by Md. Mazadul Hoque in Dhaka
For long five-decade US-based the World Bank , International Monetary Fund, USAID had been financing in country’s mega projects among others as loans and grants. Besides, the financial support is continuously coming from Asian Development Bank, Islamic Development Bank, UKAID. The donors and the lenders’ role in developing the country’s infrastructures never be denied. Later, China- led Asia Infrastructure Investment Bank ( AIIB) made immense contributions in financing many projects. Bangladesh joined AIIB in 2016. Non-stop inflow of funds sanctioned by foreign donor agencies is accelerating execution of mega projects. With a view to fulfilling Sustainable Development Goals ( SDGs), the need for financial assistance from multilateral and bilateral donors is required. So, there is a need for sourcing funds for infrastructure and sustainable development. .
It is good news that Bangladesh is going to be member of the New Development Bank ( NDB). The NDB was established by Brazil, Russia, India, China and South Africa ( BRICS) in July 2015. The birth of the NDB is an alternative to the US-dominated World Bank and International Monetary Fund. Bangladesh in 2014 placed proposal to the NDB to become founding member. But, the efforts did not see any green signal then. Very recently, the NDB has modified its maiden plan. As part of membership expansionary policy, the NDB will include more 15 economies. Bangladesh is one of them. Bangladesh after so many years got proposal for membership from the NDB due to its decent economic growth rate. The talks regarding NDB membership was held recently between the NDB president and finance minister- AHM Mustafa Kamal. In the hours-long meeting Bangladesh was offered nearly 0.76 percent share in NDB initially. If the UN member countries join the bank, the share of Bangladesh would reach 0.42 percent. The New Development Bank’s purpose is to support infrastructure and sustainable development projects in BRICS and other emerging economies.
It is important to note that Bangladesh will have to pay $382 million in the next seven years for becoming NDB member as part of terms and conditions. The need for joining the NDB is a must considering speedy implementation of projects and programmes drafted by the government. Besides, After LDC graduation, there would be no chance of getting foreign loans on easy terms. The bank could be a new funding source to implement 8th Five Year Plan, attain the Sustainable Development Goals ( SDGs) and Vision 2041, implement the Delta Plan and cope with post pandemic challenges. According to the 8th Five Year Plan, external borrowings require $12 billion, per annum. Another $9.46 billion annually will be required to implement the SDGs. For SDG purpose , the country needs $ 1.0 trillion in 15 years or 20 percent of GDP annually. The total spending on delta- related projects requires 2,5 percent of gross domestic product per annum by 2030. The investment plan of Bangladesh Delta Plan 2100, prepared by World Bank, consists of 80 projects and its investment cost is $ 37 billion until 2030. The current mobilization trend of foreign resources ranges from $7 to $8 billion. So, to address the need , there is a need to be a member of the NDB.
There is a must say that the NDB lending rate is expected to be tolerable. In, 2016, the bank disbursed around Tk $1.5 billion in infrastructure and sustainable development projects in BRICS. In 2018, the bank so far approved 17 projects worth $ 4.7 billion. The number of projects approved in 2019 stands at 22 with $ 7.2 billion. The NDB has also cumulatively approved 72 projects worth $ 25.7 billion. Notably, 27 percent of the Bank’s project approvals are denominated in the local currencies of the respective borrowing members instead of USD. Since 2016, the NDB has provided $1.5 billion in loans to BRICS member states for infrastructure and sustainable development. What should be noted that the NDB stepped in and committed to a $10 billion Emergency Assistance Program to help BRICS countries tackle immediate health impacts and economic recovery concerns; The NDB member countries account for 42 per cent of the world’s population and contribute more than 20 per cent of global GDP.
The Agreement on the NDB was signed during the BRICS Summit held in Fortaleza on July 15, 2014. Following ratification by all five founding members, the Agreement entered into force on July 3, 2015. At the March 2012 New Delhi Summit, the leaders of BRICS countries directed their finance ministers to examine the feasibility and viability of setting up a new development bank that would support economic growth in BRICS and other emerging economies and developing countries. One year later, in the Durban Summit in March 2013, BRICS leaders announced the start of formal negotiations to establish NDB. The inaugural meeting of the Board of Governors of NDB was held in Moscow on July 7, 2015. The NDB began its journey with $ 100 billion of initial authorized capital. The initial subscribed capital of the NDB is $50 billion.
Bangladesh would be deprived of many facilities after LDC graduation, no doubt. Nevertheless, the Covid-19 has disrupted economic activity to a great extent. Poverty and inequality have already been adversely affected by the pandemic. In seventh Five Year Plan, the government set the target of job creation of 10.29 million ( 0.20 million migrants) during FY2016 to FY2020. It is hearting that only 1.8 million jobs were created at the end of the FY 2016-17 against the target of 3.9 million. In FY20 actual tax revenue collection was 8.68 percent of GDP against a 14.1 percent target. it can be said that the programmes designed by the government is expected to create huge employment and reduce inequality. If the economy does not reduce income inequality within shortest possible time, Bangladesh will have to face more economic challenges. Sadly saying, the income Gini coefficient rose from 0.458 ( 2009-10) term to 0.482 in 2016-17 that measures income inequality. If the NDB led by BRICS awards membership card to Bangladesh, financing facilities must be made sure. The pace of economic growth must be accelerated if the plan and programmes are executed with NDB fund. Lower interest rate, acceptable and tolerable terms and conditions on loans and grants is highly expected from the NDB
Md. Mazadul Hoque is an analyst of economic affairs