF, like those of WB, are accompanied by ‘conditions’ that often go

against the debtor countries in question. In most of the cases, the conditions are not relevant to

the causes or the management of the crisis that the countries face, with many of these conditions

(privatization, trade liberalization, increasing bank interest rate as well as the price of fuel and

electricity, tariff cuts and producing PRSPs, etc.) coming in conditionality package under the

pressure of major IMF shareholders for their own interests. Between 1995 and 2000, IMF

attached with each of its loans sanctioned, on an average, 41 conditions, which they reduced as a

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result of tremendous protests coming from different countries concerned. In 2002, IMF released

a guideline of its conditionality policy, which was the modified version of its imposed

conditions. Though the new guideline was dubbed ‘positive’ by IMF, different countries have

been subjected to these conditions– particularly while availing Poverty Reduction and Growth

facilities (PRGF) loans– that they view as ‘severe’ and ‘excessive’.

In June, 2003, Bangladesh has been provided by IMF with a loan worth US$501,500,000 which

was to be released in three years in three installments, some of the conditions being the

renovation of government Banks, privatization of Rupali Bank, reducing the interest rate of

Sanchay Patras (savings scheme), raising the price of gas and oil, among others. It is the IMF

that has been imposing structural adjustment programmes on different countries; and in the

macro economic level Bangladesh has got the IMF as its main consultant the directives of which

played a major role in fixing the national salary structure (article 4 mission). This raised the

exchange rates of the dollar against taka, led to increases in the price of gas, fuel, and electricity

resulting in the tragedy of Kansat in Chanpainababganj, Rajshahi that claimed this year the lives

of 19 farmers who, along with many others, protested against the price hike.

The effects of Aid

The issue of the economic effects of aid,

Especially public aid like that of the effects of private foreign investment is fraught with

disagreement.

Aid has indeed promoted growth and structural transformation in many LDCs.

Aid does not promote faster growth but may in fact retard it by substituting for rather

than supplementing domestic savings investment and by exacerbating LDC balance of

payments deficits as a result of rising debt repayment obligations and the liking aid to

donor country exports.

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Officially aid is further criticized for focusing on and stimulating the growth of the

modern sector, thereby increasing the gap in living standards between the rich and the

poor in developing countries.

Foreign aid has been a positive fore for anti-development in the sense that it both retards

growth through reduce savings and worsens income inequalities.

Foreign aid has been a failure because it has been largely appropriated by corrupt

bureaucrats, has stifled initiatives and has generally engendered a welfare mentality on

the part of the recipient nations.

Quite apart from these criticisms, donor countries over the past two decades have grown

increasingly disenchanted with official foreign aid as domestic issues such as

unemployment, government deficits and balance of payment problems gained by priority

over international politics.

However, in recent years there has been an increasing willingness on the part of the public to

donate development assistance via NGOs

Recommendation

(1)Aid dependent should be reduced gradually.

(2) Export-import gap should de decreased and foreign aid based should be eliminated.

(3) Domestic resources should be utilized properly.

(4) Encourage private sector investment and create favourable environment for them.

(5)Maintenance law and order and bureaucratic accountability should be ensured through

parliament.

(6) The chapter of corruption should be closed and create employment opportunities.

(7)Government income should be increased and expenditure should be decreased.

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Conclusion

Aid programmes are in need of restructuring in order to be more effective. A good account

keeping, effective administration and determining the exact volume of loan and aid, and

coordination among the donors are the measures to be adapted to this end. Most importantly,

donors need to realize that they have moral obligations to help poor nations, but have no right to

attach conditions to the aid that they provide. The people demands honesty and transparency,

i.e., donors and government should provide the following data for every project funded: the

percentage of project funds which are believed to have been lost due to corruption at different

levels, a breakdown of which groups are the immediate recipients of the funds (e.g. donor

country citizens, local consultants, different income groups in Bangladesh, an independently

conducted benefit incidence analysis giving a breakdown of who are the ultimate beneficiaries of

the project, a clear statement of the specific conditionality’s for the project, a signed declaration

stating whether disbursement of the project funds may be used as leverage for other concessions

or favours from the Government of Bangladesh and others. Therefore, for aid to be effective no

conditions are acceptable at all - be it in aid, loans or grants. As committed, discussion in

parliament on overseas assistance is necessary for public participation. Non-interventions of the

IMF and WB in the allocation of financial and technical assistance, cancellation of PRSP,

domestic resource mobilization and preparation of a central plan to make the donor agencies and

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government accountable to be accountable to the people are the prerequisites to ensure aid

effectiveness

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