India, China and Russia have not given financial help to BD in crisis
Mahfuz Emran: The main and trusted friends of the government including India, China and Russia are not in any help of supporting during the ongoing financial crisis or any budgetary support for Bangladesh.
In one hand the devaluation of the currency, on the other hand the dollar crisis. According to the BPM6 calculation in accordance with the conditions of the International Monetary Fund (IMF), the central bank has $20.68 billion in foreign currency reserves. Along with restricted imports, banks are also not opening LCs as required. As a result, industrialists have to face various obstacles while collecting raw materials. Production has slowed down. Growth in remittances is lower than expected. Government spending in various sectors including debt repayment is increasing. However, revenue collection is not increasing in line with this. The banking sector is suffering from cash crunch. The inflation rate has been above 9 percent for almost the entire period of the current financial year 2023-24. All in all, there are fears about the balance of the macro economy. Even in such difficult times, the countries known as Bangladesh’s closest allies are not coming forward with loan promises or financial assistance.
India, China and Russia are the three countries known as Bangladesh’s closest allies in the international arena. According to Economic Relations Department (ERD) data, no loan assistance commitments from the three countries were met in the first four months (July-October) of the current fiscal year. At that time, some money was discounted in favor of Bangladesh by the countries, but it was basically the loan money promised earlier. In these four months, $9.24 crore have been waived from India against the previous loan agreement for various ongoing projects. China has discounted $3.69 million. Russia has released $26 million. Bangladesh is one of the founding members of the Asian Infrastructure Investment Bank (AIIB), which was established to develop infrastructure in the Asia-Pacific. Bangladesh did not get any new loan commitments from the organization in the first four months of the financial year. At this time, against the previous loan agreement, the company discounted $55.77 lakh.
Observers of international geo-economics and economists say that the country’s current economic situation has created a kind of fear among development partners about Bangladesh’s debt repayment capacity. In this situation, Bangladesh’s closest allies, known as new donors, have now maintained a somewhat conservative position in coming forward with new loan assistance.
In this regard, former ambassador Humayun Kabir told, “The reason is completely economic.” Countries like India, China or Russia are now being recognized as neo-donors in the international arena. In giving loans, these countries first consider returns. They usually offer loans on strict terms. Due to this reason, they think a lot before giving loan if the capacity of the recipient is reduced. Again, the kind of conditions they give, in the current situation, the Bangladesh government may not think it is appropriate to take a loan under such difficult conditions. Again, as part of the IMF loan negotiation, the recipient country reviews the list of the amount of debt. With that in mind, the government may now be focusing on strengthening economic ties with Western donors. The whole issue here is financial. We might call them their closest friends. But there is still a lot of work to be done in the area of financial relations with them.
A major part of the government’s expenditure in the development sector is financed by foreign loans. In the current financial year 2023-24, the total allocation in the annual development plan or ADP of the government has been estimated at Tk 2 lakh 63 thousand crores, of which 94 thousand crores are expected to be provided through foreign loans. According to the latest data of ERD, in the first four months of the current financial year, the foreign debt was written off at $162.61 million, which is less than Tk 18 thousand crore according to the latest exchange rate (equal to Tk 110 per dollar). And at the same time, new loan commitments of $362.85 million have been received. Among these, no new loan commitments were made by China, India, Russia and AIIB.
However, experts believe that the closest allies should be the first to come forward to deal with this economic crisis in the pre-election period. However, some say that political and economic uncertainty is much higher this time compared to previous national elections. For this reason, countries may have adopted a ‘go slow’ policy on new loan commitments.
Dhaka University Development Studies Department Chairman Professor Dr. Rashed Al Mahmoud Titoumir told, “In the current political reality of the country, considering the uncertainty and risk, the allies are not getting funding at the most needed moment. Loans from multilateral sources have slowed down, though loans from bilateral sources have slowed. Perhaps in the current political reality they have adopted a “Wet and Sea Policy”. Because of that, the amount of FDI in the country has also decreased.
According to ERD’s latest annual report (2022-23), India has pledged a total of $755.57 million in credit assistance to Bangladesh since independence. Out of this, a little more than $172.35 crore has been discounted till 2022-23 financial year. And from July to October of the current financial year, another $9.24 million have been discounted. In the whole of the last financial year, there was no pledge of loan assistance from India. Of the total loan commitments made by the country, $736.2 million has come under the latest three Lines of Credit (LoC) agreements. The agreements were signed between March 2010 and March 2017.
Chinese President Xi Jinping visited Bangladesh in October 2016. During his visit, Bangladesh received a verbal commitment from China to invest $2000 million in a total of 27 projects in various sectors including infrastructure, information technology. According to the latest exchange rate, which is equivalent to about Tk 2 lakh crore. A large part of these verbal commitments has not been formalized so far.
According to ERD’s calculations, since independence, China has pledged a total of $1,461,110,000 to Bangladesh on the basis of formal agreements or agreements. In the last financial year, $27.62 million have been promised. China has not made any new formal loan commitments so far, this fiscal year. Up to the fiscal year 2022-23, the country has waived $725.58 million in favor of Bangladesh. And in the current fiscal year, from July to October, Tk 3.69 crore has been discounted.
After Xi Jinping’s visit, a total of 10 projects have been signed with China in the last seven years. Three of them have been completed. Seven running. The projects are Padma Rail Link Project, Single Point Mooring (SPM) in Chittagong, Dhaka-Ashulia Elevated Expressway, Development of Power Transmission Lines under PGCB, Development of Power Distribution System under DPDC, National Information Technology Network Expansion and RajshahiWasa Surface Water Supply Project.
The former Chief Economist of World Bank’s Bangladesh Mission Zahid Hossainthinks that bilateral loan agreement is not possible if the conditions are not accepted. He told, “If there are no acceptable conditions, there is no bilateral loan agreement.” Because of that, the debt commitments of these countries may decrease. Another issue is the slow pace of project implementation. There are still $42-43 billion worth of loan commitments in the pipeline. It was previously $50 billion. But due to various reasons including the weakness of project implementation, the money cannot be taken out from there.
Since independence, Bangladesh has officially received a total of $1,228,170,000 in loan assistance from Russia until the fiscal year 2022-23. Out of this, $1,138 million are being invested in the construction of the country’s first nuclear power plant at Rooppur in Pabna. Moscow has released about $5.73 billion of the promised money till last fiscal year. And in the first four months of the current financial year, the discount has been a little more than $26 million.
Speaking about the bilateral loans, the ERD secretary Shahriar Quader Siddiqui was not immediately available for comment when contacted.
But traders expect more investment commitments from allies after the election. Khairul Huda Chapal, Vice President of Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), the apex organization of businessmen said, “There is some slack in this regard during all elections. Hope the environment will be normal again after the elections. Then much more investment will come in the country.
AIIB has become a major investor in development projects in the Asia-Pacific in recent years. Bangladesh is one of the founding members of the bank. Since its inception in 2016, Bangladesh has received a loan commitment of about $2.72 billion from AIIB. Out of this, more than $143.37 million have been exempted till the last financial year. In the first four months of the current financial year, another $5.5 million have been discounted.
In the first four months (July-October) of the current financial year, loan commitments among the Allies were matched only from Japan. In these four months, the country has promised a loan of about $150.34 million. Among international development agencies, the Asian Development Bank (ADB) has pledged $103.38 million in loans. Loan commitments from bilateral and multilateral sources totaling $79.13 million.
When asked about the overall issue, Planning Minister MA Mannan told, “In the case of bilateral agreements, when the financing agreement is made based on the meeting or discussion between the heads of the two countries, the commitment comes from abroad. The Prime Minister’s Office and the Finance Department are responsible for making an agreement with any country in this regard. I don’t know if any approach is being taken for new commitments as the matter is not within my purview.’
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