Home ›› 18 Sep 2021 ›› Opinion
Bangladesh’s impressive economic growth can be attributed to the timely assistance and cooperation of the globally recognized lenders. The multilateral donor agencies have always stood by Bangladesh with their monetary support in time of need. The contribution of multilateral agencies in developing socio-economic conditions as well as in helping reduce poverty rate beggars description. The works of mega projects across the country are being carried out with external funding. Moreover, the budget deficit is filled up with borrowings from external sources. Half a dozen globally branded lenders - the World Bank, the Asian Development Bank, the International Monetary Fund, the Asian Infrastructural Investment Bank, the Islamic Development Bank and The Asian Infrastructure Investment Bank have been key borrowing sources for Bangladesh. At the time of crisis, the lenders were never late to finance Bangladesh on condition of repayment with imposed interest rate.
A media outlet reported that the World Bank’s portfolio in Bangladesh now stands at $14 billion, while that of the ADB is worth $12.3 billion. Approved and proposed projects of AIIB are worth $4.2 billion in five years of its partnership with Bangladesh. Foreign debt stood at $44.4 billion in fiscal year 2018-2019, which was 13.4 percent of GDP.
An alliance of emerging economies- Brazil, Russia, India, China, South Africa (BRICS) formed the New Development Bank (NDB) that admitted Bangladesh as its member.
As part of NDB’s membership expansion programme, Bangladesh was included in the grouping following a proposal placed by Bangladesh.
Besides, South American country - Uruguay and the United Arab Emirates got the membership of the New Development Bank which was established in 2015 aiming at financing its members mainly for infrastructure and sustainable development. In view of the remarkable economic growth trend and socio-economic development of Bangladesh, the membership was confirmed unanimously in the board meeting.
There are reasons to believe that Bangladesh will be able to address financial need for infrastructure development with the help of a new financier - NDB. Since NDB’s inception, a total of 80 projects worth around $30 billion for all member countries have been approved. Right now, a huge number of external borrowings is needed to achieve targets set in the 8th Five Year Plan (FYP). Besides, external borrowing is needed for Sustainable Development Goals (SDGs), Bangladesh Delta Plan 2100, 2nd Perspective Plan 2021-2041 implementation.
Annually, about $12 billion has to be managed from external borrowings for 8th FYP. For the implementation of SDGs, Bangladesh will have to expend around 20 per cent of GDP annually. As a result, approximately $9.46 billion has to be borrowed annually from external sources. The investment plan of Bangladesh Delta Plan 2100, prepared by the World Bank, consists of 80 projects and its investment cost is $37 billion until 2030. The current mobilization trend of foreign resources ranges from $ 7.0 to $ 8.0 billion. Shanghai-based New Development Bank formed by BRICS is expected to be a major source of financing for programmes to be undertaken in near future.
In order to revamp Covid 19-ravaged economy, Bangladesh has to finance more in vulnerable sectors hit hard by novel coronavirus. Right now, the government of Bangladesh is trying to reach out to poverty-stricken people living in downtrodden areas with cash and food.
The low-income nations in the world have recently been brought under G20 debt relief program titled “debt service suspension initiative” (DSSI). According to a media report, the DSSI has so far allowed 46 countries that have so far applied to take part-out of 73 that are eligible- to defer an estimated $12.5 billion in debt repayments. The IMF recently said that poor countries would need to spend about $250 billion up to 2025 to respond to the pandemic and an additional $250 billion to reduce poverty. So, it can be said that NDB membership came as a blessing during the post-pandemic period.
NDB lending rate is expected to be tolerable. In 2016, the bank disbursed around Tk $1.5 billion in infrastructure and sustainable development projects in BRICS. In 2018, the bank so far approved 17 projects worth $ 4.7 billion. The number of projects approved in 2019 stands at 22 with $ 7.2 billion. The NDB has also cumulatively approved 72 projects worth $ 25.7 billion. Notably, 27 percent of the Bank’s projects approval is denominated in the local currencies of the respective borrowing members instead of USD. Since 2016, the NDB has provided $1.5 billion in loans to BRICS member states for infrastructure and sustainable development.
It should be noted that the NDB stepped in and committed to a $10 billion Emergency Assistance Program to help BRICS countries tackle immediate health impacts and economic recovery concerns; the bank has an authorized capital of US$ 100 billion, which is open for subscription by members of the United Nations. The NDB member countries account for 42 per cent of the world’s population and contribute more than 20 per cent of global GDP.
It is mention-worthy that Bangladesh Foreign Minister Dr. A. K. Abdul Momen, in the meantime, sought financial assistance from IMF and Dutch Minister while talking in the program titled “Global Center on Adaption” ( GCA) in the Netherlands. The support was sought with a view to addressing the challenges of climate change. Besides, Bangladesh Railway (BR) needs foreign loans worth Tk 80 (eighty) thousand crore to construct Dhaka-Chattogram high speed rail track. The NDB could be a potential financing source of Bangladesh Railway. Bangladesh has to approach the NDB for loans to be received from time to time. The vision 2041 for becoming developed countries set by the present government requires huge financing in future. Bangladesh is set to achieve targets within the shortest possible time if the NDB along with traditional lenders continue monetary support. Hopefully, the NDB will play a pivotal role in Bangladesh economy in the days lying ahead.
The write is an economic affairs analyst. He can be contacted at mazadul1985@gmail.com
