a year ago

Budgetary-support credit

Bangladesh to receive $1.45b more shortly

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Bangladesh expects to bag another dollop of about US$1.45 billion in budgetary-support credit by next month from four other development financiers, apart from the IMF loan, officials said Monday.

Finance officials are upbeat that this forthcoming aggregate amount of US dollars would leave a space for relief from the fiscal stress, by way of financing the budget deficit and recharging the country's falling foreign-Exchange reserves.

The forex support now comes from the World Bank, the Asian Development Bank, Japan and the Asian Infrastructure Investment Bank (AIIB). The donors are likely to confirm the financing by next month to ease the financial crunch, Ministry of Finance (MoF) officials said.

Meanwhile, the International Monetary Fund (IMF) on January 30 this year approved $4.7 billion worth of budget support for Bangladesh. In early February, it disbursed the first installment $476 million from the $4.7-billion loan package.

The officials said the World Bank is likely to provide $500 million worth of budget support within next month while three others might lend $950 million support under one umbrella.

The government has been on a search for budgetary support to minimise fiscal deficit as well as to ease pressure on the foreign-exchange reserves.

As per the plan, the WB is likely to provide $500 million in credit from the assured $750 million budget support. The budget support is proposed from the Green, Resilient, Inclusive Development (GRID) programme of the Washington-based lender.

Under the green economic-recovery programme, the ADB as a lead donor is mobilising the remaining $950 million in budget support by contributing $250 million from its own coffers.

The AIIB is also expected to provide $400 million and Japan $300 million as programme loan under the economic recovery programme to Bangladesh.

The AIIB and Japan are participating as the co-financers in the budget support for green economic recovery programme.

Responding to a government request, the WB last week completed negotiations with the MoF for the $500 million budget support from GRID.

"Each of the $250 million funds was supposed to be provided in three installments in three years. But we had requested the WB to provide two installments together worth $500 million under the GRID programme as Bangladesh is struggling with budget deficit," said a senior Economic Relations Division (ERD) official.

The remaining $250 million worth of 3rd installment is requested for providing sometimes in the next fiscal, he added.

The government formed the Tk6.78 trillion national budget for the current fiscal year (FY) 2022-23 where the overall budget deficit is kept aside at Tk2.42 trillion, 5.4 percent of GDP.

Besides, Bangladesh's real foreign-exchange reserves had come down to $24 billion in recent months.

Another official at the ERD said, "We have a target to sign on the proposed $250 million worth of budget-support-credit deal with the ADB by next month."

In the last fiscal year, the ADB provided another $250 million worth of budget-support credit to Bangladesh for its economic-recovery programme. The proposed $250 million will be lent for the second phase, he added.

Meanwhile, Japan has recently completed a fact-finding mission on the budget support.

"The budget support could be some $300 million. We have a target to sign the loan deal by next month of May," said another ERD official.

He said the AIIB may also provide $400 million in loan under the same economic-recovery recipe by May.

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