Bangladesh to get $600mn from ADB to face graduation challenges

The Asian Development Bank (ADB) has assured Bangladesh of extending its budgetary support to $600mn for facing the LDC graduation challenges, officials said on Monday.

Following Bangladesh's request, the Manila-based lender has assured it of providing the increased budgetary credit, they said.

In a recent meeting with the ADB Country Portfolio Mission (CPM) in Dhaka, the Bangladesh government requested the lender, said an official at the Ministry of Finance (MoF).

The ERD sat with the CPM a week ago in Dhaka to confirm the pipeline loans and grants for Bangladesh up to the year 2026.

Earlier, the lender assured Bangladesh of providing $400 million worth of the budgetary credit.

A senior MoF official said the ADB assured the government of enlarging its support by $200 million to $600 million in tackling LDC-graduation fallout on the economy and improving the business climate, especially the position in the global logistics index.

A senior official at the Economic Relations Division (ERD) said: "We have completed our discussion with the ADB's CPM. It has assured of providing $200 million more fund for taking preparation to face the LDC graduation challenges."

He said they earlier completed negotiations for $400 million worth of loans which now widened to $600 million as Bangladesh government needs more money to face the future challenges after graduating in 2026 from the LDC status.

The proposed $600 million loan from the ADB will help Bangladesh cushion the possible shocks in some industrial and services sectors during and after the graduation from the least-developed country (LDC) status in 2026, the official said.

The Finance Division (FD) and the ERD are working with the Manila-based lender for the confirmation of the budget support by December next, a senior ERD official told the FE.

"We are working to get the budget support almost confirmed. If we get it by December 2024, the government will start preparations to manage the possible shocks in the post-LDC graduation era," the ERD official said.

Bangladesh is on track to get out of the world's poor-country club into a developing nation by 2026, after which it won't be eligible for privileges like preferential market access and concessional credits from development partners.

So, after the graduation, the country's foreign trade, aid and other international dealings will be costlier as it will have to rub shoulders with freely with peers, he said.

According to the ERD, the ADB has already provided a $1.0 million worth of Technical Assistance to Bangladesh under the 'Knowledge Support for LDC Graduation and Improving Investment Climate' project for capacity building of the government to pay its way on journey ahead.

The proposed $400-million policy-based loan will assist Bangladesh's different sectors in tackling the possible shocks during the post-LDC period and in recovery from any unwanted situation.

The borrowed money is also meant for helping Bangladesh to improve its business climate, including the upgradation of the position in global logistics index.

Analysts say the bad performance in respect of logistics stands as one of obstacles to investment flow into Bangladesh from foreign investors.

In 2023, Bangladesh secured 88th position in the World Bank's Logistics Performance Index (LPI) among 139 countries.

Meanwhile, the ADB in June 2023 approved another budget support worth $400 million to Bangladesh to advance reforms in domestic resource mobilisation, improve efficiency and productivity of public spending, and help small businesses, especially women-led ones, to access low-cost innovative bank financing.

Meanwhile, the government is also expecting some other budget support to reform financial and energy sector in Bangladesh.