The Bangladesh government is seeking budget support of more than USD 2 billion over the next one year. The government made the move mainly to finance the budget amid a fragile revenue collection situation.
At the moment, there is no alternative to cash dollars to tackle the prevailing problems such as the reserve crisis or the depreciation of taka against dollars. The government has accordingly approached the World Bank for USD 75 million and the Asian Development Bank (ADB) for USD 650 million as budget support.
Apart from that, the Asian Infrastructure Investment Bank (AIIB), the French Development Agency and different other international agencies are likely to provide some budget support too. More than USD 700 million could come from the AIIB and the France Development Agency together.
Bangladesh is currently under negotiations with these agencies. Besides, it is also in talks with China for large budget support.
This information has been availed from the sources in the Economic Relations Division (ERD). The government agency aims to release at least USD 500 million as budget support in the 2023-24 fiscal.
The government needs cash dollars. Dollar inflow increases during procurement when foreign assistance comes through projects. It takes a lot of time, whereas the grants for budget support are released immediately after the approval. So, budget support is the best possible approach now to increase dollar inflowZahid Hussain, former lead economist at the WB office in Dhaka
Speaking regarding this, former lead economist at the WB office in Dhaka, Zahid Hussain told Prothom Alo, “The government needs cash dollars now. Dollar inflow increases during procurement when foreign assistance comes through projects. It takes a lot of time, whereas the grants for budget support are released immediately after the approval. So, budget support is the best possible approach now to increase dollar inflow.”
USD 750 million from World Bank
Bangladesh was about to receive the last instalment of USD 250 million under the Development Policy Credit from the WB in the current fiscal. However, the government reached an agreement with the World Bank to raise the figure to USD 500 million on 27 November last year.
Later, during the spring assembly of the International Monetary Fund (IMF) and the WB last Month, the government of Bangladesh proposed to further raise the figure to USD 750 million. However, the WB is yet to respond in this regard.
The WB is expected to approve the budget support for Bangladesh under the Development Partner Center (DPC) during its board meeting this may. But, the size of the budget support hasn’t been finalised yet.
Bangladesh is currently under negotiations with these agencies. Besides, it is also in talks with China for a large budget support.
The main condition for this DPC loan is to rein in the sale of saving certificates. Besides, there was another condition of the legislation of a new bank company act. Bangladesh met both conditions. If the proposal for budget support gets the approval by this month, then Bangladesh will have the money by the next two weeks.
ADB arranges USD 1.37 billion
Bangladesh is currently in negotiations with the ADB over two budget support proposals – a loan assistance of USD 400 million to deal with the challenges of the country’s graduation from lower developed countries (LDC) and a 250-million-dollar assistance to create job opportunities in vulnerable population areas.
The main conditions for these two loans include, reform of the financial sector, including banking and revenue sector and necessary amendments of laws to ensure good governance. Relevant reliable sources say the ADB is expected to release this loan by next December.
The ADB is also helping Bangladesh to approach different countries and international agencies, including the AIIB and France Development Agency (AFD), for budget support. Bangladesh is expecting USD 400 million from the AIIB and USD 320 million from AFD by the next fiscal.
USD 6.5 billion received in 4yrs
The government sought budget support on an emergency basis following the outbreak of the Covid pandemic. The country received at least USD 6.5 billion as budget support from the WB and other international lending agencies so far.
The ERD officials say the government now requires nearly USD 10 billion a year as foreign assistance
The lenders provided a total of USD 1.77 billion in the 2022-23 fiscal, as updated by the finance ministry. The highest USD 2.6 billion was received as budget support in the 2021-22 fiscal, which were USD 1.09 billion in the previous fiscal and USD 1 billion in the 2019-20 fiscal.
As of the last fiscal, Bangladesh has received a total of USD 11.09 billion under budget support from foreign sources.
The ERD officials say the government now requires nearly USD 10 billion a year as foreign assistance. Some USD 7-8 billion comes from foreign loans with both tough and flexible conditions. The rest comes as assistance. However, seeking assistance through budget support is the fastest approach to increase dollar inflow as the money is released immediately after approval.
*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu.