Making good use of foreign assistance
Saturday, 25 October 2008
IN the midst of a severe global financial crisis that has hit hard the rich developed countries with its adverse multi-dimensional fallouts, prospects for external aid disbursements, the bilateral one in particular, do not seem bright for Bangladesh and other low income countries (LICs) during this fiscal year. Notwithstanding not much of encouraging signs about incremental flows thereof in the past several years matching the promises and pledges of the rich nations, such assistance has otherwise been playing an important role for the LICs to meet their shortfalls in resources for investment and other related expenditures.
As far as Bangladesh is concerned here, its tax base is still very narrow. This is a big impediment to mobilising internal resources for undertaking developmental and other activities. For this reason, foreign aid has been traditionally looked at as a way of filling resource gaps and especially for building infrastructures in support of domestic entrepreneurial activities in Bangladesh like in other developing countries. Whether such countries could ever progress so far and fast in building related facilities on their own, is highly doubtful. Thus, these countries can be considered as having gained by using such aid to strengthen their economies although the same involves in many cases debt servicing where related external funds have been in the nature of loans, not grants.
Now that the prospects of good foreign aid flow in the near future are coming under a cloud from the on-going financial and economic troubles in the developed countries, there are worries over the future of external aid-supported developmental activities. On their part, the developed countries have been offering their surpluses as developmental assistance to the developing ones. But the surpluses, mainly their tax-payers' money, may be inadequate in the near term or even the longer term if the current economic crises that have gripped the developed countries, continue further. Governments in the developed economies are increasingly using public money to plug their various holes. In this situation, it should be obvious that largesse would not be created in such circumstances to be given away generously as aid to poor countries.
Thus, there is a real concern about aid resources dwindling down substantially. Bangladesh will have to compete harder and take on more liabilities for scarce aid resources. This would require it to be more efficient for the timely, proper and full utilisation of aid resources for obtaining the optimum benefits for its economy. The situation is all the more disconcerting here. This is because of the possibility of remittance earnings from the overseas Bangladeshis ebbing in times of wider economic turmoil in different parts of the world and also of the export receipts facing some jolts under the unfolding global trade situation. Under such circumstances, the country's balance-of-payments situation will particularly call for critical reviews and monitoring in a timely manner until the global economic turmoil is over.
As far as external aid is concerned, the challenge for Bangladesh will be devising policies immediately to make the best use of it. Aid from multilateral sources such as the Word Bank (WB) and the Asian Development Bank (ADB) may not be much decreased for this country in the short term. But here too, none can be certain about the developments in the near future. However, chances are strong for bilateral aid flow from different donor countries dropping sharply under the present conditions. That makes it imperative for Bangladesh to lose no time in being proactive in ensuring the best possible flow of the available aid, whatever the same is, from bilateral sources under the changed conditions and to take most effective actions to utilise the same in the best possible manner by gearing up activities relating to execution of externally-aided development projects and programmes. A lot more has to be done in order to stay competitive to justify a reasonable flow of external aid to the country under the present grim global financial conditions. The justification will depend on fast preparatory work to get the aid resources and to use it equally as fast to satisfy the capital donors. The government has to take this message seriously and act accordingly.
As far as Bangladesh is concerned here, its tax base is still very narrow. This is a big impediment to mobilising internal resources for undertaking developmental and other activities. For this reason, foreign aid has been traditionally looked at as a way of filling resource gaps and especially for building infrastructures in support of domestic entrepreneurial activities in Bangladesh like in other developing countries. Whether such countries could ever progress so far and fast in building related facilities on their own, is highly doubtful. Thus, these countries can be considered as having gained by using such aid to strengthen their economies although the same involves in many cases debt servicing where related external funds have been in the nature of loans, not grants.
Now that the prospects of good foreign aid flow in the near future are coming under a cloud from the on-going financial and economic troubles in the developed countries, there are worries over the future of external aid-supported developmental activities. On their part, the developed countries have been offering their surpluses as developmental assistance to the developing ones. But the surpluses, mainly their tax-payers' money, may be inadequate in the near term or even the longer term if the current economic crises that have gripped the developed countries, continue further. Governments in the developed economies are increasingly using public money to plug their various holes. In this situation, it should be obvious that largesse would not be created in such circumstances to be given away generously as aid to poor countries.
Thus, there is a real concern about aid resources dwindling down substantially. Bangladesh will have to compete harder and take on more liabilities for scarce aid resources. This would require it to be more efficient for the timely, proper and full utilisation of aid resources for obtaining the optimum benefits for its economy. The situation is all the more disconcerting here. This is because of the possibility of remittance earnings from the overseas Bangladeshis ebbing in times of wider economic turmoil in different parts of the world and also of the export receipts facing some jolts under the unfolding global trade situation. Under such circumstances, the country's balance-of-payments situation will particularly call for critical reviews and monitoring in a timely manner until the global economic turmoil is over.
As far as external aid is concerned, the challenge for Bangladesh will be devising policies immediately to make the best use of it. Aid from multilateral sources such as the Word Bank (WB) and the Asian Development Bank (ADB) may not be much decreased for this country in the short term. But here too, none can be certain about the developments in the near future. However, chances are strong for bilateral aid flow from different donor countries dropping sharply under the present conditions. That makes it imperative for Bangladesh to lose no time in being proactive in ensuring the best possible flow of the available aid, whatever the same is, from bilateral sources under the changed conditions and to take most effective actions to utilise the same in the best possible manner by gearing up activities relating to execution of externally-aided development projects and programmes. A lot more has to be done in order to stay competitive to justify a reasonable flow of external aid to the country under the present grim global financial conditions. The justification will depend on fast preparatory work to get the aid resources and to use it equally as fast to satisfy the capital donors. The government has to take this message seriously and act accordingly.