Why Development Effectiveness Is Still Relevant for Bangladesh?

This chapter examines the contemporary relevance of development effectiveness for Bangladesh amid its transition towards upper-middle-income country (UMIC) status. The country’s ambitious growth and investment targets, delineated in the 8th Five-Year Plan (8th FYP) and Vision 2041, are heavily dependent on both domestic resources and foreign finance. Although the relative share of foreign aid in the country’s current GDP is diminishing, its absolute value is on rise, substantially contributing to public investment finance and recovery from the economic stagnation induced by COVID-19 and the Russia-Ukraine War. The major issues to aid effectiveness include fragmented aid, donor coordination challenges, limited harmonization with country systems, and unpredictable aid disbursement. However, the government has tackled these issues via the Joint Cooperation Strategy (JCS) and Local Consultative Group (LCG), fostering stronger partnerships and improved dialogue with development partners (DPs). Debt management strategy of the country also seems prudent as it is characterized by low debt-to-GDP ratio that guarantees macroeconomic stability and fiscal adaptability. Besides, country’s Annual Development Programme (ADP) is still largely reliant on external assistance. Additionally, as Bangladesh is approaching its graduation from Least Developed Country (LDC) status, it is imperative to bridge the gap between aid commitments and actual disbursements, and to integrate foreign aid with national priorities for long-term and sustainable development. The chapter emphasizes the necessity for continuous reforms and strategic partnerships to maximize the efficacy of foreign aid in order to attain national goals.