Bangladesh Corruption: Are Donors Enabling the System?

Anis Chowdhury

Bangladesh remains among the most corrupt countries in the world. Its Corruption Perceptions Index (CPI) score of 24 is 18 points below the global average of 42 and 21 points lower than the Asia-Pacific average of 45. A key source of corruption is overpriced aid-funded projects, which often lack competitive bidding. Projects executed through government-to-government deals are reported to cost more than 400% compared to more transparent alternatives, with an estimated 35% of project costs lost to corruption and inefficiency.

These figures are widely documented. Yet development partners continue extending loans, often framed as aid, to Bangladesh in ways that critics say violate the United Nations Principles of Responsible Sovereign Lending.

Complicity

Development partners—both traditional and non-traditional—are accused of indirect complicity. The largest contributors include the World Bank, followed by the Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA), which together account for around 70% of Bangladesh’s external debt. Russia and China are also major lenders, holding smaller shares.

Critics argue that donors have continued financing successive governments despite concerns over corruption and governance failures, prioritising strategic and commercial interests.

The World Bank briefly demonstrated a stricter stance in 2012 when it cancelled a $1.2 billion credit for the Padma Bridge project over corruption allegations. However, lending later resumed at higher levels. A former minister in the previous administration reportedly claimed that the Bank later proposed $2.25 billion in funding, raising questions about consistency in its anti-corruption stance.

Although the Padma Bridge was officially described as fully government-funded, reports indicate that China’s Exim Bank provided $2.67 billion in concessional financing. The project’s final cost rose to about $3.6–$3.9 billion, nearly three times the original estimate of $1.2 billion, contributing to pressure on foreign exchange reserves.

The International Monetary Fund (IMF) also provided a $4.7 billion support package in January 2023, with conditions focused on revenue reform, financial sector stability and human capital development. Critics argue that broader governance concerns, including corruption allegations and political repression, were not adequately addressed.

Old habits and governance concerns

Corruption in Bangladesh is described as deeply rooted, affecting much of the country’s governance structure. While reforms have been attempted in various phases, critics say progress remains inconsistent.

Recent policy decisions, including changes in central bank leadership and banking regulations, have raised concerns among analysts about weakening financial oversight and reversing earlier reform efforts. Amendments to banking laws have also been criticised for potentially allowing previous owners of troubled banks to regain control.

At the same time, reliance on external borrowing continues. Authorities have reportedly sought up to $3 billion in new financing, reflecting continued dependence on development loans rather than domestic revenue mobilisation. Bangladesh’s tax-to-GDP ratio, estimated at around 7%, remains low compared to global benchmarks.

Experts argue that weak revenue collection and continued borrowing reinforce structural dependence on external funding while limiting governance reform incentives.

Role of development partners

Major development institutions, including the World Bank, IMF and ADB, publicly emphasise anti-corruption commitments and good governance. However, critics say lending practices do not always reflect these principles in practice.

While some countries have successfully used aid to support reforms, global evidence suggests that aid allocation is not consistently linked to governance quality.

Analysts argue that future financing should be tied to measurable reforms, including strengthening anti-corruption institutions, ensuring judicial independence and improving financial sector governance.

They also emphasise the need for Bangladesh to shift toward a more trade- and investment-led growth model, reduce aid dependence and improve domestic resource mobilisation.

Without such reforms, critics warn that continued lending in weak governance environments risks reinforcing systemic corruption and financial inefficiency.