In an uncharacteristic move, the Japan International Cooperation Agency (Jica) and the Islamic Development Bank (IsDB) have agreed to provide budget support to Bangladesh to meet its growing expenditure needs in the face of the coronavirus pandemic, which has firmly taken hold in the country.
Neither the Jica nor the IsDB gives budget support, but the two development partners have had to come forward to pitch in with $1 billion and $182 million respectively.
The Japanese donor agency normally provides project aid to Bangladesh and now would call the planned support as budget aid, which came after Dhaka sought help.
Officials of the Economics Relations Division (ERD) and the Jica would now sort out how the support would be extended.
The budget aid would not, however, affect the ongoing financing to Jica-supported projects in Bangladesh, said an official of the ERD.
The IsDB would provide $60 million in new funding and the rest $122 million would be redirected from slow-moving projects the Jeddah-based multilateral development lender is bankrolling in the country.
On April 25, Kamal approached the IsDB seeking assistance in areas of food security, health and agriculture sector development and mechanisation while speaking to Bandar MH Hajjar, president of the multilateral development lender.
The IsDB has announced a $2.3 billion package to help its 57 member countries fight the coronavirus pandemic.
Bangladesh is seeking external resources to meet its rising expenses in the face of the growing ferocity of the rogue virus, which has prompted the government to enforce stay-at-home order since March 26 and in the process putting the economy on an induced coma.
The pandemic stands to wipe off the gains made in poverty reduction in the past decade, according to the World Bank; and as per estimates, more than 1.5 million of the poor and the vulnerable have lost their livelihoods for the shutdown.
This means the need to spend substantially on social safety net programmes and job creation has become imperative. At the same time, its purse strings have been tightened for the near-collapse of economic activities for more than six weeks now.
Subsequently, the country has sought $1.25 billion from the Asian Development Bank and $500 million from the WB and the Asian Infrastructure Investment Bank each to ballast next fiscal year's budget, which would be shouldering the burden of the Tk 95,619 crore stimulus packages announced.
For fiscal 2020-21, the International Monetary Fund and the World Bank projected fiscal deficit of 6.5 per cent and 9.8 per cent of GDP respectively.
Now that the development partners are rallying to provide budget support, the government is likely to unveil a bigger budget for the next fiscal year than initially thought.
The budget size may be around Tk 570,000 crore, up from Tk 550,000 crore.