Bangladesh will soon seek US$700 million in budget support from the Asian Infrastructure Investment Bank (AIIB) with the pivotal need to replenish the country's foreign-exchange reserves, officials have said.
Sources at the Economic Relations Division (ERD) say the loan to fill in the gap between the current budget and estimated revenue will be sought from AIIB's Climate Policy-Based Financing (CPBF) window.
Two programmes will be implemented under the CBFB -- one on 'Climate-Resilient Inclusive Development Programme (Sub-programme 2)' for which $300 million will be sought. For another programme, namely Water Resilience and Climate-Smart Urban Service Delivery Programme (Sub-programme 1), some $400 million will be sought from the Beijing-headquartered multilateral development bank.
In the last fiscal year, the Asian bank gave Bangladesh $400-million budget support through the 'Climate Resilient Inclusive Development Programme (Sub-programme 1)' which aimed at implementation of critical structural reforms to mainstream climate- change adaptation-and mitigation actions for a "sustainable, resilient and inclusive growth".
The sub-programme 2 will further advance the policy reforms done under the subprogram 1, a senior ERD official told the FE.
"The new programme is likely to include reform areas like climate-change adaptation- and mitigation actions and enhancing the enabling environment for climate-change actions," he said.
The Water Resilience and Climate-Smart Urban Service Delivery Programme is aimed at reforms focusing climate-critical sectors to mainstream climate-change adaptation-and mitigation actions.
The two new programmes will support implementation of the GoB-led national climate objectives as articulated in the National Adaptation Plan (NAP), 2023-2050 and the Nationally Determined Contributions 2021 update (NDC-U), Mujib Climate Prosperity Plan 2022-2041, and Bangladesh Delta Plan 2100, by strengthening the intergovernmental policy and institutional framework, mobilising climate finance, and mainstreaming gender equality and social inclusion (GESI).
According to officials concerned the AIIB so far has approved loans worth $4.62 billion for Bangladesh to implement 19 projects. However, until now, the country could secure loan commitments or signed agreements for 17 projects worth $3.35 billion.
Due to high rate of interest on project loan, the government now prefers to get budget support from various multilateral lenders to lessen repayment pressure.
In the fiscal year 2023-24, according to a latest ERD release, the government had to pay some $3.36 billion in debt servicing. Of the total sum, $2.01 billion was paid as principal of foreign loans while $1.35 billion as interest.
With paltry forex reserves in hand, the government has now become "highly dependent" on budget support from various countries to replenish its coffers, officials said.
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