Ali Riaz
The Bangladesh government’s decision to request a $5 billion soft loan from China for budget support to replenish foreign currency reserves and pay import bills is both puzzling and not surprising, at once.
Puzzling, because Bangladesh has not previously sought soft loans from China, especially such a large amount. In past years, Bangladesh borrowed from China for various projects; these are largely “supplier credit” and the highest amount China released was $1.1 billion in fiscal year 2023.
However, Bangladesh’s decision to seek soft loans should not come as a surprise considering the country’s ongoing economic crisis. The government seems to be on a loan-seeking spree in the wake of dwindling foreign reserves, downward spiraling of GDP growth and high inflation. The country needs money to meet its debt obligations and, according to a Bangladeshi think tank, is resorting to more borrowing to meet these obligations. Perhaps a vicious cycle is being created, mortgaging the future of the country.
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