The economic downturn caused by the COVID-19 outbreak has exposed the country’s economic fragility and forced the government to seek a record amount of foreign loans from donors to tackle the budget deficit in the current and next financial years.
Finance ministry officials told New Age that the government had already sought more than $4.5 billion in soft loans, including $1.25 billion from the Asian Development Bank, $1 billion from the Japan International Cooperation Agency and an additional $500 million from the World Bank.
Financial assistances have also been asked from the Islamic Development Bank, $190 million, the Asian Infrastructure Investment Bank, $450 million, and $700 million from the International Monetary Fund, they said.
While seeking the budget support from the donors in a series of teleconference, finance minister AHM Mustafa Kamal said that the country needed the higher financial assistance to tackle the economic losses wrought by the ongoing coronavirus pandemic.
Economic experts said that the chronic weakness in revenue generation, growing inequality, unemployment and misuse of funds in the name of development projects exposed the country’s economic fragility amid the coronavirus-induced crisis.
Planning minister MA Mannan admitted that the dependence on the donors would increase in the new fiscal year.
But he ruled out the new budget to be fully donor-driven saying that the country was seeking loans, not grants, from the donors as a member county of the donor agencies.
The country qualifies for loans against the backdrop of the current economic crisis, he said, adding that the country might seek loan even from the international money market to keep its economic progress going.
Policy Research Institute executive director Ahsan H Mansur estimated that the shortage of revenue income in the outgoing fiscal year would be more than double the loan sought from the donors.
The government would not have relied on the donors so much had not the country’s revenue-GDP ratio stuck at 9 per cent, one of the lowest in the world, he said.
Zahid Hussain, former World Bank’s Dhaka Office chief economist, said that growing inequality, unemployment, narrow export basket were the other economic shortcomings that bitterly exposed the nation’s vulnerability amid the current crisis.
Traditionally the country takes budget support from the WB and balance-of-payment assistance from the IMF.
The WB has been providing $750 million budget assistance under a three-year deal struck in 2018 after a gap of 10 years.
The IMF for the last time in 2012 approved nearly $1 billion under the extended credit facility that expired in 2015.
On May 7, the ADB approved $500 million as budget support in a quick response to the Bangladesh government’s request for the fund.
The Manila-based donor agency also assured the government of considering the request for $1.2 billion — out of which $1 billion has been sought as budget support for the next fiscal year, $100 million for the frontline health service providers and $150 million for employing jobless expatriates and locals.
Former caretaker government adviser Mirza Azizul Islam said that there had been misuse of public fund and the trend should have been checked so that the fragility did not get exposed.
The finance ministry officials said that part of the budget support would be used to contain the budget deficit within 7 per cent, in place of the originally projected 5 per cent, in the outgoing fiscal year because of the economic downturn that started since the last quarter (April-June) of the outgoing fiscal year.
However, a larger part of the assistance will be used to limit the deficit within a tolerable level in the new fiscal year that is expected to drag the brunt of the slowdown due to the pandemic, said the officials.
The IMF has projected only 2 per cent GDP growth in the outgoing fiscal year due to the pandemic fallout.
The country last witnessed a less-than-three-per cent GDP growth (2.83 per cent) in 1989–90 due to a devastating flood.
The government had projected over 8 per cent growth for the out-going fiscal year.
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