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 e tent 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. "uch 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 e perience of Bangladesh a ma$ority aid recipient in term of the effectiveness and efficiency with which aid has been used in the country#s effort to develop and e amines 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 e actly what is meant by the term %Aid%. Aid Aid is money, equipment, or services that are provided for people, countries, or organi&ations who need them but cannot provide them for themselves regular flights carrying humanitarian. !According to 'ollins dictionary Definition of foreign aid
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(oreign aid refers to transfer of real resources from governments or public institutions of the richer countries to governments of less developed countries )*+'s, in the third world. The flows of foreign resources can be of many types and it is important to know the different elements. (oreign 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. .fficial bilateral flows consist of capital provided by government of donor to government of recipient countries. "ultilateral flows consist of capital flows from multilateral organi&ations such as the /orld Bank, the United 0ations, the 1"(. Both types of the official flow can take the form of grants, loans or grant!like contributions. 2rants should be considered as the most desirable type of foreign aid since the represent a net addition to the resources available for development proposes. 3ome loans are given by the international lending agencies )i. e. /orld Bank, at interest rate which are lower than those in the capital markets. /here the loans are granted to the *+'#s at a concessionary rate for very long periods, say for 45!65 years, the inflow of foreign resources take the character of foreign aid as foreign private investment in the *+'#s are not e actly foreign aid because of they are made on commercial terms.

+evelopment Assistance 'ommittee )+A', defines foreign aid as official development assistance ).+A, and technical aid. The term e cludes military assistance. 7 .+A flows must satisfy all three of the following criteria8 ! their primary ob$ective must be developmental, thus it e cludes 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. +A' defines as .fficial +evelopment Assistance ).+A, official flows with a grant element of greater than 96:at a 75: discount rate.
1

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

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! the flows should come from governmental agencies and go to developing country governments. .fficial +evelopment (inance comprises .+A plus international flows satisfying only the first and third criteria. (lows from voluntary agencies may also counted as aid, but do not satisfy the third criterion.

;conomists have defined foreign aid, therefore as any flow of capital to *+',s that meets two criteria< 7. 1ts ob$ective should be noncommercial from the point of view of the donor and 9. 1t should be characteri&ed 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. 1mposing no political condition respect recipent countries rights to select their won path

and model of development.

Adhering to equality, mutual benefit and common development. =emaining realistic while striving for the best. >eeping pace with the time and paying attention to reform and innovation.

Conditions of donors organization (7,1ncreased government income and decreased government e penditure. )9, ?rivati&ation. )@,2overnment will be decreased bank loan interest. )4,2overnment subsidies will be reduced in education, health and food sector.
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)6,.pen marketing. )A, 2overnment 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 1"( imposing two types of policy conditions, namely quantitative and structural. Buantitative conditions are imposed at 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 /B instruction to stop appointing to different vacant posts resulted in raising the unemployment rate to 45: in Bangladesh in the year 9556. Bangladesh 2overnment has already started bank sector reform. The pro$ect name is C1ndustry +evelopment and Bank "oderni&ationD. Another pro$ect also in hand is named C'entral Bank 3trengthening ?ro$ectD. The loan amount is estimated as @E crore E@ lacks F5 thousand U3+ and 4 crore A7 lacks @5 thousand respectively, for the above pro$ects. +onors have imposed a tag of bank privati&ation with these loans. A lion#s share of this pro$ect money is ready to be spent as consultancy fee. According to ;=+, more than 76 to 95 percent money had always been spent for consultants. 3ome of the conditions commonly implemented are<

'utting social e penditures, also known as austerity8 1mplementing user fees in basic services such as education and health8 (ocusing economic output on direct e port and resource e traction8 +evaluation of overvalued currencies8 Trade liberali&ation, or lifting import and e port restrictions8

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1ncreasing the stability of investment )by supplementing foreign direct investment with the opening of domestic stock markets,8

Balancing budgets and not overspending8 =emoving price controls and state subsidies8 ?rivati&ation, or divestiture of all or part of state!owned enterprises8 and ;nhancing the rights of foreign investors vis!a!vis national laws.

Types of foreign Aid (oreign aid can be classified on the basis of these categori&e which is shown in below (oreign Aid

Functionaly Food Aid

De"t "urden *ard (oan 'oft (oan

#erchese o"ligation

Ti$e Fra$e 'hort Ti$e

Tied (oan

Co$$odity Aid

)ediu$ Ti$e ,ntied (oan

#ro+ect Aid

%rants&Transfer (ong Ti$e

Technical Assistence

)onetary *elp Page 0!

Figure: types of foreign aid Functionality (unctionality foreign aid can be classified into following types Food aid 1t is given by the donors to the @rd flood$ disaster$ cyclone etc! Co%%odity aid +onor countries agencies are based on their circu%stantial need! This co%%odities are the surplus of donor countries! Food$ &ice$ Wheat$ 'edicine$ 'achineries etc! (iven as co%%odities )ro*ect aid +onor countries give pro$ect aid to the developing countries based on different types of development pro$ect. They provide machinery row materials as pro$ect aid. 1t is of two types. Technical assistance Garious technology and technical e pertise are given under this pro$ect which creates long term technology dependency of third world countries on donors. 'onetary help +irect money is given here to implement the pro$ect. .n the basis of debt burden .n the basis of dept +urden foreign aid can +e classified as! ,ard loan
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orld developing countries in their crisis situation! "i#e

1t 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. -oft loan 0ormal interest at the rate of 9: or less than that in case of soft loan financing institution. Transfer pay%ent 1t is unconditional aid. 2rants %eans lo to return the credit to the donors! .n the +asis of purchase o+ligation .n the basis of purchase obligation foreign aid can be classified as Tied aid Here the recipient countries are +ound to +uy or procure the necessary %aterials related to the pro*ect pro% donor countries! /ntied loan Here the recipient is free to procure the purchase from any country at a competitive price. .n the +asis of ti%e .n the basis of time foreign aid can be classified as!
3hort term "edium term *ong term

interest credit provided +y the donors! We al ays

accept these types of grants! It is another na%e is transfer pay%ent! ,ere the recipient not

)atterns of foreign aid The process of foreign aid can be done bi!laterally or multi!laterally through speciali&ed international agencies.
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0i1lateral 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. 23a%ple Bangladesh government makes treaty with china government. Here china is bi!lateral donor. Bi! lateral agencies are U3!Aid, +A01+A, '1+A.

'ulti1lateral aid This consists of aid channeled through an international agency like World 0an#! 'any countries involve here! These countries provide aid to the recipient ith so%e condition through different international agencies li#e W0$ I'F$ AD0$ .)2C$ .C2D$ 22C etc! The funds of %ulti1lateral donors are used to alleviate poverty! 4or%al interest at the rate of 56 or less than that in case of soft loan financing institution! Transfer pay%ent 1t is unconditional aid. 2rants means low interest credit provided by the donors. /e always accept these types of grants! It is another na%e is transfer pay%ent! ,ere the recipient not to return the credit to the donor! Who (ives Aid? Historically most aid has been given as +ilateral assistance directly from one country to another. +onors also provide aid indirectly as %ultilateral assistance, which pools resources together from many donors. The ma$or multilateral institutions include the /orld Bank8 the 1nternational "onetary (und8 the African, Asian, and 1nter!American +evelopment Banks, and various United 0ations agencies such as the United 0ations +evelopment ?rogramme. Who &eceives AidH

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765 countries and territories around the world received aid in 9554. Table 7 shows the largest ten recipients, each of which received more than I7.4 billion. 1raq and Afghanistan together received nearly IJ billion. These amounts are unprecedented for two countries and account for about J.6 percent of the global total. The amounts provided to other countries shown in the table are historically more typical for large recipients.

'a*or Aid &ecipients$ 5778 Total .DA (%illions /-9: 7. 1raq 9. Afghanistan @. Giet 0am 4. ;thiopia 6. 'ongo, +em. =ep. A. Tan&ania J. 'hina E. ;gypt F. ?akistan 75. Bangladesh

4,A6E 9,7F5 7,E@5 7,E9@ 7,E76 7,J4A 7,AA7 7,46E 7,497 7,454

)3ource< .;'+ 2005 Development Cooperation Report) Why do Donors (ive Aid? +onors 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. +uring the 'old /ar, both the United 3tates and the 3oviet 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.3. foreign aid )including both .A and .+A, from 7FE5 until very recently were 1srael and ;gypt, as the U.3. provided financial support to back the 7FJF 'amp +avid peace agreement. Beginning
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in 9559 1raq 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 'hina have used aid )among other policy tools, to try to gain support and recognition for their governments from countries around the world. "any donors provide significant aid to their former colonies as a means of retaining some political influence )Alesina and +ollar, 9555,. "any 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. +onors generally provide their most concessional aid to the poorest countries, and some aid programs are designed e plicitly with this ob$ective in mind. (or e ample, the /orld BankKs concessional financing arm - the 1nternational +evelopment Association )1+A, !! has an income ceiling )IFA6 per capita in 9554,. .nce countries reach that ceiling, in most cases they %graduate% from 1+A to non!concessional 1B=+ loans. .ther programs have less formal graduation rules, but still tend to provide less aid as incomes grow. 'ountry si&e matters as well. *arge countries, such as Bangladesh, 1ndonesia, 0igeria, and ?akistan 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. (or 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. +onor country government give and primarily because it is in their political strategic or economic self!interest to do so. 3ome development assistance may be motivated by moral and humanitarian desires to assist the less future. 23a%ple: ;mergency food relief programs. But there is no historical evidence to suggest that over longer periods of time, donor nations assist others without e pecting some corresponding benefits )political, economic, military etc., in return. /e can therefore characteri&e the foreign aid motivations of donor#s nations into two broad, but often interrelated, categories political and economic.

Donor 'otives for (iving Foreign Aid 7. ?olitical motivations

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9. ;conomic motivation< Two 2ap!models and other 'riteria @. (oreign e change 'onstraints 4. 2rowth and 3avings 6. Technical Assistance A. Absorptive 'apacity J. ;conomic "otivations and self!interest &ole of Foreign Aid 1n the perspective of the development doctrine during the 7F65s 7. Aggregate large scale resource transfer 9. Bias towards industriali&ation and large pro$ect @. Belief in government capacity to use aid efficiently and to plan. 1n the perspective of the development doctrine during the 7FA5s 7. two!gap model provides allocation criteria< 1nvestment saving s or import!e port gaps may be binding 9. 'ontribution to Lbalanced growth# @. Beginning of sector )e.g. Agriculture and education, and program lending 4. ;nhanced role of technical assistance to help build human capital Besides these! 7. ;conomic development 9. ?olitical motivation @. Technical assistance
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4. =educe poverty 6. 'reate employment opportunity A. 3ocio!cultural development J. =educe investment gap E. =educe e port!import gap F. =educe foreign e change 75. =educe international trade gap 77. 'apital formulation 79. 1ndustriali&ation 7@. =educe inflation 74. ;nvironmental production The role of 'ultinational Corporation and private foreign direct invest%ent (ew developments have played as critical a role in the e traordinary growth of international development trade and capital flows during the past few decades as the rise of the multinational corporation )"0',.An "0' is most simply defined as corporation or enterprise that conducts and controls productive activities in more than one country. These huge firms, mostly from 0orth America, ;urope and Mapan )but also increasingly from newly industriali&e countries like 3outh >orea, Taiwan and Bra&il, present a unique opportunity but many pose serious problems for the many developing countries in they operates. The growth of private foreign direct investment )(+1, in the developing world was e tremely rapid during the first decades. 1t rose from an annual rate of I9.4 billion in 7FA9 to I77 billion in7FE5 and I@6 billion in 7FF5 before surging to over I7E6 billion in 7FFF. Almost A5: of this goes to Asia.

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/e must recogni&e that multinational corporations are not in the development business8 their e$ective is to ma imi&e their return on capital. This is way over F5: of global (+1 goes to other industrial countries and the fasted growing *+',s. "0',s seek out the best profit opportunities and are largely unconcerned with issues such as poverty, inequality and unemployment alleviation. 'ultinational Corporation: -ize$ )attern and trends Two central characteristics of multinational corporations are their large si&e and that fact their worldwide operations and activities tend to be centrally controlled by parent companies. They are the ma$or force in the rapid globali&ation of world trade. The @65 large corporations now control more than 4F: oh that trade and dominate the production and sales of many goods from developing countries )e.g., tobacco, electronics, footwear and clothing,. "ost poorer countries are simply dwarfed in si&e by any of the, ma$or "0's. This large scale of operation, combined with limited competition, conveys great bargaining power. .wnership of the large "0's 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 e tractive and primary industries, mainly petroleum, nonfuel minerals and plantation activities where a few CagribusinessD "0's became involved in e port!oriented agriculture and local food processing. )rivate Foreign Invest%ent : -o%e )ros and Cons for Develop%ent (ew areas in the economic development arouse so much controversy and are sub$ect to such varying interpretation as the issue of the benefits and costs of private foreign investment. The controversy over the role and impact of foreign private investment often has its basis a fundamental disagreement about the nature, style and character of desirable development process. The basic arguments for and against the development impact foreign investment in the conte t of the type of development it tends to foster can be summari&ed.
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 Traditional 2cono%ic Argu%ents in -upport of )rivate Invest%ent: Filling savings$ foreign1e3change$ revenue and %anage%ent 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. (oreign 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 e change, government revenue and human capital skills and desired level of these resources necessary to achieve growth and development targets. (or e ample! of the Csavings!investment gapeD analysis recall that the basic Harrod +omar growth model postulates a direct relationship between a countries rate of net savings, s and its rate of output growth, g, via The equation gNsOk /here, gNrate of output growth sN rate of net savings kN is the national capital output ratio. &ole and i%pact of 'ultinational Corporation in Developing countries 7. 1nternational capital movements)income flows and balance of payments, 9. +isplacement of indigenous production @. ; tent of technology transfer 4. Appropriateness of technology transfer 6. ?atterns of corruption A. 3ocial structure and stratification J. 1ncome distribution and dualistic development

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I%pact of foreign aid in developing country li#e 0angladesh 3ince independence in 7FJ7, Bangladesh has been striving hard for the development of the country and for the economic emancipation of millions of poor people. 1n this endeavour, the development partners have been playing an important role by e tending support and cooperation in different forms. These assistances include food aid, commodity aid, pro$ect aid and technical assistance. The life time of Bangladesh is dependent on foreign aid provided by international agencies. According to =ahman 3obhan, CBangladeshi policy maker has continue to wait upon the decision of /ashington, *ondon, Tokio, Barn and ?aris before they formulate their annual development budget, announce and important policy formulate a good policy.

This co%%ent ill +e clear to us through the follo ing diagra% ?lanning +uration 'ontribution of (A: 7 year plan 7FJ@!JE 45: nd 9 year plan 7FJE!E5 A4: 9nd 6 year plan 7FE5!E6 6A: rd @ 6 year plan 7FE6!F5 64.4J: 4th 6 year plan 7FF5!F6 69: th 6 6 year plan 7FFJ!9559 99: (Source: The crisis of external dependenc pu!lished ! Rahman So!han)
st

(;:Create %ore dependency Bangladesh is inheritably dependent on foreign aid for the needs and development of the country. After 7FJ6 the dependency syndrome of the economic system of Bangladesh has gained a new dimension. 3he reoriented her economic to the western capitalist system without least attempt to build up and independent and self!sufficient economy. 0ow days a new born baby internal debt of 765 UI.
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3elim $ahan said, C1t the donor countries give one taka they take 7.JA taka from the recipient countries.D At the present time Bangladesh takes some assistance which creates more dependency. Types (ood aid 'ommodity aid ?ro$ect aid (rom 7FFF!9555 UI million 459.E million AEJ.F million @4J.9 million (Source: The donor consurtion"200#)

(5:Wea#en pu+lic sector accounta+ility 1nternal resources utili&ation and mobili&ation are the two key factors of development. But Bangladesh government never depends on the ta and revenue from the general people. Because government thought that if the ta es are collected roundly the people will oppose the ne t election. 3o the government depends on foreign aid instead of ta and revenue. 3o, primarily heOshe is accountable to the donors not to the general people. (<: /nder%ine institutional =uality +onors give us pro$ect aid and other various aid to establish rural institution, which help the donors rather than domestic people. (or e ample< Garious donors!aided 0.2..s are working in the rural area in the name of development. But they serve the donors interest in plan and their functions aver!lop with local government institutional quality. (8: Increased political influence (ormer U.3.A president 0i on said, C/e should keep in mind that the ob$ective of foreign aid is not help others but it is an attempt to help ourselves.D ?roviding different conditions the donors try to influence our policy making process we depend on geo!political forces and e ternal forces. (>:Discourage private sector invest%ent and national resource %o+ilization

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(oreign aid is given only the government for subsidi&ing the public sector enterprises not to the private investors. .n the other hand, food aid acts as the substitute domestic production which discourages the internal resource mobili&ation and makes us dependent on foreign aid. Besides foreign aid breaks down our economic structure which is quickly ineffective for ensuring good governance. )?:23port1i%port gap (oreign aid leads to import based country A5: of our foreign import lie in foreign aid. 3o, our domestic resources remain une plored and unused and government cannot serve the customer )general people,.

1t is shown as! +uration 7FFE!FF 7FFF!9555 9555!9557 ; port income 1mport e penditure 6@@4 million I E57E million I 6J69million I E45@ million I 4JE7million I 6JJA million I (Source: $orld development report"200#)

(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 e pertise from donor countries as well as purchase obligation our government cannot properly use these foreign aid so, poor become more poor. 1t is shown as Areas *ocalOrural Urban 0ational =ate of poverty @F.E: 74.@: @6.A:

World 0an# and I'F presence in 0angladesh

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Bangladesh, the third largest debtor country of the /orld Bank )/B,, has been provided with credit assistance totaling nearly I95 billion by the 1nternational +evelopment Assitance )1+A, since 7FJ@, the year the country $oined the /B. The /B provides most of its loans for a specific pro$ect or for one which is based on one or another particular strategic policy such as 3tructural Ad$ustment ?rogrammes or 3A?s the main policies of which have been<

"assive privati&ation of industries and ma$or utilities, e.g., water, electricity, gas, railway, ports, etc.8 The blanket application of the Lfree market policy# which actually means a unilateral canceling of all tariff and non!tariff restrictions by the country on the receiving end of the loans8

/ithdrawal of all types of subsidies for the sake of Lefficiency#8 and +rastic cuts in government spending in order to ensure so!called Lmacro!stability# of the economy.

1n the mid!eighties, when Bangladesh was under a military regime, the 3A?s started to be introduced, resulting in the disintegration of a number of industries including Adam$i Mute "ills. Bangladesh ?etroleum 'orporation )B?', has still been under tremendous pressure of being privati&ed, and so has been the 'hittagong ?ort, the purpose of all this being putting the oil and gas sector of the country at the mercy of the large multinational companies. The loans provided by the 1"(, like those of /B, are accompanied by Lconditions# that often go against the debtor countries in question. 1n most of the cases, the conditions are not relevant to the causes or the management of the crisis that the countries face, with many of these conditions )privati&ation, trade liberali&ation, increasing bank interest rate as well as the price of fuel and electricity, tariff cuts and producing ?=3?s, etc., coming in conditionality package under the pressure of ma$or 1"( shareholders for their own interests. Between 7FF6 and 9555, 1"( attached with each of its loans sanctioned, on an average, 47 conditions, which they reduced as a result of tremendous protests coming from different countries concerned. 1n 9559, 1"( released a guideline of its conditionality policy, which was the modified version of its imposed
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conditions. Though the new guideline was dubbed Lpositive# by 1"(, different countries have been sub$ected to these conditions- particularly while availing ?overty =eduction and 2rowth facilities )?=2(, loansthat they view as Lsevere# and Le cessive#.

1n Mune, 955@, Bangladesh has been provided by 1"( with a loan worth U3I657,655,555 which was to be released in three years in three installments, some of the conditions being the renovation of government Banks, privati&ation of =upali Bank, reducing the interest rate of 3anchay ?atras )savings scheme,, raising the price of gas and oil, among others. 1t is the 1"( that has been imposing structural ad$ustment programmes on different countries8 and in the macro economic level Bangladesh has got the 1"( as its main consultant the directives of which played a ma$or role in fi ing the national salary structure )article 4 mission,. This raised the e change rates of the dollar against taka, led to increases in the price of gas, fuel, and electricity resulting in the tragedy of >ansat in 'hanpainababgan$, =a$shahi that claimed this year the lives of 7F farmers who, along with many others, protested against the price hike. The effects of Aid The issue of the economic effects of aid, ;specially 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 *+'s. Aid does not promote faster growth but may in fact retard it by substituting for rather than supplementing domestic savings investment and by e acerbating *+' balance of payments deficits as a result of rising debt repayment obligations and the liking aid to donor country e ports. .fficially aid is further critici&ed 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.

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 (oreign aid has been a positive fore for anti!development in the sense that it both retards growth through reduce savings and worsens income inequalities. (oreign 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. Buite 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 02.s &eco%%endation )7,Aid dependent should be reduced gradually. )9, ; port!import gap should de decreased and foreign aid based should be eliminated. )@, +omestic resources should be utili&ed properly. )4, ;ncourage private sector investment and create favourable environment for them. )6,"aintenance law and order and bureaucratic accountability should be ensured through parliament. )A, The chapter of corruption should be closed and create employment opportunities. )J,2overnment income should be increased and e penditure 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 e act volume of loan and aid, and coordination among the donors are the measures to be adapted to this end. "ost importantly, donors need to reali&e 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 pro$ect funded< the percentage of pro$ect 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 citi&ens, local consultants, different income groups in Bangladesh, an independently conducted benefit incidence analysis giving a breakdown of who are the ultimate beneficiaries of the pro$ect, a clear statement of the specific conditionality#s for the pro$ect, a signed declaration stating whether disbursement of the pro$ect funds may be used as leverage for other concessions or favours from the 2overnment 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. 0on!interventions of the 1"( and /B in the allocation of financial and technical assistance, cancellation of ?=3?, domestic resource mobili&ation and preparation of a central plan to make the donor agencies and government accountable to be accountable to the people are the prerequisites to ensure aid effectiveness

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&eferences "urshid. >.A.3 )955@,, 'ritical ?erspective on Aid in Bangladesh available at http<OOwww.bdiusa.orgOMournal:95of:95Bangladesh:953tudiesOGolume :956.7:95)955@,O'=1T1'A*:95?;=3?;'T1G;3:95.0:95A1+:9510 :95BA02*A+;3H.pdf accessed on 9A!75!7@ .baydullah, " )955J,. 1mpact of foreign aid on development in Bangladesh available at http<OOresearchbank.rmit.edu.auOviewOrmit<F6AF access date 5A!79!79 Pmer ;roQlu and Ali Ravu& <The role of foreign aid in economic development of developing countries available at http<OOces.epoka.edu.alOicmeOa74.pdf accessed on 9A!75!7@ Buibria ".2. )9575,. Aid effectiveness in Bangladesh available at http<OOwww.economics.illinois.eduOdocsOseminarsOAid!;ffectiveness!in!Bangladesh.pdf accessed on 9A!75!7@ =ehman 3obhan, )7FE5,.The 'risis of ; ternal +ependence< The ?olitical ;conomy of (oreign Aid to Bangladesh, University ?ress *imited, +haka Tarp and H$ertholm, )9555,. (oreign Aid and +evelopment< *essons *earnt and +irections for the (uture, =outledge, 77 0ew (etter *ane, *ondon ;'4? 4;;.

Todaro, ". ?. and 3. '. 3mith, )955E,. ;conomic +evelopment. 75th ed. Toronto< Addison! /esley. http<OOedm.iboninternational.orgOcomponentOcontentOarticleO@A@!features!on!aidO7A9!aid! situation!in!bangladesh

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