Bangladesh will remain a priority market for the Asian Infrastructure Investment Bank (AIIB) in 2019 despite infrastructure stakeholders’ concerns about inflationary pressures and their projected depreciation of the taka.
According to the inaugural Asian Infrastructure Finance report there continue to be significant infrastructure investment opportunities across Asia, including in Bangladesh, despite current market uncertainty and short-term challenges.
In contrast to other countries in the report, a marginal reduction in infrastructure borrowing costs over the next 12 months is expected in Bangladesh due to a more competitive domestic financing environment. In other words, lending spreads are expected to narrow as the financial sector strengthens, due to more long-term lenders in the market.
However, currency volatility could affect project financing, although multilateral development banks are expected to help with the hedging challenge.
“Bangladesh is a fast-growing economy and its improving economic conditions presents a great opportunity to address infrastructure shortfalls,” said AIIB Vice President Policy and Strategy Joachim von Amsberg. “We remain committed to working with the Bangladeshi government and other partners to identify infrastructure projects that are financially sound and have the potential for significant economic impact.”
AIIB is actively reviewing several projects in the transport, energy and water sectors including the Mymensingh Kewatkhali Bridge Project and the Sylhet to Tamabil Road Upgradation Project. To date, AIIB’s Board of Directors has approved up to USD274 million for three projects in the energy sector.
As governments grapple with the need for macroeconomic stabilization and sustaining a high level of infrastructure investment to meet growing demands, AIIB is developing strategies to help its members respond to short and long-term challenges in infrastructure development.
“There is growing awareness of Bangladesh’s economic potential,” said AIIB Principal Economist Dr. Jang Ping Thia. “Improving on construction costs and project implementationwould further accelerate private sector investments.”
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