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Five Year Plans
Five Year Plans
Five Year Plans
Five‐year plans are financed through the development, or capital budget, which was separate from
the government's revenue, or administrative, budget. After the independence of Bangladesh, it was
widely believed that once reconstruction tasks were over, the domestic economy would provide
most of the resources needed for development. This view was mistaken because systematic
drainage of Bangladesh’s resources during the British and Pakistani colonial regimes, which had left
it with a deficit in food grain availability. Low levels of internal savings and a high population living
below poverty line were evident: what in other words could be called a state of chronic external
dependence.
The country has followed the course of planned development since 1973. In a medium term
framework, the First Five Year Plan was launched in July 1973. This was followed by a Two Year
Plan (1978‐80) in the background of world‐wide inflation and uncertainties. In 1980, the five year
plan framework was reinstated and since then three five year plans were implemented in
succession. There was no development plan during 1995‐97 after the expiry of the Fourth Plan
(1990‐95). Every plan targeted at an average annual GDP growth rate of above 5 per cent but
achieved about 4 per cent. In spite of large inflow of foreign assistance to augment meager domestic
resources, the planned effort for development has not been able to free the economy from the low
growth trap. Almost half of the population of Bangladesh still continues to eke out an existence
below poverty line with very little access to the basic amenities of life.
Every Plan targeted for an average annual growth rate of above 5 percent. Despite a large flow of
foreign assistance, the planned effort has not been able to get away from the low growth trap as half
the population of Bangladesh still continues to live below poverty line.
The summarized version of planned development effort is given below: (in million Taka)
In 1991, with the reinstitution of elected government, a new economic program was initiated that
included financial sector reform and liberalization measures to encourage investment, government
revenue improvement efforts (realized largely through implementation of a value‐added‐tax), and
tight monetary policy. Income transfer measures, Food‐for‐Work, and other programs were also
implemented to help protect the poorest segments of the population from the transitional effects of
structural reform. Political turmoil from 1994 to 1996 helped reduce the final average annual
growth rate under the Fourth Five Year Plan (1990–1995) to 4.15% (short of the 5% target), albeit
the best performance so far under an economic plan. The 1996 elections brought renewed
economic stability. Exports grew 14% 1996, and GDP growth for 1996/97 rose to 5.5% as the
economy rebounded. Floods during 1998 and 1999 caused some economic slowdown but this was
balanced by unprecedented growth in gas production and electricity production sectors. Average
annual GDP growth under the Fourth Five‐Year Plan rose to 5.3%.
Fiscal year 2000 was marked by a sharp increase in monetary expansion due to unprecedented
borrowing from the banking sector (though the sale of treasury bills) to cover budget shortfalls due.
Domestic borrowing increased primarily due to the reduced availability of external concessional
financing. Historically, Bangladesh has received foreign aid disbursements equivalent to about 6%
of GDP, have lately declined to amount equaling 3–4% GDP. Moreover, according to the IMF, much
of the domestic borrowing was being used to cover recurrent expenses such as wage and salary
increases. The revenue to GDP ratio rose in 2001 from 8.5% to 9.4%, but this improvement was
more than offset by expenditure to GDP ratios of 14.4% and 14.1%, creating budget deficits
amounting to 5.9% and 5%, in 2000 and 2001 respectively. The drain on foreign reserves from
domestic borrowing contributed to reducing the foreign exchange cover for imports to imprudent
levels of two months in 2000 and one‐anda‐half months in 2001.
For 2001/02, however, the IMF predicted a sharp decline to around 3.5% due to the global
economic slowdown and the contractions after the terrorist attacks of 11 September 2001 on the
United States.
The Role of Donor Agency in Flourishing the Economy of Developing Countries Like
Bangladesh
There is no denying the fact that embryonic countries constantly demonstrate a predisposition to
bring in the policy pronouncement of highly developed countries in their delicate resources despite
the shifting of overall socio‐economic procedure virtually. In bona fide world state of affairs aspects
that next to influence the strategy decisions of budding countries are found fictional in progressive
countries. It is evident that reserve constraints and technical non‐progressive phenomena are two
focal setting that formulate the budding countries reliant upon the advanced countries. The highly
developed countries make available financial assistance for the economic development of the
developing countries through unusual multilateral and bilateral donor agencies, which are officially
termed as ‘Development Partner’.
The ‘Development Partner’ all the way through their lending tricks play a vital role in the policy‐
making method of developing countries. The intact process is now more evident in an interestingly
univocal world order that materialize after the collapse of communism as a governing and
economic system in the 1980s. The international financial agencies more than ever the World Bank
and International Monetary Fund as policy shift pursued a free‐market‐based world order where
the developing countries were urged, cajoled and hard‐pressed to initiate market economy through
structural modification reforms.
As a result, over the last one‐decade developing countries have made changes in their state oriented
development strategy mostly in line with the policy advice of the Development Partners.
Development Partners tend to justify their role in policy decisions of recipient countries that aids
are given from the taxpayers’ money of the advanced countries who preserve the right to know
whether money is being utilized in proper ways. Despite continued financial assistance by the
Development partners a vast majority of world population in the recipient countries live under the
poverty line and unable to meet their basic needs. Increasingly Development partners are becoming
concerned with the aid effectiveness and often attribute the underdevelopment of third world
countries to their inappropriate internal policies. Although the failure of IMF’s policy advice in
managing the financial crisis in East Asia has given rise counter argument that the economic crisis
afflicting the developing countries was fundamentally global in nature
The World Bank in its policy research report, “Assessing Aid, What works, What doesn’t, and Why”
has laid emphasis on the internal policies of the recipient countries as important factors to make
aid effective. In different international forums including the Aid Consortium Meeting that held
under the auspices of the World Bank, the Development partners review the policy issues of the
recipient countries with top priority; and before making any aid commitment want to make it sure
that appropriate policy environment is prevailing in the recipient countries.
Among the Development partners the World Bank (WORLD BANK) is the most important whose
confessional financial assistance has allowed it enormous access in the policy making process of
developing countries which we can see with particular reference to Bangladesh.
The WORLD BANK has been working in Bangladesh since 1972, soon after the Independence.
Robert D. McNamara was the First WORLD BANK president visited Bangladesh in the year 1972 to
assess the aid requirement of the war devastated country. The then highly nationalistic government
that led to the liberation of the country from occupying Pakistani forces was very much critical
about the Bank’s close allies with the Pakistani regime. The dispute that emerged between the Bank
and GOB was the issue of the Bangladesh’s share of debt liability. GOB declined to take the
responsibility of debts taken by the erstwhile Pakistan government from different bilateral and
multilateral donor agencies/countries. In the First Aid Consortium meeting of donor countries,
which was held in Dhaka in March 1973, the Bank exerted pressure upon the government to come
to a solution on the debt issue. After long parley the then government had accepted an inherited
debt liability of $483 million against the projects, completed before independence and physically
located in the territory of the erstwhile East Pakistan. The process through which Bangladesh
resolved it’s past debt liability was viewed as highly instructive and mentioned as a glaring example
of the Bank’s pressure on Bangladesh. But dependence upon the external aid left very little option
for the government of the newly independent country to reject the Bank’s conditional lending offer.
Domestic resources that were available to the economy found inadequate to implement the
development projects. As a result, despite the Bank’s controversial role in the liberation struggle,
the GOB had to accept conditional external assistance to implement the first five‐year plan, which
was launched in 1973. In the subsequent years, dependence of the country on the mobilisation and
influx of foreign funds into Bangladesh for financing not only the development projects but also the
import of food items and essential commodities has become more institutionalized.
The WORLD BANK as an important single source of aid to Bangladesh co‐ordinate the Aid
Consortium for Bangladesh. The creation of the Bangladesh Aid Consortium has institutionalized
the leadership of the World Bank. The resident mission of the WORLD BANK, which is the largest in
Bangladesh, conducts detailed research on different aspects of Bangladesh’s economy. Since 1972
the Bank’s concessional lending arm, the International Development Association (IDA), has
financed more than 167 operations with loans of about $8.2 billion. Till September 1998, Bank
loans of more than $2.05 billion fund 21 projects in Bangladesh (The World Bank, 1998). Initially
the Bank’s approach was more humanitarian; and, the Bank worked closely with others to revive
the war‐torn country’s economy. Early projects financed by the Bank were cyclone shelters built in
the coastal areas of the country. In the early years, the Bank supported efforts to expand
agricultural production, which have helped Bangladesh achieve a self‐sufficient food supply, and to
develop population and family planning programs that have dramatically lowered the high fertility
rates. From the mid‐1980s, the Bank expanded support for more energy projects and helped to
reduce the country’s dependence on imported energy. Since early 1990s the Bank and other
Development partners by keeping pace with the global change pushed the government for allowing
more private sector participation in the public sector management and diverted the aid flow for the
social sectors like health and education, which have direct impact on poverty alleviation.
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