The Asian Development Bank (ADB) promised to increase Bangladesh’s budgetary assistance to $600 million in order to address the challenges associated with LDC graduation, officials announced Monday. According to them, the Manila-based lender promised to grant Bangladesh’s request for the increased budgetary credit.
According to a Ministry of Finance (MoF) official, the government of Bangladesh made this request during a recent meeting with the ADB Country Portfolio Mission (CPM) in Dhaka.
A week ago, in Dhaka, the ERD met with the CPM to confirm the pipeline loans and grants for Bangladesh through 2026.
Prior to this, the lender promised that Bangladesh would supply $400 million of the budgetary credit.
A senior MoF official promised the government that the ADB would increase its assistance by $200 million to $600 million to address the economic effects of LDC graduation and enhance the business environment, particularly the country’s standing in the global logistics index.
We’ve finished our conversation with the ADB’s CPM,” stated a senior official at the Economic Relations Division (ERD). Additionally, it has promised to provide $200 million to help prepare for the challenges of LDC graduation.
He said they had previously finished negotiations for $400 million in loans, but that amount had now increased to $600 million because the Bangladeshi government needs more funding to deal with upcoming issues once it leaves the LDC category in 2026.
The ADB’s proposed $600 million loan will assist Bangladesh in mitigating potential shocks in certain industrial and service sectors both during and after the country’s 2026 transition out of the least-developed country (LDC) category, according to the official.
According to a senior ERD official who spoke to the FE, the Finance Division (FD) and the ERD are collaborating with the Manila-based lender to confirm the upcoming budget support in December.
We are in the process of confirming the budget support. The ERD official stated, “If we receive it by December 2024, the government will begin preparing to handle the potential shocks in the post-LDC graduation era.”
Bangladesh is on course to leave the poor-country club and become a developing nation by 2026, at which point it will no longer be eligible for benefits such as concessional credits from development partners and preferential market access.
According to him, the country’s foreign aid, trade, and other international transactions will be more expensive after graduation since it will have to freely interact with its peers.
Under the ‘Knowledge Support for LDC Graduation and Improving Investment Climate’ project, the ADB has already given Bangladesh $1.0 million in technical assistance to help the government build the capacity to pay for its future. This is in accordance with the ERD.
The proposed $400 million policy-based loan will assist Bangladesh’s various sectors in coping with potential shocks in the post-LDC period and recovering from any unintended incident.
Along with improving Bangladesh’s business environment, the borrowed funds will also help the country’s ranking in the global logistics index.
One of the factors preventing foreign investors from investing in Bangladesh, according to analysts, is the poor logistics performance.
Out of 139 countries, Bangladesh ranked 88th in the World Bank’s Logistics Performance Index (LPI) in 2023.
In June 2023, the ADB authorized an additional $400 million in budget support for Bangladesh to increase domestic resource mobilization reforms, boost public spending productivity and efficiency, and assist small businesses—particularly those led by women—in obtaining innovative, low-cost bank financing.
Meanwhile, the government anticipates additional budgetary assistance to reform Bangladesh’s energy and financial sectors.
