Foreign loans and grants for Bangladesh

[Joel Ahmed]

https://www.tbsnews.net/bangladesh/foreign-aid-release-hits-10b-first-time-466434

Saifuddin Saif

27 July, 2022, 11:00 pm

Last modified: 27 July, 2022, 11:07 pm

Foreign aid release hits $10b for first time

 

The release of foreign aid has reached a record $10 billion in FY22, thanks to fast utilisation of external loans in some megaprojects nearing completion, more budget support from development lenders and funds for Covid-19 vaccines. 

In the last fiscal year, Bangladesh posted a 26% year-on-year growth in having foreign funds disbursed.  The aid released in FY21 amounted to $7.95 billion, according to the latest report of the Economic Relations Division (ERD). 

Budget support and vaccine purchases account for around $2.6 billion of the external funds released in the last fiscal year. The rest of the assistance was spent on different development projects, said the report. 

In FY21, Bangladesh received $1.09 billion in budget support from development lenders.

ERD officials said the foreign funds released in the last fiscal year helped a lot in propping up dwindling forex reserves. 

Former Director General of Bangladesh Institute of Development Studies (BIDS) Dr Mustafa K Mujeri told The Business Standard that in post-pandemic times, the implementation of foreign-funded projects were speeded up, which led to a rise in disbursements of foreign funds.

The government is also getting a good amount of budget support to meet deficits, he said, adding that availability of such low-interest loans has somewhat taken the pressure off bank borrowing. 

Meanwhile, in the last fiscal year, the Asian Development Bank and Japan released the most funds. The country received $2.6 billion from ADB and $2.2 billion from Japan.

The assistance released from the World Bank stood at $1.7 billion. Besides, the disbursal from Russia and China amounted to $1.2 billion and $1 billion respectively. 

But new commitments of loans from development partners in FY22 have dropped by 13% to $8.2 billion from $9.4 billion a year ago, according to the ERD report.

The World Bank, ADB and Japan have made commitments of over $1.5 billion each, while China has pledged to provide Bangladesh over $1 billion.

According to ERD data, foreign aid to the tune of $48.5 billion has remained in the pipeline after the end of FY22. At the beginning of the fiscal year, the amount in the pipeline stood at $50.34 billion.

In the meantime, Bangladesh repaid principal plus interest amounting to around $2 billion in the last fiscal year to the development lenders. In FY21, the repayments stood at $1.9 billion.

As the grace periods of external loans for various development projects have ended, the repayment pressure of principal is growing.

Dr Mustafa Mujeri said as many foreign-funded projects are nearing completion, debt repayment pressure will go up in the next few years. So the government has to adopt more strategies to increase flexible external loans. 

He suggests speeding up project implementation to increase disbursements of foreign aid now stuck in the pipeline.

He also said exports and remittances should be given importance to reduce dependence on foreign debts in the future.

[Joel Ahmed]

https://www.thedailystar.net/news/bangladesh/news/external-debt-servicing-payment-peak-515b-2030-3080191

External debt servicing: Payment to peak at $5.15b in 2030

Finds ERD in its projections

Rejaul Karim Byron

Wed Jul 27, 2022 08:30 AM Last update on: Wed Jul 27, 2022 09:12 AM

Bangladesh's foreign loan servicing burden will peak in fiscal 2029-30 with repayment of $5.15 billion, which experts deem to be very much within the safe territory -- quelling fears that the country might become the next emerging economy after Sri Lanka and Pakistan to run into external debt distress.

The projection was made by the Economic Relations Division, which manages foreign debt repayment activities, in May-June as part of the government's updated medium-term debt strategy (MTDS).

This fiscal year, $2.78 billion would be paid against foreign loans, up from $2.45 billion last year. Repayment amounts would progressively increase and hit a peak in fiscal 2029-30.

After that, it would successively decline. For instance, in fiscal 2034-35, it would be $4.45 billion.

Similarly, the country's external debt to GDP ratio would also be contracting.

For instance, it would be 13.4 percent in fiscal 2031-32, down from 18.1 percent in fiscal 2021-22, said the International Monetary Fund in its most recent Debt Sustainability Assessment that was published in March.

Historically, Bangladesh's average external debt to GDP ratio has been 18.7 percent. It is projected to come down to 15.1 percent, according to the IMF's DSA calculations.

"Bangladesh remains at a low risk of external and overall debt distress," the IMF said in the report.

External and domestic debt indicators are below their respective thresholds under the baseline and stress test scenarios, it added.

Subsequently, one of the four strategies earmarked in the government's MTDS, which was finalised this month, entails increasing external financing.

The strategy envisages meeting 36 percent of gross financing needs through external financing at concessional and semi-concessional interest rates.

Semi-concessional financing comes with floating interest rates and concessional financing has a fixed interest rate.

Another strategy entails doubling the share of semi-concessional loans from the current level while maintaining the share of traditional concessional financing.

The updated MTDS also ruled out the possibility of issuing any international bonds, which tipped Sri Lanka's debt burden over the hill.

The publication was presented to the IMF staff mission that concluded its nine-day tour of Bangladesh on July 21. The mission endorsed the strategy, it said in its concluding statement.

"Bangladesh's external debt-GDP ratio is so low that even if the cost of debt rises, the chances of the debt burden becoming unsustainable are minimum," said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

However, there are tail risks, which are events with a small probability of happening.

Tail risks mostly come from endogenous factors such as the ongoing Russia-Ukraine war, which has sent the prices of commodities spiralling in the global market, causing a drain on Bangladesh's foreign currency reserves and widening the current account deficit.

"Such a situation cannot be written off," Hussain said.

In future, if exports or remittance, the two main sources of foreign currency for Bangladesh, plummet or imports soar, there would be cash flow constraints on the government.

This would make it tricky to service debt on time.

"Austerity measures might be needed then to maintain debt repayment such that the country does not face any problem in getting loans in future," he said.

Since independence, Bangladesh has been able to repay its foreign loans on time and has never applied for rescheduling of instalments, according to the ERD.

To prevent such a scenario, Hussain advised caution in project selection with foreign funding.

"If the mega projects are not commercially viable, they may end up being mega liabilities. We need to select projects that would have a visible contribution to the economy, which could be in production, export earnings or import cost savings. There must be a concrete contribution, there must be commercial viability."

The source of foreign funding must also be assessed carefully too such that the terms are favourable to the country.

"Are we ensuring all concessional facilities? Do the funds come with conditions that the procurement must be done from a select source, or do we have to make a high down payment? Do we have to take all our advice from them; do the contractor must come from them? These things must be considered."

[Joel Ahmed]

https://bdnews24.com/economy/2yyo6d6vb9

IMF says Bangladesh seeks loan under fund's resilience trust

The creditor's Resilience and Sustainability Trust is designed to help countries ensure sustainable growth, IMF's Asia and Pacific Department director says

 

Bangladesh asked the International Monetary Fund to start talks on a new loan under the creditor's Resilience and Sustainability Trust (RST), which is designed to help countries ensure sustainable growth, said Krishna Srinivasan, director of the IMF's Asia and Pacific Department, in a Tuesday interview.

Bangladesh's $416 billion economy is the first in Asia to put such a request forward to the Washington-based lender as it seeks to ramp up its attention on how to mitigate the impact of climate change.

"The RST comes also with an (upper credit tranche) programme, so it's a joint initiative. The amounts will have to be discussed subsequently," Srinivasan told Reuters. This means that Bangladesh will need a regular IMF-supported programme such as a stand-by agreement or an extended fund facility to be able to get this new type of financing.

"This facility is aimed at addressing transformational changes in countries, notably climate change and pandemic preparedness," he said. "One would hope that other countries would also take advantage of this instrument."

RST funds are capped at 150% of a country's quota or, in Bangladesh's case, the maximum of $1 billion.

Bangladesh is seeking a $4.5 billion loan from the IMF, local newspaper The Daily Star reported on Tuesday.

The IMF expects to begin lending from the RST in October. Low-income and vulnerable middle-income countries can apply to get the financing, which has channelled special drawing rights from countries with strong external positions, according to the fund's website.

The loans will have a 20-year maturity and a 10-1/2-year grace period.

"We would hope that it is one among more to come down the road," Srinivasan said.

 

[Joel Ahmed]

https://today.thefinancialexpress.com.bd/last-page/annual-debt-servicing-crosses-201b-1658945036

BD begins repaying big foreign loans

Annual debt servicing crosses $2.01b

 FHM HUMAYAN KABIR |  July 28, 2022 00:00:00

Bangladesh's debt servicing crossed US$2.01 billion in the last fiscal year as payment for some previously borrowed big loans began, officials say, amid reported strains on the country's foreign-exchange reserves.

Out of the debt-servicing amount, $1.42 billion is paid as the principal and $468.36 million as interest for medium-to-long-term (MLT) outstanding loans during the period from July 2021 to June 2022, Economic Relations Division (ERD) data show.

This is for the first time that the debt serving leapt over the two-billion mark, and economists say the amount would climb up when repayment of foreign loans against some megaprojects would start in two years or so.

In the previous FY2021, Bangladesh repaid $1.91 billion worth of funds against outstanding loans, $1.73 billion in FE2020, $1.59 billion in FY2019 and $1.41 billion in FY2028, as per the official count.

"The debt servicing will be rising in the coming years as the grace period for many big loans will be finished. So, the loan repayment will be rising," also says a senior ERD official.

Meanwhile, the country's foreign-aid inflow hit a record US$10 billion in the last fiscal year (FY), 2021-22, some 25-percent higher than previous fiscal's.

The foreign development partners disbursed $7.97 billion worth of MLT loans and grants during the previous FY2021, they said Wednesday.

The ERD officials said an impressive amount of external assistance released by three major development partners-the Asian Development Bank (ADB), Japan and the World Bank (WB)-boosted the amount of foreign aid.

According to the ERD statistics, the foreign lenders disbursed $9.81 billion in loans and $197.62 million in grants during the just-concluded FY2022.

Out of the $10 billion total assistance during the last July-June period, the ADB alone released some $2.2 billion, the Japan International Cooperation Agency (JICA) $1.8 billion and the WB $1.6 billion.

Besides, Russia disbursed nearly $1.2 billion and China $800 million worth of aid during the past fiscal.

Meanwhile, the development partners released a total of $7.38 billion worth foreign aid in the FY2020 and $6.54 billion in FY2019.

They in the last FY2022 also made a significant amount of MLT loans and grants commitment through signing deals for $8.20 billion.In the previous FY2021, Bangladesh had received commitments for $9.44 billion worth of MLT loans and grants. A senior ERD official said the government received some $1.13 billion as budgetary support during last fiscal which also contributed to the record-high foreign-aid inflow. Out of the $8.20 billion worth of aid commitments in the last fiscal, the development partners confirmed $7.83 billion in concessional loans and $377.89 million in grants.

The disclosure on dollar-denominated aid comes on the day when government high-ups dispelled 'scaremongering' over foreign-exchange reserves-some of the analysts drawing into reference the Sri Lanka situation.

[email protected]

[Joel Ahmed]

https://www.tbsnews.net/bangla/বাংলাদেশ/news-details-105930

সাইফুদ্দিন সাইফ

13 August, 2022, 11:30 pm

Last modified: 13 August, 2022, 11:30 pm

আগামী তিন বছরে ৯.৪৬ বিলিয়ন ডলার দেওয়ার প্রতিশ্রুতি এডিবির

গত ২৪ জুলাই বাংলাদেশ লেন্ডিং পাইপলাইন ২০২৩-২০২৬-এর হালনাগাদ তালিকা অর্থনৈতিক সম্পর্ক বিভাগে (ইআরডি) পাঠিয়েছে ম্যানিলাভিত্তিক ব্যাংকটি। হালনাগাদ তালিকার আওতায় বাংলাদেশ প্রতি বছর গড়ে ৩ বিলিয়ন ডলারের বেশি ঋণ পাবে এডিবির কাছ থেকে।

 

মহামারি-পরবর্তী পুনরুদ্ধার অব্যাহত রাখতে এবং বৈশ্বিক অনিশ্চয়তা থেকে উদ্ভূত প্রভাব মোকাবিলায় সহায়তার জন্য আগামী তিন বছরে বাংলাদেশকে প্রায় ৯.৪ বিলিয়ন ডলার ঋণ দেওয়ার প্রতিশ্রুতি দিছে এশীয় উন্নয়ন ব্যাংক (এডিবি)।

গত ২৪ জুলাই বাংলাদেশ লেন্ডিং পাইপলাইন ২০২৩-২০২৬-এর হালনাগাদ তালিকা অর্থনৈতিক সম্পর্ক বিভাগে (ইআরডি) পাঠিয়েছে ম্যানিলাভিত্তিক ব্যাংকটি। হালনাগাদ তালিকার আওতায় বাংলাদেশ প্রতি বছর গড়ে ৩ বিলিয়ন ডলারের বেশি ঋণ পাবে এডিবির কাছ থেকে।

এর আগে ২০২২-২৪ পাইপলাইনে এডিবির ঋণ প্রস্তাব ছিল ৭.৯১ বিলিয়ন ডলার। 

ইআরডি ও এডিবি কর্মকর্তারা জানান, লেন্ডিং পাইপলাইনের আওতায় এডিবি মোট ৪৪টি প্রকল্পে ঋণ দিতে সম্মতি জানিয়েছে। সরকারের বিভিন্ন সংস্থার সঙ্গে আলোচনা করে এ তালিকা চূড়ান্ত করা হয়েছে।

বাংলাদেশ কান্ট্রি প্রোগ্রামিং মিশন (সিপিএম) রিপোর্ট-২০২২ অনুযায়ী, এডিবি দেশের প্রধান প্রধান অবকাঠামোগুলোর অব্যাহত উন্নতির জন্য সহায়তা দেবে।

আন্তঃআঞ্চলিক বাণিজ্য বাড়াতে, বাজারে আরও ভালো প্রবেশাধিকার নিশ্চিতে এবং চাকরির সুযোগ ও বেসরকারি খাতে বিনিয়োগের সুযোগ বাড়াতে প্রয়োজনীয় সংস্কারসহ সড়ক ও রেলপথ করিডোরের উন্নয়নে সহায়তা করা হবে বলে উল্লেখ করা হয়েছে প্রতিবেদনে।

জলবায়ু পরিবর্তনের প্রভাব প্রশমন ও অভিযোজনে সমন্বিত সমাধানও দেবে এডিবি।

পরিচ্ছন্ন জ্বালানিতে রূপান্তর ত্বরান্বিত করার জন্য জ্বালানি দক্ষতা ও নবায়নযোগ্য শক্তি ব্যবহারের সুযোগ অনুসন্ধান করা হবে বলেও প্রতিবেদনে উল্লেখ করা হয়েছে। এছাড়া টেকসই পরিবহন গড়ে তোলার জন্য এডিবি ম্যাস র‍্যাপিড ট্রানজিট ও বৈদ্যুতিক বাহনের উন্নয়নকে সহায়তা দেবে।

মোট ছয়টি খাতে ভাগ করে অগ্রাধিকার ভিত্তিতে প্রকল্প তালিকা তৈরি করেছে এডিবি। 

বাংলাদেশ লেন্ডিং পাইপলাইন ২০২৩-২৫-এর তথ্য বলছে, সবচেয়ে বেশি ঋণ পাবে পরিবহন খাত। আগামী তিন বছরে এ খাতে ২.৯ বিলিয়ন ডলার ঋণ দেবে এডিবি। শিক্ষা ও স্বাস্থ্য খাতে ২.৩৫ বিলিয়ন, পানি ও নগর খাতে ১.৩৯ বিলিয়ন, আর্থিক খাতে ১.৩ বিলিয়ন, জ্বালানিতে ১.০৭ বিলিয়ন এবং কৃষি খাতে ৪৪১ মিলিয়ন ডলার দেবে। 

এডিবি আগামী তিন বছরে কয়েকটি সড়ক ও রেল প্রকল্পেও অর্থায়ন করবে। যেমন আখাউড়া থেকে লাকসাম পর্যন্ত রেললাইনকে ডুয়েলগেজ ডাবল লাইনে রূপান্তর প্রকল্পে ৩০০ মিলিয়ন ডলার দেবে সংস্থাটি।

এছাড়া টঙ্গী-ভৈরব-আখাউড়া লাইলনের মিটারগেজকে ডুয়েলগেজ ডাবল রেললাইনে রূপান্তরে আরও একটি প্রকল্প এডিবি স্ট্যান্ডবাই রেখেছে। 

সংস্থাটি বলছে, সব প্রক্রিয়া শেষ করে এই প্রকল্পে ২০২৩ সালে অর্থয়ান করা সম্ভব হবে।

সরকার ইতিমধ্যে ঢাকা-চট্টগ্রাম রুটের রেললাইনকে ডুয়েলগেজ ডাবল লাইনে রূপান্তরের কাজ শুরু করেছে। ৭২ কিলোমিটার দৈর্ঘ্যের আখাউড়া-লাকসাম অংশ এই প্রকল্পেই অন্তর্ভুক্ত। চলতি বছরের জুন পর্যন্ত এ কাজের অগ্রগতি ৮৫ শতাংশের বেশি।

অন্যদিকে ঢাকা-টঙ্গী ডুয়েলগেজ ডাবল লাইনের কাজও চলছে।

ঢাকা-চট্টগ্রাম পিপিপি হাইওয়ে প্রকল্পের জন্যও ৪০০ মিলিয়ন ডলার দেবে এডিবি।

শহর দুটিতে বাণিজ্য বৃদ্ধি করতে ও বিদ্যমান হাইওয়েতে যানজট কমাতে বাংলাদেশকে নতুন এক্সপ্রেসওয়ের ডিজাইন প্রণয়নে সহায়তা করছে এডিবি।

ঢাকা-নর্থওয়েস্ট করিডোর রোড প্রজেক্ট প্রকল্পে পরপর দুই বছরে মোট ৭০০ মিলিয়ন ডলার ঋণ পাওয়া যাবে সংস্থাটির কাছে থেকে ।

অন্যদিকে এ সময়ে গাজীপুরে ধীরাশ্রম ইনল্যান্ড কনটেইনার ডিপো নির্মাণে ২০২৩ সালে এডিবির কাভহ থেকে ১০০ মিলিয়ন ডলার ঋণ পাওয়া যাবে। 

ঢাকা ম্যাস র‌্যাপিড ট্রানজিট ডেভেলপমেন্ট প্রজেক্ট (লাইন ৫ সাউদার্ন রুট), এসএএসইসি ইন্টিগ্রেটেড ট্রেড ফ্যাসিলিটি প্রজেক্টসহ আরও কয়েকটি প্রকল্প এডিবির পাইপলাইন থেকে অর্থায়ন পাবে।

শিক্ষা ও স্বাস্থ্য খাতের অধীনে স্বাস্থ্যসেবা উন্নয়ন প্রকল্পে সহায়তা হিসেবে ৫০০ মিলিয়ন ডলার দেবে এডিবি। বৈশ্বিক ঋণদাতা সংস্থাটি টিকা উৎপাদন ও রেগুলেটরি আপগ্রেডেশনের জন্য দেবে ৩০০ মিলিয়ন ডলার।

এছাড়া সেকেন্ড স্ট্রেংদেনিং সোশ্যাল রেজিলিয়েন্স প্রোগ্রাম বাস্তবায়নে ২৫০ মিলিয়ন ডলার ঋণের আশ্বাস দিয়েছে এডিবি। 

দক্ষতা উন্নয়নের জন্য সংস্থাটি দুই বছরে ৬০০ মিলিয়ন ডলার ঋণ দেবে। পাশাপাশি পরবর্তী প্রজন্মের মাধ্যমিক শিক্ষার উন্নয়নেও সহায়তা প্রদান করবে।

এছাড়া টেকসই অর্থনৈতিক পুনরুদ্ধার কর্মসূচির আওতায় ২০২৩ সালে এডিবি বাংলাদেশকে ২৫০ মিলিয়ন ডলার বাজেট সহায়তা দেবে।

জলবায়ু পরিবর্তন শক্তিশালীকরণ কর্মসূচির আওতায় বাজেট সহায়তা দেওয়া হবে ৫০০ মিলিয়ন ডলার। ২০২৩ ও ২০২৫ সালে দুই কিস্তিতে এ ঋণ দেওয়া হবে।

'স্ট্রেংদেনিং ইকোনমিক স্ট্রাকচার ফর এলডিসি গ্র্যাজুয়েশন' শীর্ষক একটি কর্মসূচির আওতায় ২০২৫ সালে বৈশ্বিক ঋণদাতা সংস্থাটির কাছ থেকে বাংলাদেশ ২৫০ মিলিয়ন ডলার পাবে।

এডিবি দুই ধরনের শর্তে ঋণ দেয়। সফট লোন দেওয়া হয়ে সাধারণ মূলধন সম্পদ (রেয়াতি) থেকে। এই ঋণ দেয়া হয় নির্দিষ্ট ২ শতাংশ হারে। আর সাধারণ মূলধন সম্পদ (নিয়মিত) থেকে ঋণ দেওয়ার ক্ষেত্রে সুদ নির্ধারিত হয় 'সেকিউরড ওভারনাইট ফাইন্যান্সিং রেট' ও 'কনট্রাকচুয়াল স্প্রেড' (০.৫%)-এর ভিত্তিতে। 

দুধরনের ঋণ পরিশোধের মেয়াদকালই ২৫ বছর এবং গ্রেস পিরিয়ড ৫ বছরের। আর অবিতরণকৃত ঋণের ওপর ০.১৫ শতাংশ কমিটমেন্ট চার্জও আছে।

বাংলাদেশ ইনস্টিটিউট অভ ডেভেলপমেন্ট স্টাডিজের সাবেক মহাপরিচালক ড. মোস্তফা কে মুজেরি দ্য বিজনেস স্ট্যান্ডার্ডকে বলেন, 'এরকম ছাড়ের ঋণ আমাদের আরও দরকার। যা আমাদের বর্তমান অর্থনীতি পরিস্থিতির উন্নতি করতে আনতে সাহায্য করবে। প্রত্যাশিত সুফল পেতে চাইলে আমাদের যত দ্রুত সম্ভব প্রকল্প বাস্তবায়ন করতে হবে।'

[Joel Ahmed]

The World Bank has promised a loan of $1.5 billion to Bangladesh for 55 new projects, said Mercy Tembon, World Bank's outgoing country director for Bangladesh and Bhutan.

"In the last 3 years, the World Bank has released about $8 million for Bangladesh. The World Bank has committed to finance $1.5 billion in 55 new projects for Bangladesh," said Mercy Tembon during her farewell meeting at the Ministry of Planning in the Sher-e-Bangla Nagar area of the capital on Monday (22 August).

[Joel Ahmed]

https://www.tbsnews.net/bangladesh/only-income-generating-loans-will-be-taken-development-partners-lgrd-minister-483982

TBS Report

25 August, 2022, 09:55 pm

Last modified: 25 August, 2022, 09:59 pm

Only income generating loans will be taken from development partners: LGRD minister

He said this yesterday speaking as chief guest at a discussion on 'Bangabandhu's work and biography’ and Doa Mahfil programme

 

Only those investments which would be profitable for the country, or income generating, will be taken from development partners after scrutiny, said Local Government, Rural Development and Cooperatives Minister Md Tajul Islam.

The minister also said various development partners, including different countries and organisations, expressed interest in investing about $11 billion in the overall development of the country, including the development of infrastructure.

He said this yesterday speaking as chief guest at a discussion on 'Bangabandhu's work and biography' and Doa Mahfil programme, said a press release.

The local government division organised the programme at the Department of Public Health and Engineering in the capital on the occasion of National Mourning Day.

The minister said, "If we invest money given by development partners in various productive sectors, then the country will be in a profitable position even after paying off the loans. Loans are taken by all countries for the development of their countries, welfare of their people, to improve their standard of living. Loans of all countries are paid by their people, because the money that the government uses to repay the debt is basically the people's money."

He said some people cannot appreciate the unprecedented development that has taken place in the country under the leadership of Prime Minister Sheikh Hasina. After the assassination of Bangabandhu on 15 August in 1975, the development of the country stopped, he continued. 

The country turned from poor to poorer, he went on. The country was known as a nation of beggars and poor people at that time, he said.

The Public Health Engineering Department's Chief Engineer, Md Saifur Rahman, LGED Chief Engineer Sheikh Mohammad Mohsin, National Institute of Local Government Director General Saleh Ahmad Mozaffar, and Dhaka WASA Managing Director Taqsem A Khan, also spoke at the programme chaired by Local Government Division Secretary, Mohammad Mezbah Uddin Chowdhury.

 

[Joel Ahmed]

https://www.thedailystar.net/opinion/views/news/imf-loan-talks-we-need-prepare-3103171

IMF Loan Talks: Here's how we need to prepare

Ahmad Ahsan

Thu Aug 25, 2022 10:00 PM Last update on: Fri Aug 26, 2022 12:17 AM

Two points stand out in the International Monetary Fund's (IMF) statement from last week about the current economic situation in Bangladesh. First, Bangladesh is "not in a crisis situation." Second, any economic programme to address the current challenges to our economy will be the government's programme. Specifically, the statement said, "It is the authority's programme and our efforts will be focused on collaborating with them to design a programme which will support them in addressing their long-term structural issues."

Bangladeshi economists have also pointed out we are not in a crisis but facing difficult external conditions that need firm handling so that they do not become one. With four to five months of foreign exchange reserves and low foreign debt, we have enough ammunition to address short-term needs, barring other big shocks. As announced by the Fund, the discussions on this programme will take place in October.

With these positive developments and government actions to lower imports, such as depreciating the currency and allowing banks to trade more freely, the dollar kerb market is calmer. As I write, the dollar has fallen there – i.e., the taka has regained value – by 10 percent over the last 10 days.

At the same time, as the government knows, there is no room for complacency or errors made in haste. Instead, let us use the current challenge to strengthen our economy.

As a previous August 3 IMF statement puts it, the reality is that our economy faces "a sharp deterioration in external conditions." The immediate issue is not foreign debt but rather the record-breaking trade deficit of USD 33 billion and the current account deficit of USD 19 billion – i.e., the deficit even after including the USD 22 billion of remittances receipts sent by heroic Bangladeshi workers abroad. To put things in perspective, last year's current account deficit increased nearly five times over the FY 2021 deficit and is almost four times the average current account deficit of the past five years.

Current account deficits are fundamentally the result of spending more than our income or, what is the same, importing more goods and services than we export. So, managing the current account will mean that our imports will need to grow markedly less than our exports in the next few years.

The immediate driver behind the high external deficits has been the spike in energy, fertiliser, food, and edible oil import prices. But that is not all. Even without these import price increases the current account deficit of FY 2022 would have been significant – perhaps twice that of the previous year.

That is because long-pending unaddressed structural weaknesses have made the economy and exports less diversified and competitive. These problems include low revenues and inadequate public expenditures, made worse by weak management; a strained financial sector burdened by non-performing loans, weak governance and interest rate caps; weakness in infrastructure, energy and urban development planning – all of which lower our economy's competitiveness.

More fundamentally, an insufficiently trained labour force and a burdensome investment climate constrain our economy, as evidenced by the minimal foreign direct investment inflows. These are not long-term but pressing matters. Because of these weaknesses, we excessively depend on foreign services and skilled expatriate workers. Thus, our gross external payments for these services have almost doubled over the past five years to approximately USD 14 billion.

One driver of our large deficit is that our real exchange rate appreciated by more than 70 percent over the past decade, which made imports cheaper and our exports more expensive. That needed a correction. The depreciation of the taka by about 10 percent over the past few months has been one response. However, signalling that the exchange rate may still be unsettled, the kerb rate premia – the difference between the interbank rate and the kerb rate – remains at about 14 percent.

Thus, we will need realistic thinking. Assuming that energy prices will steadily decline is not warranted, given that winter is coming to Europe and North America. Even if Iranian oil enters the global market, it will provide only one percent of demand. European countries are stocking up and contracting oil and LNG supplies to avoid the perils of an unheated cold winter. Facing these conditions and high inflation, European and American demand for our exports will likely be subdued, even with some switching to our cheaper garments products. A global food shortage and rising prices are also all but guaranteed. Together, these ingredients can lead to deeper and longer-term economic difficulties and even a crisis for globalised developing economies such as ours.

Further, economic events during times of uncertainty, such as now, can be sudden and unexpected, as we have already discovered. It becomes critical for governments to stay ahead of events by preparing a well-coordinated programme to stabilise the economy and be ready for contingencies.

How should the government prepare such a coherent, well-coordinated programme? There needs to be three elements in it.

First, as good civil servants will tell you, strong political leadership will be imperative. For speed and authority, it may be best to organise a small economic committee of ministers that has the confidence of the prime minister to prepare and implement such a programme.

They and their civil service team should prepare large parts of the economic stabilisation and recovery policy package in advance of the IMF's visit, negotiate with them when they arrive, and steer it through Cabinet approval. That will enable better coordination and political support. Leaving this task alone with the Ministry of Finance and the Bangladesh Bank could slow things.

A historically good example of this comes from India during its foreign exchange crisis of 1991, when, with the support of the IMF, they prepared and implemented a path-breaking economic reforms package. Reputed Indian economists say that was the programme that generated 20 years of rapid economic growth. That reform programme was almost wholly Indian prepared by then Finance Minister Manmohan Singh with the partnership of Commerce Minister P Chidambaram, with technical inputs provided by then Finance Secretary Montek Ahluwalia and other civil servants. Certainly, the steadfast political support of PM Narasimha Rao made it possible. Other examples are Thailand's Cabinet Committee for Economic Policy, Indonesia's Industry and Economic Committee, and Malaysia's Special Cabinet Committee to protect the Economy and Labour market against Covid-19.

Who should be the members of such a committee in Bangladesh? The ministers of finance, agriculture, commerce and planning perhaps, along with the participation of the Governor of the Bangladesh Bank. The Foreign Ministry can advise on fraught matters such as assuring Europe and the US if we import oil from Russia. Including the road transport and bridges minister can provide political heft.

Second, while the finance minister does not need to be the chair of such a committee, the secretariat of this committee has to be the Ministry of Finance, and it has to be staffed by the most experienced civil servants in finance and the other ministries. Finance, in particular, is a ministry where nothing can replace the experience of working there for years. Difficult policy decisions about revenues, expenditure, subsidies, exchange rates, interest rates, bank governance, food and energy prices, regulations and safety nets will be needed. Only civil servants with the experience and knowledge of their subject will have the confidence to lay down situations and options most starkly to their political superiors. If this link in the chain falls, the political masters will be uninformed and blindsided.

Third, outside experts and stakeholders need to be consulted not only for their advice, but also to communicate the objective situation and get their support. Bangladesh has several former governors, finance secretaries and other civil servants who have effectively dealt with the IMF and with difficult economic situations in the past. We also have competent economists, including some with first-hand experience working in crisis-prone countries. Bangladesh also has thoughtful stakeholders in the chambers of commerce and business associations who can offer valuable perspectives. Finally, major political figures should also be taken into confidence to at least attempt to get unity behind the recovery programme.

Dr Ahmad Ahsan is the director of the Policy Research Institute (PRI) of Bangladesh and a former World Bank economist and Dhaka University faculty member. Views expressed in this article are the author's own.

[Joel Ahmed]

https://bonikbarta.net/home/news_description/311884

বাংলাদেশকে ৩০০ কোটি ডলার দেবে দক্ষিণ কোরিয়া

বণিক বার্তা অনলাইন

আগস্ট ৩১, ২০২২

দক্ষিণ কোরিয়া আগামী পাঁচ বছরে বাংলাদেশকে ৩০০ কোটি ডলার সহায়তা দেবে বলে জানিয়েছেন দেশটির রাষ্ট্রদূত লি-জ্যাং কিউন। তিনি জানান, বাংলাদেশ ও দক্ষিণ কোরিয়ার মধ্যে গতবছর রেকর্ড পরিমাণ বাণিজ্য হয়েছে। আজ বুধবার ডিপ্লোমেটিক করেসপন্ডেন্ট অ্যাসোসিয়েশন, বাংলাদেশ আয়োজিত ডিক্যাব টকে তিনি এ কথা জানান।

বাংলাদেশে নিযুক্ত রাষ্ট্রদূত বলেন, গত বছর দুদেশের মধ্যে দ্বিপক্ষীয় বাণিজ্য হয়েছে ২৩০ কোটি ডলার। এর আগে রেকর্ড বাণিজ্য হয়েছিল ২০১১ সালে এবং ওই বছর বাণিজ্য হয়েছিল ১৮০ কোটি ডলার। কভিড ও বৈশ্বিক পরিস্থিতির মধ্যেও এ বছর জুলাই পর্যন্ত দুই দেশের মধ্যে বাণিজ্য হয়েছে ১৮০ কোটি ডলার এবং এটি অত্যন্ত উৎসাহব্যঞ্জক।

তিনি বলেন, দক্ষিণ কোরিয়ায় এ বছর বাংলাদেশ থেকে ৪ হাজারেরও বেশি কর্মী যাবে। আরো বাংলাদেশী কর্মী পাঠাতে আগ্রহী।গত বছর সেপ্টেম্বর থেকে আবার পাঠানো শুরু করেছি। চলতি বছর জানুয়ারি-আগস্ট পর্যন্ত বাংলাদেশ থেকে ৩ হাজারেরও বেশি কর্মী গিয়েছেন।

লি-জ্যাং কিউন বলেন, কোরিয়াতে এখন ১০ হাজার বাংলাদেশী কর্মী আছেন। কোরিয়ায় বাংলাদেশী জনশক্তি কম হলেও বাংলাদেশে রেমিট্যান্স প্রেরণে কোরিয়া ১০ নম্বর অবস্থানে। রাষ্ট্রদূত বলেন, দক্ষিণ কোরিয়ার সহযোগিতায় ঢাকায় একটি টেকনিক্যাল ইনস্টিটিউট আছে। এখন আমরা সিলেট ও খুলনায় আরো দুটি খোলার চিন্তা করছি।

[Joel Ahmed]

https://www.tbsnews.net/economy/exchange-rate-results-decline-outstanding-external-debt-585374

Saifuddin Saif

15 February, 2023, 11:05 am

Last modified: 15 February, 2023, 12:20 pm

RELATED NEWS

Exchange rate results in decline in outstanding external debt

https://www.youtube.com/watch?v=w8-hB9MlPsc

Bangladesh's outstanding external debt to gross domestic product (GDP) ratio declined to 13.78% at the end of fiscal 2021-22, compared to 16.9% in the previous fiscal year, mainly due to variations in exchange rates, according to recently released data by the Economic Relations Department (ERD).

It resulted in a $4.03 billion decline in the gross foreign loan, and the outstanding amount stood at $55.60 billion last year.  

The outstanding external debt was supposed to be a record $59.647 billion in the last financial year. But the amount dropped as the dollar appreciated amid the Russia-Ukraine war and other foreign currencies, including special drawing rights (SDRs), depreciated against the greenback.

According to ERD data, Bangladesh's outstanding foreign debt was $50.879 billion as of fiscal 2020-21.

In the last fiscal year, $10 billion was released in foreign debt. And Bangladesh has repaid loans of $1.526 billion to various development aid agencies.

As a result, the remaining $8.767 billion was supposed to be added to the outstanding debt. But the total foreign loan dropped by $4 billion in the calculation of the ERD.

According to ERD officials, Bangladesh's debt liability has decreased due to the reduction of outstanding debt. This has also reduced the external debt to GDP ratio, which is good for the country.

According to officials, the government is currently in a profitable position on paper. But later, when the dollar rate stabilises, this $4 billion can return to being outstanding. 

It is like the stock market. A share of Tk100 increased by Tk200 today, and it will be seen that it has decreased by Tk100 tomorrow. The reason for a valuation adjustment is profit or loss; it must be determined on the basis of facts. When the share is cashed, the amount of profit or loss depends on that time, they added.

Zahid Hussain, former lead economist of the World Bank's Dhaka Office, said that outstanding foreign debt is decreasing in books. Whether Bangladesh has actually benefited will depend on the exchange rate at the time of debt repayment.

"For example, suppose we took a loan in Japanese yen. The agreement stipulates that the loan must be repaid in yen. If one dollar costs 100 yen when I borrow, my liability is 100 yen," he said.

"If the price of one dollar becomes 110 yen at the time of return, then, by buying 100 yen for less than one dollar, we can give back. As the yen depreciates, we will benefit," he added.

The noted economist said that if the dollar depreciates after six months, the debt will increase again.

"Whether we make a profit or a loss depends on the exchange rate at the time of the refund," he added.

According to the people concerned, the dollar has skyrocketed over the past year and a half due to the situation brought on by the Russia-Ukraine war. Again, there is a sign of stabilisation over the last three months.

In this situation, the profit or loss of Bangladesh on its non-dollar-denominated debt, including SDR, depends on the rise and fall of dollar price in the international market.

According to ERD data, of its total foreign loan, Bangladesh has taken the highest 42% in SDR until fiscal 2021-22, followed by 33% in dollars, 16% in Japanese yen, and 3% in euros.

According to officials and economists, due to the exchange rate, Bangladesh often receives an additional amount when taking out loans. In such a recent example, the country is getting $200 million in addition to the loan it had sought from the International Monetary Fund (IMF).

Originally, the IMF loaned 3.3 billion SDR to Bangladesh, which was first estimated at $4.5 billion. But the country now expects to receive $4.7 billion as the dollar appreciates.

Bangladesh will receive the IMF loan in seven instalments over three and a half years. Whether the country will get the $4.7 billion depends on the exchange rate at the time of the loan's release. The value of SDRs against the dollar may reduce Bangladesh's borrowing capacity. And it may increase the capacity again.

[Joel Ahmed]

https://www.tbsnews.net/economy/foreign-aid-commitments-fall-43-disbursement-21-627898

Saifuddin Saif

07 May, 2023, 10:25 pm

Last modified: 08 May, 2023, 10:18 am

Foreign aid commitments fall 43%, disbursement 21%

Loan repayments increased by 29% in the July-March period of FY23 compared to the same period of FY22

 

The year-on-year disbursements and commitments of foreign loans from development partners have decreased in the first nine months of the current fiscal year, which may intensify pressure on the country's foreign exchange reserves.

According to the Economic Relations Division (ERD) of finance ministry data, foreign aid disbursement has decreased to $5.36 billion in the July-March period of FY23, registering a 21% fall compared to $6.79 billion in the same period of FY22.

In addition, commitments of foreign aid declined by 43% to $3.07 billion in the nine months of this fiscal year, down from $5.43 billion in the corresponding period of the last fiscal year.

However, the government's loan repayments increased by 29% in this period of the current fiscal compared to the same period last fiscal.

According to ERD officials, the disbursement did not see a rise due to the lack of capacity to implement the ongoing development project. In addition, the development partners released funds for budget support and vaccine purchase in the last financial year. Only $250 million in budgetary support has been received from the Asian Infrastructure Investment Bank (AIIB) till March of the current fiscal year.

ERD data shows that Japan's International Development Cooperation Agency (Jica) made the largest disbursement in the July-March period, releasing $1.3 billion.

Among other development partners, the World Bank has released $854.29 million, the Asian Development Bank $801.93 million, Russia $747.2 million, and China $637.67 million.

ERD sources said commitments in the first nine months of the current fiscal fell by $2.35 billion compared to the same period last year.

Regarding the drop in commitments from development partners, ERD officials said the government is taking fewer loans due to the higher Secured Overnight Financing Rate (SOFR) in the international market and because of this, the commitment has decreased.

Currently, the SOFR rate is above 4%.

According to ERD data, the highest commitment received was from Jica — around $1.29 billion in the July-March period of FY23. In addition, commitments of $844.75 million from the Asian Development Bank (ADB), $300 million from the World Bank and $253.5 million from AIIB have been received.

The total debt repayments by the government increased in March as $329 million (principal and interest) against the Rooppur power project loan was paid.

Including Rooppur debt repayment, the government has paid a total of $2.059 billion in foreign loans during July-March of the current financial year, which was $1.595 billion in the same period of the previous year. 

[Joel Ahmed]

A "Framework Arrangement” has been signed between the Government of the People’s Republic of Bangladesh and the Government of the Republic of Korea to provide soft loan of US$ 3.00 billion during the period 2023-2027.

 

[Joel Ahmed]

https://www.tbsnews.net/economy/external-debt-surges-past-100b-mark-813091

Zainal Abadin

22 March, 2024, 10:40 am

Last modified: 22 March, 2024, 02:25 pm

External debt surges past $100b mark

Economist Zahid Hussain, however, thinks the country’s foreign debt is not too high in proportion to GDP size

 

Bangladesh's external debt has surpassed the $100-billion mark for the first time, primarily driven by government borrowing to fund various development initiatives, including large-scale projects.

According to recent data released by the Bangladesh Bank, as of December last year, the country's foreign debt stood at $100.64 billion, marking an increase from $96.55 billion recorded in the previous quarter.

Nearly 80% of this external debt was taken by the government and the remaining 20% was sourced by the private sector, as per Bangladesh Bank statistics.

The nation's overall foreign debt experienced a notable increase over the past year, despite a decrease in private-sector borrowing. This surge is primarily attributed to the government's significant borrowing from foreign sources, which rose by $7.48 billion in 2023.

With borrowing on the rise, the pressure on repayments is also intensifying. In fiscal year 2022-23, the government repaid $2.79 billion in principal and interest to foreign lenders. The figure is projected to exceed $3.65 billion by the end of the current fiscal year. Looking ahead, the repayment burden is estimated to soar to $4.21 billion in the next fiscal year, according to assessments provided by the finance ministry.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, however, told TBS, "Our $100 billion foreign debt is not too high in proportion to the size of our GDP. Many countries with similar GDPs have higher external debts than ours."

However, the source of the loans and the terms on which these were taken are a cause for concern, he said. "If we fail to meet the conditions, we may face difficulties in the future."

He also said, "We must ensure that the loans are used properly and that we generate income from them. Otherwise, we will not be able to repay the loans on time. If we fail to implement projects on time and complete their work within the initial budget, we may face difficulties.

"Therefore, we need to increase our dollar income alongside our foreign debt. Otherwise, it will be distressing in the future."

Bangladesh's external debt has increased by over 200% over the last decade from $29.3 billion in June 2013 to $100 billion by December 2023.