After a gap of two years, the Bangladesh Development Forum (BDF) organised by Economic Relations Division (ERD) was held in Dhaka. The objectives of arranging such a programme is to portray the gained economic performances before the representatives of donor agencies. The programme began with highlighting the overall socio-economic development across the country where participants were amazed at seeing the statistics displayed on the screen. The BDF has been formed under the Local Consultative Group (LCG), a platform of development partners working in Bangladesh.
The message of the BDF was dished out far and wide with the policymakers seeking more support from donor agencies. In the programme, the government sought more external aid to take our economy forward within a brief time. As a young analyst of economic affairs, this scribe thinks grants and loans from donor agencies are required to address the current need and continue the development spree. If the ongoing development work fully or partially depends on foreign sources, the government may be at its wit's end while repaying the loans at high interest rates.
As Bangladesh is going to graduate from the least developed country (LDC) status, dependence on external aid has to be narrowed down anyhow. Many challenges are lying before us in terms of repayment of the loans. According to a report in a daily, the average annual inflow of foreign aid has been equivalent to around 2.0 per cent in recent years. It was more than 6.0 per cent a couple of decades ago. The total size of foreign aid rose to nearly US$6.54 billion in the last fiscal year (FY) from a paltry amount of $ 270.80 million in FY 1971-72. Despite enjoying a high volume of aid and loans from development partners, the government used to seek specific aid commitments from the foreign development partners from the Aid Consortium held in Paris earlier.
To materialise development plans and programmes undertaken by the visionary government, a huge capital is needed right now. It would be better, if the required fund is managed from domestic sources. Grants and loans are continuously being taken from development partners at high interest rates. The development partners are Japan International Cooperation Agency (JICA), World Bank (WB) and Asian Development Bank (ADB) among others. In recent times, the World Bank pledged to provide more loans including 10 million US dollars for creating Export Readiness Fund (ERF) and the fund for Road Safety in Dhaka city. So, the grants and loans from donor agencies are notably increasing.
Foreign grants and loans were badly needed just after being free from Pakistani occupation during the first five-year plan (1974-1978). At that time, Bangladesh was in a what-to-do situation with the population who had no jobs. To address the demand, we had to seek grants and loans from donor agencies. The credit was $3,531 billion. Currently, Bangladesh economy recorded significant growth in all sectors. Inflow of foreign remittance in recent decades is really admirable. Export income has increased to a great extent. The unemployment rate is now below 20 per cent that was above 40 per cent in ten years ago. So, in such a situation, our economy need not borrow much from development partners.
Under the sixth five-year plan (2011-2015), Bangladesh saw the highest growth performance next to the world's second largest economy China. Then only $ 12.82 billion came from donor agencies as grants and loans. Bangladesh's growth rate was 6.3 per cent against 5.5 per cent in India, 5.8 per cent in Indonesia, 3.3 per cent in Thailand, 2.9 per cent in Latin America. Since Bangladesh has become a role model in the world in terms of growth rate, the development partners might contribute to our economy in alternative ways. In 2016 when Chinese President Xi Jinping visited Bangladesh, more than two dozens of deals were signed between the two countries amounting to $ 20.53 billion. For infrastructure development, the Chinese President pledged to give these loans.
What should be noted here that the government borrowing from banks already crossed Tk 50,000 crore side by side with borrowing from other sources. Many countries were forced to sell out their prime earning sources to loan providers due to failure of repayment of loans. So, the state has to decide in a prudent way about good and bad sides of foreign loans. Nevertheless, we always dream of getting grants and loans whenever any country's head visits Bangladesh. Rather, we have to try to convince them to invest here their huge capital. At this moment, we have to create a congenial business environment to woo foreign investors. The time has appeared to discourage loans from donor agencies. They can help us in many other ways. Current GDP growth rate of Bangladesh attests to the fact that there is no need for foreign aid. Foreign direct investment (FDI) is badly needed for 100 Economic Zones. We have to give our attention to FDI only, if we hope to see a sustained economy.
Md Mazadul Hoque is a banker and analyst of economic affairs.