Bangladesh looks to huge foreign funds to cover budget deficit amid pandemic

With the global economy battered by the coronavirus pandemic, Bangladesh has sought record $4.5 billion in loans from foreign donors to cover the deficit in the national budget for 2020-21.

Finance Minister AHM Mustafa Kamal says he has received “positive response” from the donor agencies over the loan assistance.

“We need a lot of money to offset the economic losses,” he told bdnews24.com on Friday, pointing out that revenue collection, export, import, remittance and every other sector took a blow from the coronavirus pandemic.

Bangladesh had earlier taken budget assistance from the World Bank and Asian Development Bank. The International Monetary Fund also provided loans to keep balance of payment.

But this time the government has sought Tk 1 billion from Japan International Cooperation Agency and Tk 190 million from the Islamic Development Bank or IsDB as well to narrow the budget deficit in an unprecedented move.

Kamal said he spoke to Japanese Ambassador Naoki Ito over phone on May 10. “I hope we will get budget assistance from JICA for the first time,” the minister said.

He sought IsDB’s help during a conversation with its President Bandar MH Hajjar via video call on Apr 25. The IsDB has recently announced a $2.3 billion bailout package in response to the coronavirus crisis.

An official at the Economic Relations Division, speaking on condition of anonymity, said IsDB pledged to move funds from an ongoing project to budget assistance. Bangladesh also sought $150 million from the development bank as loan to mitigate the coronavirus crisis.

Streets are deserted, stores are shut in Dhaka due to the restrictions announced by the government to stem coronavirus spread. Photo: Asif Mahmud Ove

The government has asked for $500 million from the Asian Infrastructure Investment Bank for the current fiscal year and another Tk 500 million for the next two fiscal years. Bangladesh expects $100 million from the China-led lender in credit to fight coronavirus.

ADB Country Director Manmohan Parkash told bdnews24.com Kamal had sought $1 billion from the Manila-based lender in budget assistance. “I expect a positive result from Manila,” he said.

Bangladesh has also sought $700 million from the IMF and $500 million from the World Bank in addition to the ongoing assistance.

The size of the next budget will hover around Tk 5.5 trillion, according to Shamsul Alam who is a member of the Planning Commission’s General Economics Division.

The coronavirus crisis has hit revenue earnings hard, he said and emphasised sourcing funds from foreign donors.

“And the bigger the credit, the better it will be for us because now, during the crisis, interest rates are very low,” he said.