Funds have started to pour into Bangladesh after the interim government appealed to bilateral and multilateral development partners after the past government left the state’s finances in a state of disarray.
The World Bank on September 17 made a commitment to mobilise an additional $2 billion for Bangladesh this fiscal year to support critical reforms, flood response, better air quality, and health.
This will be in addition to another $750 million policy-based loan and $250 million investment loan and guarantee facility as budget support targeting financial sector reforms.
“We would like to support you as fast as possible and as much as possible,” World Bank country director for Bangladesh Abdoulaye Seck said on the day at a meeting with chief adviser, professor Muhammad Yunus in Dhaka.
He said the bank would support the critical financial needs of the country.
Dr Yunus took office on August 8 after former prime minister Sheikh Hasina was ousted by a mass protest, and then she fled to neighbouring India.
The 84-year old Nobel Laureate is believed to be backed by western nations, especially the US. A US delegation visited Bangladesh in mid-September and made commitment to support the interim government’s reform agenda and extend financial supports.
“Our delegation met with the chief adviser professor Muhammad Yunus, affirming our dedication to fostering inclusive economic growth, institution building, and development to benefit the people of Bangladesh,” the US Embassy in Dhaka said in a social media post after the meeting on September 15.
On this occasion the USAID announced $200 million in aid to support Bangladesh’s development journey.
After the visit of US delegation, different multilateral and bilateral development partners have come forward with financial support for Bangladesh.
The Asian Development Bank (ADB) has also come up with $1.5 billion policy-based loan support which will be given in three phases. The ADB will provide $400 million as budget support by this December.
Also, the Islamic Development Bank (IsDB) has come up with a big financial package for Bangladesh under its ‘Member Country Partnership Strategy (MCPS). The IsDB is likely to provide between $4 billion and $5 billion to Bangladesh in various sectors in next three years.
IsDB’s head of regional hu, Muhammad Nassis Sulaimanm on September 17 had a meeting with finance adviser Dr Salehuddin Ahmed in Dhaka and made the commitment. “As part of our Member Country Partnership Strategy (MCPS) our plan for the next three years is to support Bangladesh by around $4 to 5 billion,” Sulaiman told reporters after the meeting.
He said the IsDB will continue supporting the socio-economic development of Bangladesh in terms of resources and collaborating with other development partners as well.
Meanwhile, Germany has come up with a support of €600 million ($659 million) for Bangladesh to develop the country’s renewable energy sector, and help develop life standard of small ethnic minorities, women, and youths, in a period of 10 years.
To replenish the foreign currency reserve, the government is also expecting a fresh $3 billion loan from the International Monetary Fund (IMF) in addition to the ongoing $4.7 billion that the multilateral lender extended to the country in January last year to help stabilise its macroeconomy.
IMF visit
An IMF staff team visited Dhaka from September 24–30 to discuss recent developments and the authorities’ reform priorities. The team assessed the requirement of additional resources after Bangladesh sought an additional $3 billion loan from the IMF. Moreover, the finance adviser and the central bank governor will visit Washington this month to join the annual meetings of the World Bank and the IMF where they will have discussion with the IMF high-ups for the loans.
The IMF, team after conclusion of the visit, on September 30, in a statement expressed willingness to “stand in solidarity with the people of Bangladesh during these difficult times”.
“We support the authorities’ efforts to initiate policy adjustments, including continued monetary tightening and rationalising non-priority capital spending, in response to these challenging circumstances,” it stated.
Moreover, it said: “The IMF remains a steadfast partner, fully committed to supporting Bangladesh and its people. Within the framework of the ongoing IMF-supported programme, we will continue to work closely with the authorities to advance Bangladesh’s reform agenda, which aims to ensure macroeconomic stability, promote job creation, strengthen institutions, and foster strong, sustainable, and equitable growth,” the multilateral lender said.
“We welcome the authorities’ renewed commitment to implementing the reforms under the IMF-supported programme. Discussions on how to proceed with programme reviews will continue during the upcoming 2024 IMF-World Bank Annual Meetings,” it added.
Also, the government is looking for a budget support loan from the China-led Asian Infrastructure Investment Bank (AIIB), which last year also gave several loans to Bangladesh.
Finance ministry officials in Bangladesh said that the government is expecting more financial support from the other development partners, including from China, the UK, India, Japan, and the EU as efforts step up to rebuild the economy, which has experienced very tough times over the last 15 years due to mismanagement.
However, while borrowing the fresh loans, the government expects that the development partners will put forward reform proposals that are attainable.
“We have asked our development partners to give implementable conditions against these assistances,” finance adviser Dr Salehuddin Ahmed told the media.
Ahmed said that support is needed to carry out the reforms. He pointed out that budgetary support, technical support, and liquidity support, have also been discussed with the development partners.
He said most of the multilateral and bilateral partners came with open minds and they really want to support the people of Bangladesh. The discussions were “fairly” positive and the main focus was on the implementation of the reform programmes.
Central bank officials said the forex reserve is increasing gradually, as the central bank stopped selling dollars to the commercial banks, with new governor Ahsan H Mansur taking office last month.
Also, they said that the reserve will further go up once the fresh foreign loans and aid is made available. Central bank data shows that on September 26 the forex reserve stood at $19.56 billion, according to the BPM6 calculation method from the IMF.
There is also some other good news.
A record amount of foreign currency came as foreign remittances this September, thanks to Bangladeshi expatriates residing in various countries. Data released by the central bank shows that in September some $2.4 billion reached to Bangladesh as remittance through banking channel, up from $2.22 billion in August and $1.91 billion in July this year.
There is a huge task ahead for Bangladesh and its partners, but there are some promising signs.
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