Bangladesh Finance Minister AHM Mustafa Kamal has warned the developing countries from taking loans through the Belt and Road Initiative (BRI) of China. In an interview to the Financial TImes (FT), Finance Minister Mustafa Kamal said the developing countries must think twice before taking BRI loans keeping in mind the global inflation and slowing growth which add to the indebted emerging economies.
Minister Kamal also suggested that China should evaluate the loans more rigorously as the poorer countries risk falling into debt trap due to wrong decisions about taking debt. In this context he pointed out the case of Sri Lanka whose economic crisis was exacerbated due to infrastructure projects funded by Chinese debt which failed to generate adequate returns. Referring to BRI projects taken up without rigorous decision making, he said that ‘everybody is blaming China. China cannot disagree. It is their responsibility’, FT quoted Mustafa Kamal.
Finance Minister Kamal said that Bangladesh has sought a loan of USD 1.5 billion as the first instalment of support out of the total package of USD 4.5 billion. The funding requirement included the climate change resilience projects and budgetary support. However, the IMF has not yet decided upon the quantum of loan it will provide to Bangladesh. Further, Bangladesh is seeking USD 4 billion more from World Bank, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB) and Japan International Cooperation Agency (JICA), said the Minister.
The statement of Finance Minister Kamal comes in the backdrop of the visit of Chinese Foreign Minister Wang Yi to Dhaka on August 6-7. Prior to his visit, Bangladesh Foreign Secretary Masud Bin Momen had said that Bangladesh is not negotiating any fresh loan from China. Briefing the media after the visit of Chinese Foreign Minister Wang Yi, Bangladesh Foreign Minister Dr A K Abdul Momen said that currently 27 projects are running in Bangladesh with Chinese support. However, out of the promised USD 20 billion financing, only about USD 3.8 billion has been disbursed for the projects till now.
Bangladesh became a part of the China-led BRI in 2016 during the visit of the Chinese President Xi Jinping during which China promised to spend USD 26 billion for BRI projects and USD 14 billion on joint ventures. The BRI projects included the Padma Bridge Rail link for USD 2.6 billion, Dhaka-Sylhet four lane highway project for USD 2.1 bn, Tunnel under Karnaphuli River for USD 705 million and several others.
Bangladesh has recently taken several steps to safeguard its Foreign exchange reserves which fell below USD 40 billion in June this year. It has tightened import related rules, stopped non-essential projects, banned foreign travel of officials and imposed load-shedding across the country to save fuel oil, among many other decisions. Earlier, this week, the government announced a steep price hike of fuel-oil ranging between 40-52 percent amid protests across the country.
However, the government and several economists have said that Bangladesh is not yet facing any serious threat of falling into a foreign exchange crisis or debt trap due to its strong export performance in Ready Made Garments (RMG) sector and remittance income from abroad.