Maldives seeks loan from Bangladesh

Isa Khan

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In another show of the growing strength of Bangladesh's economy, the government might give loans to the Maldives after the Island nation sought funds.

If the government agrees to the request, it will mark the second time that Bangladesh has lent money to another country.

Dhaka in August lent $250 million to Colombo, Sri Lanka in the form of currency swap to help prop up the latter's fast-depleting foreign reserves and ease pressure on its exchange rate.

The Maldives' economy is largely dependent on tourism and its economy contracted by 32 percent last year due to the pandemic.

The low level of usable reserves and high indebtedness pose significant risks to macroeconomic stability of the Maldives, according to the World Bank.

"The Maldives requested us for a loan for a longer term. We are actively considering it," Bangladesh Bank Governor Fazle Kabir told a roundtable yesterday during the final session of the three-day Annual BIDS Conference on Development: Celebrating 50 Years of Bangladesh.

The event organised by Bangladesh Institute of Development Studies was held at the capital's Lakeshore Hotel.

Speaking about inflation, he said, "With the recent rise in prices of commodities globally amid economic recovery and demand-side pressure, the country may face some challenges in taming general inflation in the coming months.

"However, the bumper production of rice in the last harvesting season and the government's serious drive for boosting the food stock from domestic and international sources may provide a sense of relief."

Abdur Rouf Talukder, senior secretary of the Finance Division, said subsidies and inflation would be the major challenges in the current fiscal year.

Subsidies in these three areas are 1 percent of the GDP for this fiscal year. But the prices of oil, gas and fertiliser have gone up in the international market, he said.

The government has adjusted the fuel prices. But the prices of electricity, gas and fertiliser have not been adjusted yet, the senior secretary added.

"If the prices are not adjusted, the country's subsidies expenditure will just double, from 1 percent of GDP to 2 percent this fiscal year."

Rouf Talukder said the government was expecting some import-induced inflation and cost-push inflation.

Syed Akhtar Mahmood, a former lead economist of the World Bank, said Bangladesh has an ambition to become a higher income country within two decades.

"It is good to have an ambition. But it should also be accompanied by a certain degree of prudence."

History shows that many countries have aspirations to graduate from lower-middle income to higher-middle income, and from middle income to higher income. Not all those aspirations have been met. There are examples where countries have been stuck in the middle-income trap, said Akhtar Mahmood.

He said lack of adequate emphasis on innovation and productivity growth is one of the main reasons for those countries being caught in the middle-income trap, said Akhtar Mahmood.

So, investment should be made in innovation, product development, and improving processes and business models, he observed.

He said Bangladesh needs to move from business-friendly policy to market-friendly policy.

Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), said as Bangladesh becomes a developing country, it should move away from the predominantly market access competitiveness to the productivity and skills-driven competitiveness.

This is because upon graduation from the group of the least developed countries, Bangladesh would lose the preferential market access to many of its export destinations, he said.

"Conscious policy choices have to be made in order to make our transition sustainable."

Brac Executive Director Asif Saleh said Bangladesh has ensured basic services in health and education in the last 50 years.

But the current Bangladesh aspires to ensure affordable and quality services because people are not getting quality services despite spending money, he said.

Asif said now the question arises as to how the emerging Bangladesh sees the role of social sectors going forward.

"Our social sectors played a very complementary role to the government to ensure that the benefit of the growth goes to the last mile," said Asif Saleh.

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, said Bangladesh needs local and foreign direct investment, capacity building, need-based skills and product development to turn the country into a developed one.

He called for offering the same policy support to all exporting sectors that is currently being given to the garment sector.

Shamsul Alam, state minister for planning, Ahmad Kaikaus, principal secretary to the prime minister, Mashiur Rahman, economic affairs adviser to the prime minister, Pradip Ranjan Chakraborty, secretary of the planning division, Binayak Sen, director-general of the BIDS, Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh, and Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, Dhaka, also spoke.

Sultan Hafeez Rahman, director of the BIDS Graduate School of Economics, chaired the session.

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