Jica wants to know govt's loan repayment plan, state banks' health

What Jica is looking into:

• Whether there is any realistic agenda and timetable to implement structural reforms

• Which reforms are seen as most critical for sustaining growth

• Whether govt considers alternate scenarios for growth that depend on pace and vigour of reform effort

• If pressure for a wider fiscal deficit emerges or not in case of low reform or weak growth scenario

The Japan International Cooperation Agency (Jica), a major development partner of Bangladesh, has enquired about the government's plans to settle outstanding loans of governmental and state-owned entities, as well as the potential risks faced by state-owned enterprises, including public banks.

A three-member delegation from Jica is scheduled to visit Bangladesh from 15 to 21 May to evaluate credit risk management. Ahead of their visit, the agency sent a letter with a questionnaire to the Planning Division on 30 April.

The Jica Macroeconomic Risk Assessment Mission is coming to Bangladesh to understand different facets of the national economy, such as inflation, balance of payments, import tariffs, and export duties.

Keiichiro Yuasa, director of the Credit Risk Analysis and Environmental Review Department within Jica headquarters' Macroeconomic Analysis Division, will lead the delegation.

In the letter sent to Planning Division Senior Secretary Satyajit Karmaker, Jica said, Bangladesh has adopted numerous structural reforms over the past several decades.

The government and institutions, such as the Asian Development Bank (ADB), International Monetary Fund (IMF) and the World Bank recognise the importance of continuing with structural reforms, especially to build resilience to climate; improve human capital and physical infrastructure; strengthen the business climate and further liberalise trade and foreign direct investment (FDI), it said.

Despite several attempts, Senior Secretary of Planning Division Satyajit Karmakar could not be reached over mobile phone for his comment on the matter.

However, requesting anonymity, a related official of the Planning Division told TBS that after receiving the queries of the Jica mission, the preparation for the answer is underway with the cooperation of other ministries.

The letter says the Jica team will ask numerous questions during the visit.

The team will want to know which reforms are seen as the most critical for sustaining growth. It will also enquire about a realistic agenda and timetable to implement structural reforms and reforms that are most suited to encouraging FDI.

It will ask questions if the government considers alternate scenarios for growth that depend on the pace and vigour of the reform effort. It will also want to know key lessons of the scenarios if they are considered by the government.

The team will want to know if pressure for a wider fiscal deficit emerges or not in the event of a low reform or weak growth scenario.

Jica said that in the FY24 budget, the government showed its commitment to raising revenues to support higher spending on infrastructure and building human capital. In this regard, Jica will want to know what risk the government sees to the commitment to keeping fiscal policy on a sustainable path.

The team will want to know if state-owned enterprises and public banks are at risk.

Jica will seek clarification under what conditions would the government take responsibility for covering any arrears or debt servicing difficulties of the state-owned enterprises.

Jica said the global economy is entering a challenging period right now, with conflicts in several areas of the world, slower growth in China, and the risk of increased volatility in world commodity prices, especially for oil.

In this scenario, Jica said, it will want to know Bangladesh's assessment of the impact of the global economic environment on Bangladesh's outlook for growth, inflation and the balance of payments.

It will also question what range of scenarios for global economic trends Bangladesh is contemplating when conducting its risk assessment and whether the government uses the other policy levers at its disposal — import tariffs, export duties and quotas, restrictions on capital flows and macroprudential policies — to help insulate Bangladesh's economy from global economic developments.

Jica-funded projects in Bangladesh 

As per the Economic Relations Division (ERD) under the finance ministry, Bangladesh currently has 56 ongoing development projects funded by Japan.

The estimated implementation cost for these projects is Tk3,00,080 crore. Of the amount, Tk2,05,552 crore will be provided as loans and grants by Japan, while the remaining Tk89,927 crore will be covered by the government's own funds and Tk4,601 crore by implementing agencies.

Bangladesh's total outstanding debt to Japan stands at $10.44 billion.

Japan committed support worth $1.5 billion in the last fiscal year which is the highest among the bilateral partners and third highest among all the development partners following the World Bank and the ADB. Commitment from Japan in FY22 was $1.7 billion, the second highest among all development partners.

At the same time, Japan topped the list among all the bilateral sources with the disbursement amount of $1.9 billion, while scoring second following the World Bank. Disbursement from Japan in FY22 was $2.2 billion, second following the ADB.

Since Independence, Japan has contributed significantly to the overall development of Bangladesh, according to the Annual Report 2022-23 of the ERD.

Japan has committed financial support of more than $30.18 billion as project assistance, food assistance, commodity assistance, technical assistance, and budget support to Bangladesh in the form of loans and grants. Of the amount, $20.25 billion has been disbursed.

So far 5,104 km of roads, 134 bridges and power plants with a total capacity of 2,343 MW and 25,000 km of distribution lines have been constructed with Japanese assistance.

Some ongoing flagship projects with Japanese assistance are the Matarbari Ultra Super Critical Coal-Fired Power Project, Dhaka Mass Rapid Transit Development Project, Bangabandhu Sheikh Mujib Railway Bridge Construction Project, Hazrat Shahjalal International Airport Expansion Project, and Matarbari Port Development Project.

According to the latest data released by the Finance Division, the accumulated debt of the government at the end of 30 September 2023 totalled Tk1,655,156 crore, of which the domestic debt is Tk9,74,092 crore and the foreign debt is Tk6,81,064 crore.