Bangladesh getting $1.02b soon for deficit financing

Latest budget-support credits coming from three donors

FHM HUMAYAN KABIR | Friday, 26 May 2023

A latest dollop of US$1.02 billion in budget-support credits is expected from three foreign lenders next month for Bangladesh government's deficit financing, with two immediate spinoffs.
Officials hope the external borrowings in dollar would help in lessening ballooning local-borrowing trend and easing a bit strains on Bangladesh's foreign-exchange reserves amid a global crunch.
The Ministry of Finance (MoF) Thursday sat with Economic Relations Division and officials concerned with the task of streamlining the proposed budgetary support within the terminal month of the outgoing fiscal year, they said.
Early this week, the government completed negotiations with the Asian Development Bank (ADB) on a loan of $400 million as budget support, ERD officials said.

A fact-finding mission from Japan is likely to arrive in Dhaka next month for wrapping up negotiations on its proposed $250 million worth of budgetary support to Bangladesh, they added.
Meanwhile, the government has come close to negotiating another amount of $400 million from China-based lender Asian Infrastructure Investment Bank (AIIB), one official said.
The government's bank borrowings during July-May this fiscal for deficit financing already had overshot the mark in the corresponding previous period.
The government borrowed Tk 780 billion between July 01 and May 10 this fiscal year (FY), 2022-23, 117-percent higher than that in the corresponding period last FY2022, Bangladesh Bank (BB) official data showed.
The government borrowings from the banking system for the first time in many years could cross even its upwardly revised target of Tk 1.11 trillion. The original target of borrowing from banks was Tk 1.06 trillion, analysts and officials said.
The overall budget deficit for the fiscal year 2022-23 was estimated at Tk2.42 trillion, or 5.4 percent of the gross domestic product or GDP.
"We have already completed negations with the ADB for getting $400-million budget-support credit. We will complete the negotiations shortly with AIIB and JICA. We are hopeful of getting the financial supports from all the three major development partners within next month," a senior MoF official told the FE.
He said as ADB's negations were completed last week, now with two other lenders-AIIB and Japan-would also be finalised soon.
For availing the AIIB and Japan's loan packages, Bangladesh has to fulfill different dos already recommended by the Manila-based lender, ADB, he said.
An ERD official said the board meeting of ADB is likely to be held on June 6 where they were expecting endorsement of the proposed $400-million budget support.
"When the ADB will approve the loan, two other donors are also likely to confirm their proposed amounts of credit within next month, June," he added.
Meanwhile, the MoF has been on a hectic hunt for budgetary support from different development partners trying to make two ends meet in national spending as the 2022-23 fiscal budget was framed with huge deficit. Revenue collection to finance the over Tk 6.78-trillion budget looked way off the outlay.
The MoF official holds hope for lower borrowing at the end of this fiscal (months of May and June) from the local banking system for financing the deficit budget as the concessional credits may be confirmed within next month.
The World Bank (WB) early this month had already confirmed $500 million in budget support for helping government minimize its budget deficit.
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