Importance of aid in difficult times
Sunday, 13 July 2008
The caretaker government has resorted to its characteristic way of borrowing from the internal sources to make up for the revenue shortfall. In fact, this higher level of governmental borrowing from the banking system as well as the public, was noted even before the takeover by the caretaker government. The trend has only accelerated recently. Not only the government is feeling strapped for cash, the lending to the private sector could also feel a credit crunch over the medium and longer terms, if this situation persists.
Traditionally, inadequacies in internal resources to take care of governmental spending and make available sufficient resources for lending in the private sector, is met from the injections of foreign aid. Notwithstanding disclaimers to the contrary by government officials that they can do with less aid, the reality is that such aid remains a big source of support for the economy. Especially, in the current context, foreign aid can be very useful to help reduce the government's borrowing and averting an unwelcome large deficit in the budget.
But reports have it that a slowdown in aid availability could be around the corner as the donors are not convinced that the government will fulfill the conditionalities for faster disbursement of aid. But it is questionable how far the act of withholding or reduction of aid would help the people of Bangladesh, or hasten the further decline of the country's economy. The fate of foreign investments as well as recoveries of foreign loans is also crucially linked to avoiding a serious economic downturn of the country. Considering these factors and the hardships to be faced by people, the donors need to be realistic and maintain a good level of aid disbursement in these difficult times.
But more significant would be for the government to engage the donors in immediate negotiations to improve the flow of aid.
Humayun Ahmed
Pallabi, Dhaka.
Traditionally, inadequacies in internal resources to take care of governmental spending and make available sufficient resources for lending in the private sector, is met from the injections of foreign aid. Notwithstanding disclaimers to the contrary by government officials that they can do with less aid, the reality is that such aid remains a big source of support for the economy. Especially, in the current context, foreign aid can be very useful to help reduce the government's borrowing and averting an unwelcome large deficit in the budget.
But reports have it that a slowdown in aid availability could be around the corner as the donors are not convinced that the government will fulfill the conditionalities for faster disbursement of aid. But it is questionable how far the act of withholding or reduction of aid would help the people of Bangladesh, or hasten the further decline of the country's economy. The fate of foreign investments as well as recoveries of foreign loans is also crucially linked to avoiding a serious economic downturn of the country. Considering these factors and the hardships to be faced by people, the donors need to be realistic and maintain a good level of aid disbursement in these difficult times.
But more significant would be for the government to engage the donors in immediate negotiations to improve the flow of aid.
Humayun Ahmed
Pallabi, Dhaka.