The World Bank has announced good news for poor countries, such as Bangladesh, at a time of the global economic crisis caused by the novel coronavirus pandemic.
Bangladesh is eligible for debt relief from G-20 nations as the international forum announced a year-long moratorium on debt repayment for low-income countries amid the pandemic.
World Bank Group President David Malpass said its poor member countries will get this advantage as part of its support for implementing social safety net programmes, providing food and treatment to people, and keeping microenterprises afloat.
Economic Relations Department (ERD) and World Bank officials, in Dhaka, said following this decision – for the next year – Bangladesh and other poor countries will not have to make debt payments for bilateral loans they have taken from different countries.
Bangladesh makes repayments of around Tk12,750 crore a year to external creditors. Of the amount, the country is to repay around $31 crore or Tk2,700 crore with interest in instalments of bilateral loans.
By postponing the loan repayment, the amount will be spent on meeting emergency needs including for social safety net programmes and supporting small and medium enterprises.
Bangladesh needs to repay $9 crore to China, $9.5 crore to Japan, $9 crore to Russia and $1.5 crore to India among the G-20 countries every year. The remaining $2 crore is owed to Saudi Arabia, the United States and different European countries for loans the country has taken, according to the ERD and economic division officials.
Finance ministry officials said Bangladesh takes loans from China, Russia, India, the US, the United Kingdom, France, and Germany – which are G-20 nations. The country will not have to repay them for the next year. However, Bangladesh must apply to avail itself of the privilege.
While applying for the advantage, countries must inform the institutions of the negative impacts on their foreign currency earnings – because of drops in exports and remittance inflows due to the pandemic – and their stimulus packages to fight the pandemic, they added.
It has not been decided yet whether the government will avail of this advantage on bilateral loan repayments. The government's policymakers are now discussing it, the officials said.
Dr Zahid Hossain, former World Bank lead economist for the Dhaka office, said, "Bangladesh takes maximum loans from the World Bank and the Asian Development Bank. However, the two organisations are not going to halt debt payments."
"The relaxation in repayments will be applicable only for the loans the poor countries have taken from the G-20 nations. As members of the World Bank, Bangladesh and other poor countries will get the advantage," he added.
"A one-year halt to bilateral loan repayments will be helpful for all poor countries, including Bangladesh, for now. With the kind of impact the novel coronavirus has had on the economy, any such assistance will create big opportunities," ex-ERD secretary Monowar Ahmed told The Business Standard.
Dr Zahid said, "Two points have to be clarified to apply for this advantage. One is how Bangladesh is being hit hard in foreign currency earnings. According to the World Bank migration report, the country's remittance inflows will decrease to $14 billion though we expected to rake in $19 billion. Similarly, exports collapsed but our expenditures have not decreased in comparison to that."
"Secondly, we have to mention different initiatives – such as social safety net programmes and big aid for the poor – to fight the novel coronavirus. There must be transparency in everything," he added.
"This is a big advantage for us at this time of economic crisis. For this, we do not have to do much more than submit an application. However, if we, on the one hand, say we are in big trouble, and on other, the hand, say our economic growth will reach at least six percent, the picture of economic losses will lose its accuracy," he pointed out.