LDC graduation: Bangladesh not to face foreign loan pressure

The debt to Gross Domestic Product (GDP) ratio of Bangladesh will increase to 20 percent from 14.3 after the country's graduation from 'Least Developed Countries' (LDCs) status in 2024.

Consequently, Bangladesh will be in a favourable condition in terms of foreign assistance as the threshold of 40 percent of GDP is acceptable.     

The country will also not have any pressure to repay the principal and interest of foreign loans, according to a study by the Economic Relations Division (ERD).

However, Bangladesh will lose the concessional loan facility after the LDC graduation. That said, the window of commercial loans will also get a boost. 

Kazi Shofiqul Azam, former ERD secretary and adviser of "Support to Bangladesh's Smooth and Sustainable Graduation from LDC Status" project, was speaking at a workshop at the ERD in the capital on Wednesday.

The workshop was chaired by Abdul Baki while Monowar Ahmed, ERD secretary, was the chief guest.

Shofiqul Azam added that there is no relation between LDC graduation and interest hike.

"The World Bank, Asian Development Bank, and Japan International Cooperation Agency (JICA) have increased their loan interest rates after Bangladesh attained a lower-middle-income country status," he said.

Recently, foreign loans have increased for mega projects. As for foreign aid disbursement, the rate of repayment is also increasing, he said.   

Saying that Bangladesh has repaid $1.2 billion as principal and interest, following the LDC graduation, the repayment amount would be $2.5 – 3 billion, Shofiqul said.

"In the 2016-17 Fiscal Year (FY), the disbursement was only $3 billion and that increased to $6 billion in the next two consecutive fiscals. And it is projected that it will reach $7 billion in the current fiscal."

He also pointed out three setbacks – loss of trade facility, fall in concessional loan, and increased contribution to international funds – after Bangladesh's graduation from LDC.  

However, because of the credit rating of interest, private entrepreneurs will get loans at a lower rate. 

The government expects to get around $10 billion Foreign Direct Investment (FDI), which is $3 billion now, he further said.

"The Bangladeshi workforce in the global market will get an income raise that will boost the remittance flow too," said Shofiqul.

The government's focus on bilateral relations and preparations for free trade agreement with several countries are underway, he added. 

Responding to a query, the former ERD official said that Bangladesh's exports can get a boost owing to the coronavirus issue, with investors in China beginning to shift investment to countries like Vietnam, Cambodia and Bangladesh. 

He noted, though, that the coronavirus outbreak will not have any impact on the country's development projects.

ERD Secretary Monowar Ahmed said foreign loans will not decrease after the LDC graduation. Many of the donors, such as ADB and the World Bank, are interested in investing in some big projects.