The high degree of food aid dependency in Bangladesh has given rise to concern about the efficacy of food aid as a resource transfer, centring particularly on the question of possible disincentive effects on domestic production. This paper examines the structure of incentives facing Bangladeshi farmers during the past 25 years. It is concluded that the direct price effects of food aid in Bangladesh did not cause disincentives to farmers. Food transfers also made a contribution toward alleviating Bangladesh's severe foreign exchange constraint. Regarding agricultural development, the possibilities inherent in food aid were probably used more efficiently, or productively, during the 1960s than during the 1970s. Overall, the net contribution of food aid to Bangladesh is considered to have been positive and significant.