Bangladesh receives record $1.98b foreign loans in pandemic

The government received a record 1.98 billion US dollar in loans from donor countries and agencies in June amid the coronavirus (COvid-19) pandemic.

The previous highest total foreign loans in a month for Bangladesh was $1.43 billion in June 2018, reports bdnews24.com.

In the fiscal year that ended on June 30, the country received a total of $7.27 billion in foreign loans, a record for a financial year with 17.2 per cent year-on-year growth.

And more than half of the amount, or $3.76 billion, came in the last four months of the fiscal year after the government detected the first coronavirus cases in the country.

“Besides implementing the stimulus package domestically to offset the impact of the pandemic, the government applied for loan assistance by depicting the correct picture of our economy. The donors responded well after we called for help,” said Finance Minister AHM Mustafa Kamal.

Though the economy almost stalled for the last three months of fiscal 2019-20 due to the outbreak, the government did not face a big crisis, thanks to “good” loan flows from abroad, said Ahsan H Mansur, an economic researcher.

“The situation had fuelled the government’s tendency to borrow from the banks. It had appeared once that the government’s bank borrowing would cross Tk 1 trillion. But the foreign loans finally kept the government from borrowing from local banks and the total bank loans stood at about Tk 600 billion.

Mansur, executive director of Policy Research Institute, also thinks that the foreign loans contributed to foreign currency reserves surpassing $38 billion for the first time.

Bangladeshi policymakers had to meet the donors in Paris for loans in the so-called Paris Consortium to discuss development strategy, plan and funds in order to get loans. The country used to receive $1.5 billion to $2 billion annually at that time. Now the foreign loans in a month has surpassed that amount of a year.

Bangladesh has been holding the meetings, collectively known as the Bangladesh Development Forum, with “development partners” in Dhaka since 2002.

In fiscal 2019-20, the World Bank provided Bangladesh with $1.3 billion in loans.

The Asian Development Bank (ADB), which counts a financial year from January to December, gave Bangladesh $1.3 billion in 2019 and $1.2 billion in the first half of 2020.

The International Monetary Fund (IMF) provided $732 million as budget assistance to tackle the coronavirus crisis in the last fiscal year. Asian Infrastructure Investment Bank gave $500 million.

The rest of the funds came from the Japan International Cooperation Agency, the Islamic Development Bank, and other agencies and countries.

Finance Minister Kamal expressed satisfaction over the overall picture.

“We added Tk 30 billion to the Tk 50 billion stimulus package for the payment of the garment sector workers. This has yielded positive results. Our exports have turned around,” he said.    

“All key macroeconomic indicators, including remittance, import and exports, have rebounded. The country’s economy is slowly getting back strength,” Kamal said.

“Overall, these are encouraging us. We hope we will be able to tackle the Covid-19 crisis bravely.”