The government has moved to frame a national aid policy for the first time to face situation after promoting to middle-income status as the country will lose its entitlement of low-cost development fund.
The Economic Relations Division (ERD) under the Planning Ministry is now in the process of preparing a draft policy to ensure a clear, effective and coordinated approach to managing foreign assistance, according to sources.
The move comes amid expectation that the country would graduate from a low-income status to a middle-income one by 2021.
“Before finalisation of the policy, opinions will be taken from stakeholders this month, and later, it will be sent to the cabinet for seeking final approval,” said an official.
The proposed policy is expected to highlight future phenomena of the foreign aid situation, noting that when Bangladesh reaches the middle-income status, external finance flows are bound to evolve significantly.
Official Development Assistance (ODA) that flows from bilateral development partners (DPs) are likely to decrease, according to the proposed policy.
The external resources include ODA (grants and concessional loans), vertical funds and international donation, climate fund, aid for trade, non-concessional, commercial borrowings, and other sources of cooperation, such as south-south and triangular cooperation.
Other potential resources, such as support from southern sources, and dedicated funds may increase in the future, according to the draft.
With the launch of new multilateral and regional financial institutions, it is foreseen that there could be important changes to the multilateral lending system, it added.
Officials said the policy will be applicable to the mobilisation of external resources and their effective management for development interventions in Bangladesh.
In addition, it will provide guidance to support the implementation of domestic and international commitments to development cooperation and its effectiveness, they said.
Both on-budget and off-budget development cooperation will come under the purview of the policy. However, IMF credits, special borrowings by the Food Ministry, the Bangladesh Shipping Corporation, Bangladesh Biman and Bangladesh Petroleum Corporation, and assistance for defence and special assistance during disasters and natural calamities will remain beyond the scope of this policy.
Former finance adviser to the caretaker government, Mirza Azizul Islam said it is a good move for effective use of aid. He, however, said hundreds of policies are in Bangladesh, but they are not effectively implemented, which makes them useless.
According to the ERD, Bangladesh receives foreign aid to the extent of 2% of gross domestic product every year on an average.
