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Written by: Staff

DHAKA, Mar 13 (Reuters) Foreign aid flows into Bangladesh fell in July-December 2005 by more than 40 per cent from a year earlier, finance ministry officials said.

Bangladesh received $488 million in foreign aid in the first half of fiscal 2005/06, down from $815 million a year earlier, they said.

The World Bank provided $326.64 million, the International Monetary Fund $97.20 million and the rest was from other donors.

The country's net foreign aid receipts were $237 million in that period after it had paid out $251 million to repay earlier debt. The year-earlier amount was over $500 million.

''Foreign aid flow is declining gradually due to the government's failure to meet the several conditionalities imposed by donors,'' Atiur Rahman, chairman of the Samannay, a private think tank, said.

Both the IMF and the World Bank have been pressing Bangladesh to raise state-regulated fuel prices to ease pressure on the economy.

The government has moved slowly on donors' suggestions that it should reform taxes to increase revenue and privatise state-owned banks, analysts say.

Political uncertainties may also be a factor.

''The aid flow is unlikely to increase soon because the overseas donors are watching the country's political situation ahead of the January election,'' Atiur said.

Opposition parties have threatened to boycott the polls unless the government accepts their demand for electoral reforms they feel are needed to make the election free and fair.

A visiting World Bank executive director, Dhanendra Kumar, asked Bangladesh to make the government procurement process transparent to ensure the effective use of aid.

''We have discussed disbursement and utilisation of a $150 million development loan,'' he told reporters after meeting with the finance minister.

This is part of a $1 billion loan the World Bank had approved for Bangladesh to implement a three-year poverty reduction programme since 2003.

He arrived in Dhaka on Saturday on a three-day visit to review how aid is being used and look at progress on the implementation of reforms.

Also on Monday, the European Commission (EC) announced an aid package for Bangladesh to help boost its capacity in trade and commerce.

''We have offered 50 million euro ($59.6 million) to boost Bangladesh's export volume by improving infrastructure facilities,'' Herve Jouanjean, director general of the EC's external relations directorate, said after meeting officials.

The EU is Bangladesh's biggest trade partner.

(US$ = 70.33 taka) ($1=.8391 Euro) REUTERS SD DS1445

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