Economy
BD won’t fall into Chinese Debt Trap: AK Abdul Momen
Bangladesh strongly ruled out the possibility of falling into any Chinese debt trap as the return on its investments is much higher than the cost of the funds, said Foreign Minister AK Abdul Momen at Bangladesh Business Summit 2023.
Foreign Minister said there is a wrong perception among many people that Bangladesh would slip into a Chinese debt trap.
“No way… no way,” Momen said.
He made the comments in reply to questions from Richard Quest, CNN’s Business editor-at-large, at the Bangladesh Business Summit.
The 3-day summit, organized by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), partaken at the Bangabandhu International Conference Centre in Dhaka to showcase the country’s progress and potential to both global and local investors.
The debt-trap question has surfaced as Bangladesh has borrowed heavily from many countries, including China in recent years to pull off its growth targets. The bankruptcy of Sri Lanka, whose largest lenders include China, in 2022 has cemented the worries.
But Foreign Minister said Bangladesh has received many loans from international agencies with Japan being the largest bilateral lender.
“We are taking loans from all sources on a very prudent basis and in a calculative way.”
Of the $72.3 billion foreign loan, the World Bank accounts for $18.2 billion, followed by the Asian Development Bank ($13.3 billion), Japan ($9.2 billion), Russia ($5.1 billion), China ($4.8 billion) and India ($1.02 billion).
Whatever investments have been made with the debts, the return on the investments is higher than the cost of the funds, Momen said.
Bangladesh has a low risk of external and overall debt distress despite higher external borrowing in recent terms, said the International Monetary Fund in February.
Commerce Minister Tipu Munshi said it was true that the war has inflicted sufferings on the country.
“Yes, I can understand that people are suffering for the high price, but the government is trying to sort it out.”
However, Bangladesh is doing well despite some challenging situations, he said. “For instance, export incomes have increased amid the global economic turmoil.”
The commerce minister admitted that the worry remains due to the lingering war.
He is optimistic about continuing the development journey as the country is benefiting from demographic dividends and the business climate is conducive.
The commerce minister spoke about the government’s investments in the education sector.
“We have to go for various types of investments in the sector, particularly for work-related education such as vocational training and technical education. This will help our economy.”
Quest questioned whether the upcoming election would be free and fair.
Responding, the foreign minister said the government has organized thousands of elections over the last 14 years.
“All institutions have been developed for a free, fair, transparent and credible election.”
“We have put in place transparent ballot boxes and we have an independent election commission with full authority. Therefore, we believe the upcoming election would be free, fair and credible.”
The government established a level-playing field, he said, urging all parties to participate in the elections.
When Quest pointed to people’s perception of whether the government has turned into authoritarian and anti-democratic, the foreign minister said there are both right and wrong perceptions.
“Unfortunately, in our society, people falsify many things. But in the long run, people behave very smartly and when they vote, they vote for us. Every class of the population is very happy with the performance of the present government,” he claimed.
In a separate session, Prime Minister’s Private Industry and Investment Adviser Salman F Rahman, said “We want a real export-based Bangladesh from where software, as well as hardware, will be exported. Already a number of companies are producing hardware.”
In order to support the fast-growing economy, the government is building a deep-sea port in Matarbari. It will go into operation in 2026.
Everybody is surprised that Bangladesh has made tremendous progress despite not having a deep seaport, Rahman said. “We are increasing the capacity of Chattogram port, Mongla port and Payra port.”
“It will be a real game-changer for us when the deep seaport becomes operational.”
Speaking about the sources of finances, the adviser said Japan is bankrolling the Matarbari port project.
“We are talking to companies in Singapore, Saudi Arabia, and the UAE for the management of the port.”
The government is going to hand over the Chattogram port to private operators for its management.
“In fact, today we are going to sign an MoU with Saudi Arabia,” Rahman said.
He ruled out the chance of Bangladesh facing a Sri Lanka-like situation.
The Island nation plunged into a serious crisis last year after its foreign currency reserves dried up.
Owing to escalated commodity prices, Bangladesh’s reserves have slipped to a six-year low of $31.15 billion, meaning it has fallen by about 30 percent from the $44.14 billion recorded in March last year.
“We are not going to hand over the ownership of the ports. So, there is no worry that our economy will face a situation that the Sri Lankan economy had faced,” said Rahman.
The British journalist wondered how Bangladesh would transform itself into a digital nation when he had to spend two hours traveling a distance of two kilometers.
“We are in a growing stage. Our infrastructure development is taking place. The metro rail is already operational and the elevated expressway is going to be operational. If you come back after five years, you will just need 20 minutes instead of two hours,” Rahman answered.
During her presentation, Tini Sevak, vice president for audiences and data at CNN International, said a green supply chain would have a greater effect on companies in the coming days.
Bangladesh has already begun its journey to modernize its workplaces following a number of disasters a decade ago. Today, the country has the highest number of green garment factories in the world.
“Technology will be a key factor too for the future growth of companies,” Sevak said.
The summit also aims to draw foreign direct investment (FDI).
FDI to Bangladesh rose 13 per cent year-on-year to $2.89 billion last year. But the inflow has been far lower than the expected level given the country’s business volume and potential of the economy.
In recent times, globally FDI was impacted across many industries due to the supply chain disruptions stemming from the pandemic, the war and major layoffs by technology companies, Sevak added.
Rob Bradley, senior vice-president for ad sales and digital commercial strategy at Warner Bros. Discovery for Asia Pacific and Latin America, Md Jashim Uddin, president of the FBCCI, Xiangchen Zhang, deputy director-general of the World Trade Organisation, and Laurent Olmeta, CEO of CMA CGM Asia Pacific Limited, a logistics company, also spoke.
The International Monetary Fund (IMF) has urged Bangladesh to maintain a tight monetary policy to contain inflation, while stressing that monetary tightening alone will not be enough to restore economic stability.
Inflation in Bangladesh rose to 8 per cent in September, according to the IMF. The Washington-based lender has called for broader reforms in the financial sector, stronger revenue mobilisation and improvements in overall economic management to address the country’s persistent economic challenges.
Sonali Jain-Chandra, deputy director of the IMF’s Asia and Pacific Department, made the remarks in response to a question at a news conference on the economic outlook for Asia and the Pacific, held on the sidelines of the IMF and World Bank Group annual meetings in Bangkok, Thailand.
Asked whether tight monetary policy alone would be sufficient to tackle inflationary pressures that have persisted for more than three and a half years, Jain-Chandra said maintaining a restrictive monetary stance was important, but needed to be accompanied by other reforms.
Bangladesh is currently facing challenges in three key areas: revenue mobilisation, the financial sector and inflation, she said.
The IMF also expressed concern over the fragile state of Bangladesh’s financial sector, saying a credible reform strategy was needed to strengthen the sector’s capacity and ensure stability.
The fund also highlighted the country’s persistently weak revenue collection. Bangladesh’s tax-to-GDP ratio has declined over time and currently stands at around 7 per cent, placing it among the lowest in the world, according to the IMF.
The IMF stressed the need for a coordinated effort to increase revenue collection, saying higher government revenues were essential to finance development expenditure and strengthen the financial sector.
It called for necessary reforms to the revenue system and effective measures to improve the government’s capacity to generate income.
Talks Under Way on New IMF Programme
Meanwhile, discussions are continuing on a potential new lending programme for Bangladesh.
Jain-Chandra said Bangladeshi authorities approached the IMF in May for support under a new programme after deciding not to draw further instalments under the previous arrangement.
In response to the request, an IMF mission visited Dhaka in July to discuss various aspects of Bangladesh’s economic reform agenda.
According to Jain-Chandra, the reform issues discussed during the visit were closely aligned with the recommendations outlined in the IMF’s Article IV consultation for Bangladesh earlier this year.
The IMF has remained in regular contact with Bangladeshi authorities since the July visit, she said.
Jain-Chandra added that the fund remained closely engaged with the authorities and was ready to support Bangladesh in initiating the reforms needed to address its economic challenges.
The International Monetary Fund (IMF) has projected that Bangladesh’s gross domestic product (GDP) will grow by 3.2 per cent in the 2026-27 fiscal year, while average inflation could rise to 10.9 per cent, signalling mounting pressure on the country’s economy.
The projections were outlined in the IMF’s World Economic Outlook (WEO) report, released on Tuesday.
The latest growth forecast marks a significant downward revision from the 4.3 per cent projected by the IMF in April. The fund had subsequently forecast growth of 3.5 per cent in July before lowering its estimate further to 3.2 per cent.
The IMF has also sharply revised its inflation outlook for Bangladesh. In April, it projected average inflation of 6 per cent for the 2026-27 fiscal year. The latest estimate raises that figure to 10.9 per cent.
The combination of slower economic growth and persistently high inflation points to continued pressure on Bangladesh’s macroeconomic stability.
Bangladesh growth outlook trails other forecasts
The IMF’s latest growth projection for Bangladesh is lower than those of other major international development institutions.
The World Bank has forecast GDP growth of 3.4 per cent for Bangladesh in the 2026-27 fiscal year, while the Asian Development Bank (ADB) has projected growth of 4 per cent.
According to the IMF, Bangladesh’s economy grew by 3.6 per cent in the 2025-26 fiscal year, following growth of 3.5 per cent in the preceding fiscal year.
India, Bhutan expected to grow faster
The IMF has projected stronger economic growth in neighbouring countries, with India’s economy expected to expand by 7 per cent and Bhutan’s by 6.9 per cent in the relevant fiscal year.
The contrasting forecasts highlight the challenges facing Bangladesh as it seeks to restore economic momentum while tackling persistent inflation.
The IMF’s latest projections come as the annual meetings of the IMF and the World Bank Group are underway in Bangkok, Thailand.
Bangladesh’s economic situation, reform programmes and efforts to secure financing from development partners are among the key issues receiving attention during the meetings.
The World Bank supports the Bangladesh government’s policies to address the country’s current economic challenges, restore stability and implement medium- and long-term development plans, Finance Minister Amir Khasru Mahmud Chowdhury said on Tuesday.
He said the global lender was broadly aligned with Bangladesh’s economic programmes and policy priorities and would continue to support the country’s economic recovery and future development.
The finance minister made the remarks while speaking to journalists after a meeting with a World Bank managing director in Bangkok, Thailand, on October 13.
Amir Khasru said Bangladesh’s economy was facing significant challenges when the current government took office. Alongside dealing with the financial and economic burdens inherited from the previous period, the country was also having to navigate global economic disruptions caused by ongoing wars and geopolitical tensions.
He said the World Bank understood the realities facing Bangladesh and supported the government’s policy approach to overcoming the economic difficulties.
“The World Bank is aligned with the programmes and policy direction we have set to restore economic stability and ensure future development,” the minister said, adding that both sides would continue working together.
He said the World Bank was willing and prepared to provide the assistance Bangladesh needed.
No decision yet on proposed $10 billion in additional assistance
Clarifying reports that Bangladesh had sought an additional $10 billion in assistance from the World Bank, the finance minister said no final decision had been made.
He said discussions with the lender were ongoing and that possible proposals would be reviewed in light of those discussions. The process could take several months to complete, he added.
“No decision is being made at this stage. I have seen several inaccurate reports here and there. This is a discussion, and there will be follow-up based on these talks. It is a process that will continue over the next few months,” he said.
The minister stressed that the ongoing discussions should not be interpreted as a final agreement. Rather, they were intended to establish a basis for determining the next steps and considering possible decisions.
Further discussions would also take place in Dhaka, he said.
Expressing satisfaction with the progress of the talks, Amir Khasru said Bangladesh was in a favourable position to establish a framework for future cooperation.
He reiterated that the government’s economic policies, programmes and medium- and long-term development plans were broadly aligned with the World Bank’s position.
Government’s economic agenda aligned with BNP manifesto
The finance minister also said the World Bank’s position was consistent with the government’s economic plans and the Bangladesh Nationalist Party’s (BNP) election manifesto.
He said discussions were underway on how to address the country’s economic challenges and achieve the government’s development objectives.
According to the minister, the government has submitted a written proposal outlining a framework for partnership with the World Bank. Discussions on the proposed framework will continue.
He said the World Bank had provided various recommendations and suggestions, while Bangladesh had also presented its own proposals and recommendations.
Further discussions would be based on these submissions, he added.
Government optimistic about inflation and GDP targets
Asked about forecasts by the World Bank and the Asian Development Bank (ADB) on inflation and gross domestic product (GDP) growth, and how they compared with the government’s targets, the finance minister said the government did not intend to dispute the projections made by other institutions.
He said the institutions had prepared their forecasts based on their own calculations and analyses, adding that the country’s economic performance would become clearer as progress on key indicators was assessed over time.
“We do not want to dispute anyone’s projections. They have made their estimates based on their own calculations. We are carrying out our work, and they are doing theirs. What matters most is that the cooperation we need continues,” he said.
The minister expressed optimism that the government would be able to meet the inflation targets set out in the national budget.
He said the government was working to restore economic stability through continued engagement with the World Bank, implementation of its economic policies and progress on medium- and long-term development plans.
