Foreign lenders stepping up

One of the major concerns in the aftermath of the demise of the last government has been how Bangladesh will manage repayments of multi-billion dollar loans taken over the years and to what extent foreign lenders would extend assistance to the interim government. Setting aside wild rumours, there is no denying that the economy has the potential to become a trillion-dollar economy in the next decade, if the right reforms are initiated and adhered to by successor governments.
Bringing back investors' confidence will require a lot of work, but then Bangladesh has many things going for it. A robust ranking in readymade apparels is followed by several other sectors that are reaching the stage when they too can contribute more to export earnings. However, all this hinges on several factors besides reforms and the principal one is getting finance from international lenders on soft terms. Repayment of past debt can and must be renegotiated given the present economic situation. For years, media had highlighted the fact that the government was sorely lacking in negotiation skills. This has resulted in availing of foreign credit at less than favourable terms for Bangladesh. Since the country is embarking on a roadmap of reform, developing requisite human resources in this particular area cannot be overemphasised.
It is good to see those traditional lenders like the World Bank (WB: $500 million) and the Asian Development Bank (ADB: 400 million) take the lead, closely followed by the Asian Infrastructure Investment Bank (AIIB: 200 million) and South Korea (100 million) come together to provide US$1.20 billion for economic recovery. Needless to say, the month-long violence that engulfed the country in July, 2024 has sapped the energy out of many sectors - some of whom had no cushioning and simply went down under. The severing of internet connection cut off about half a million freelancers from their customers, the nationwide violence seriously dented domestic tourism, and it dealt a terrible blow to small-and-medium enterprises (SMEs), many of whom had used social media to sell their ware and services.
In view of all this, $1.2 billion infusion into the battered economy will come as a major reprieve for a country that is struggling with falling reserves. There is some concern that China would shy away from the new government, but that is proving to be false because AIIB is a China-led initiative.
Bilateral relations depend a lot on cordiality and trust and hence any country that does not treat Bangladesh favourably may find itself less involved in its economy from this point on. The foreign policy of Bangladesh remains "friendship to all, malice to none". The country will require massive injections of foreign investments if it wishes to maintain a robust GDP growth and billions of dollars will be needed in the future too. Regardless of geopolitical considerations, it would be futile to think any country can get by without Chinese investments and/or loans. What has to change are the terms of finance and renegotiation of past loans taken. The same goes for the Indian Lines of Credit, should Bangladesh wish to avail them. That the country's foreign exchange (forex) reserve has fallen to around $20 billion from an estimated $46 billion in the span of three years is alarming. It has wreaked havoc with imports, leading to a contraction of the economy as reflected in reduced industrial output and consumption. This latest forex injection should help cushion the depleting reserve for now.

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