Miga offers up to $1b guarantee to Bangladesh
The commerce ministry is awaiting a decision from the central bank and the finance ministry on using $500 million to $1 billion of foreign loans to import essential commodities on the back of a guarantee from the Multilateral Investment Guarantee Agency (Miga).
The Miga is a member of the World Bank Group and its mandate is to promote cross-border investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders.
In a letter to the BB and the finance ministry recently, the World Bank Group arm offered to become a guarantor for the import of essential commodities worth $500 million to $1 billion.
"As far as I know, the Miga has sent a letter to the central bank and the finance ministry expressing its interest to be a guarantor to facilitate the import of essential goods," Senior Commerce Secretary Tapan Kanti Ghosh told The Daily Star yesterday.
How the funds would be used and disbursed are yet to be decided. "The discussion is at a very primary level now," Ghosh said.
The issue is being discussed among the officials of the Miga, the BB and the finance ministry. "The final decision will come from the central bank and the finance ministry," said the senior secretary.
Multilateral Investment Guarantee Agency (Miga) is a member of the World Bank Group and its mandate is to promote cross-border investment in developing countries by providing guarantees
Once the decision is made, the commerce ministry will move for the imports of essential commodities using the guarantee.
Md Mezbaul Haque, the spokesperson of the Bangladesh Bank, no decision had been taken about the issue yet.
The development comes amid the falling foreign currency reserves of Bangladesh, which threatens to hurt the supply of essentials in the local market.
The reserves have been declining steadily since the Russia-Ukraine war erupted as it has sent the prices of commodities higher. As a result, Bangladesh has to pay more to buy essentials from external sources but export earnings and remittance receipts have not gone up proportionately.
Amid escalated imports, the reserves slipped below $33 billion this week after the central bank cleared international import bills. It was $44.95 billion in early January of 2021.
The government is trying to ensure a smooth supply of imported items such as rice, wheat, edible oil, sugar, lentil, onion, chickpeas and dates, amid a dollar shortage in the banking sector.
The import of edible oil, sugar, lentil, onion, chickpeas and dates dipped in July-November as traders face difficulties in opening letters of credit (LCs) amid the US dollar shortage. This led traders and importers to warn that there might be a shortage of the items during Ramadan when their demand usually surges.
Following requests from the business community, the commerce ministry has already suggested the central bank set aside US dollars to be used by private importers before the fasting month to purchase key essentials from the international markets.