3 years ago

Japan to dispense $1.0b in budget aid

First such loan deal likely next week

Flags of Bangladesh and Japan are seen cross-pinned in this photo symbolising friendship between the two nations
Flags of Bangladesh and Japan are seen cross-pinned in this photo symbolising friendship between the two nations

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Bangladesh for the first time is expected to secure US$1.0 billion worth of budget support from Japan next week.

The support would help the government weather the impact of the COVID-19 on the economy, officials said on Monday.

The Ministry of Finance officials said they are likely to sign a loan deal with the Japan International Cooperation Agency (JICA) on August 5 in Dhaka.

This will be the first time in the history that Japan is extending budget support, said the officials.

The possible $1.0 billion budgetary support could be disbursed in two tranches in fiscal year 2020-21 and in FY2021-22, said a senior finance official.

He said, "Japan usually provides us the official assistance through different packages to bankroll some development projects every year. But this time, the Bangladesh's largest bilateral donor is coming forward with the big chunk of fiscal support."

"Due to the massive impact of COVID on the Bangladesh's economy, we had sought the budget support from Japan and some other multilateral donors to cushion the virus blow to the economy. And our largest bilateral donor responded quickly," an additional secretary told the FE.

He said this would help ease the resource constraints the government is facing due to the pandemic.

Meanwhile, the Finance Minister AHM Mustafa Kamal had requested the International Monetary Fund (IMF), the World Bank (WB), the Asian Development Bank (ADB), the Islamic Development Bank (IsDB) and the Asian Infrastructure Investment Bank (AIIB) to provide financial support to finance the budget to tackle the impact of the coronavirus pandemic.

In May, the IMF confirmed $732 million balance of payments support, the ADB $500 million budgetary support and the WB disbursed the $250 million and the second tranche of the pending $750 million budget support recently.

The ADB has also assured the government of another $1.0 billion budgetary support for Bangladesh, which could be confirmed soon.

Besides, the Beijing-based AIIB and the Jeddah-based IsDB are also expected to provide some $350 million worth of budget support for Bangladesh.

With the global economy getting battered by the coronavirus pandemic, Bangladesh's economy has also been suffering a lot with millions of people thrown out of jobs.

It needs huge investments for reconstructing the economy, which suffered a body blow after the outbreak of the COVID-19 pandemic.

Mr Kamal talked with the IMF, WB, ADB, AIIB, IsDB and Japan for getting assurance of the budgetary support to the economic recovery. Bangladesh's economy expanded at a rate of 8.15 per cent rate in FY2019.

He said that he had received "positive response" from the donor agencies over the loan assistance.

Japan is proving financial support under its ODA packages to many development projects, including the ongoing Uttara-Farmgate-Motijheel MRT-6 metrorail construction project, MRT-5 and MRT-1 metro rail construction projects and Railway bridge parallel to Bangabandhu bridge on the Jamuna River.

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