Why is the Aid Community Optimistic About the Bangladesh Economy?

Bangladesh is a development success story in South Asia and the World Bank is proud to have been a partner in the country’s development journey in the past 50 years“. — Martin Raise, World Bank Vice President for South Asia (21 Sept. 2022)

CIn line with the World Bank Vice President’s claim, Bangladesh’s economy has grown well over the past decade. This puts Bangladesh on course to become the next Asian tiger. Stability in both the economy and the political sphere is the main driving force. Consequently, over the years, international investment also began to increase. Recently, developing countries have been confronted with enormous social unrest, political violence and other socio-economic problems. In this phase, the aid community looks for a strong social and economic framework that can use their aid, as well as a stable economy. Bangladesh’s economic sector continues to thrive, prompting donor organizations to take an optimistic stance on the country.

Optimistic Bangladesh: A Trusted Partner for Donors

Martin Raiser, head of the World Bank in South Asia, observed: “Other countries can learn from Bangladesh’s development experiences.” The World Bank will continue to support efforts to foster the nation’s growth in ways that Eve can benefit fromRyone“.

Amazingly, the International Development Association (IDA), the World Bank’s credit window, provides Bangladesh with 18 billion dollars in the next five years. Bangladesh now has a US$14.7 billion IDA program, making it the largest of its kind. In addition, the Multilateral Investment Guarantee Agency (MIGA) and the International Finance Corporation (IFC) will provide $695 million in annual guarantees for external loans in the energy and industrial sectors $4.5 finance Billions for private sector growth. To further strengthen local municipal institutions in Bangladesh to respond to and recover from the COVID-19 epidemic, the government has signed a US$300 million financing agreement with the World Bank. The ADB is expected to provide an average of about US$2.5 billion per year from 2023 to 2025, with a total of about US$9.5 billion planned for Bangladesh. In addition, the Asian Infrastructure Investment Bank has proposed new loans totaling $1.51 Billions for five initiatives. Overall, foreign aid to Bangladesh increased dramatically between 2021-22.

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At a time of economic instability on a global scale, Bangladesh is able to sustain itself by receiving this aid. Bangladesh has managed to astound financiers by achieving the prosperity it needs at a time when other Asian nations are experiencing a severe economic downturn.

Why are donors optimistic about Bangladesh?

A healthy economy with moderate growth

In fiscal 2020, Bangladesh’s growth rate collapsed to 3.4%. The next fiscal year, FY2021, it roared back with a roar 6.9 percent Extension. The country’s high growth rate has been sustained over the years. Therefore, despite the turbulence in the global economy, it can still develop at a healthy pace. Bangladesh’s foreign exchange reserves have averaged over $30 billion a year over the past seven years. In fiscal 2022, exports hit a record high of $52.1 billion.

Stable GDP and low debt to GDP ratio

Bangladesh’s debt ratio has historically been among the lowest in the world and this trend has not changed. Bangladesh’s economy is still the 41st largest in the world. Given the size of Bangladesh in terms of both its population and its economic output, this is quite astounding. Even his current level of 40%, the company’s loan-to-value ratio is still well below the globally recognized maximum of 77%. Exports are up 34% this year compared to last year. HSBC Bank recently forecast that by 2030 Bangladesh will be the 26th economy in the world.

Constant and extensive infrastructure development

Bangladesh is experiencing an infrastructure revolution. The Padma Bridge, for example, would increase Bangladesh’s annual GDP by 1.3-2 percent and connect the country’s south-west to its northern and eastern areas, significantly reducing travel time between Dhaka and key business hubs such as Khulna, Jashore and Barisal. In just a few months of its construction, the Padma Bridge has more than earned the government 10 million dollars in income.

Uninterrupted flow of remittances

At the beginning of the pandemic, many people expected that the amount of money sent home by expatriates would decrease as so many of them lost their jobs. There is an increase in the number of Bangladeshis working and sending money home at rates comparable to those before the outbreak. The amount of money sent home went up $2.03 billion in August 2022, a 12.57 percent increase from the $1.81 billion repaid in July of fiscal 2021-22.

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The growth of the middle class in 2022

The country’s middle-class population is growing rapidly – ​​by an average of 10.5 percent per year. This compares to 7.8 percent in Indonesia, 7.9 percent in Myanmar and 4.9 percent in Thailand. It is one of Asia’s least developed growth markets, and by 2025 the total population is expected to reach that 34 million. On the other hand, middle-income growth has a direct positive correlation with rising foreign investment.

Massive urbanization

Bangladesh is undergoing a rapid urbanization process as a direct result of the revolution in the country’s infrastructure and transport links. According to a projection, metropolitan regions would be home to 50 percent of the world’s population by 2040. This suggests that a significant portion of the country will eventually have the opportunity to expand its businesses. Mercy Tembon, World Bank Country Director, said: “Bangladesh is urbanizing rapidly. With around 36 percent of the population living in urban areas, city bodies and municipalities can play a crucial role in helping the urban poor recover from the pandemic and prepare for the future shocks”.

Innovative digital economy

They exist in Bangladesh around 47.61 million People who have access to the internet and over 45 million people regularly use social media. The massive participation created a new platform for the digital economy. On the other hand, international aid and investment are also looking for an economy that has already made a considerable development in the cutting-edge technological platform.

Education, Youth and Women

Compared to the average literacy rate of 86.3% Globally, Bangladesh’s share is 74.70%. When a country has a higher literacy rate, any type of foreign investment or aid can reach its maximum potential. In Bangladesh, over 2.3 million young professionals enter the labor market each year and around 45% of Bangladesh’s population is under the age of 24. Bangladesh’s economic expansion has created jobs for millions of people, especially women. According to the World Economic Forum, Bangladesh has the highest female enrollment rate in primary and secondary schools among South Asian countries. In addition, the labor force participation of women in Bangladesh increased 34.7 percent in 2021, up from 15.8 percent in 1996.

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Geographical proximity and advanced domestic connectivity

Bangladesh has a coastline of 580 kilometers, and its ports of Chittagong and Mongla handle 90 percent of the country’s foreign trade. Bangladesh also has 10 operational land ports connecting several states in neighboring India. Bangladesh is also building deep sea ports in the cities of Matarbari and Payra to strengthen its geostrategic position. On the other hand, there was a seamless connection network of three international airports and five national airports22,418 kilometers of motorways, an extensive road network of high quality and 2,955 kilometers of railways.

Connectivity across regions

The Asian roads AH1, AH2 and AH41 connecting India and Myanmar pass through the country of Bangladesh. In addition, regional highway corridors such as SAARC, BIMSTEC and SASEC encircle Bangladesh from all sides. All of these ties are also heavily dependent on Bangladesh’s success due to the country’s exceptional geographic location. In addition, Bangladesh is investing heavily in building its infrastructure to connect to the regional bottleneck

Asia’s richest man, Gautam Adani, has devised a strategy to provide Bangladesh with electricity generated in a coal-fired power plant with a capacity of 1,600 megawatts by the end of 2022, a strong signal that Bangladesh is an investment-friendly and stable economy. Therefore, donors and investors are sending a strong message to the world that Bangladesh remains a resilient and durable economy despite the fallout from the COVID-19 pandemic, the Ukraine war and a host of geopolitical challenges.

[Photo by Nahian Bin Shafiq, via Wikimedia Commons]

*SM Saifee Islam is Research Analyst at the Center for Bangladesh and Global Affairs (CBGA), Dhaka, Bangladesh. The views and opinions expressed in this article are those of the author.