Forex now for dev projects

In a first-ever move, the government is going to use €524.56 million from the ballooning foreign exchange reserves for a development project.

This is being done as part of a plan to use the money from the reserve for development projects.

The government formed Bangladesh Infrastructure Development Fund (BIDF) to lend the money from the forex reserves for the dredging of a channel for Payra Port, a seaport in Kalapara, Patuakhali.

Initially, investments will be made from the BIDF to the port and power sectors. The annual investment target from the fund would be no more than $2 billion, according to finance ministry documents.

The government would pick those projects for the foreign currency loans that would have a high rate of return so that it can repay the loans also in the foreign currencies, said the documents.

The capital and maintenance dredging of Rabanabad Channel of Payra Port scheme is the first project to be financed through BIDF.

A tripartite loan agreement was signed yesterday between the Finance Division, Payra Port Authority and Sonali Bank Limited to finance Tk 5,417 crore (€524.56 million) for the infrastructural development project.

Prime Minister Sheikh Hasina joined the signing agreement virtually from the Gono Bhaban.

Sonali Bank would finance the Ramnabad Channel dredging project. Bangladesh Bank will issue the loan to Sonali Bank at an interest rate of 1 percent. The latter will disburse the loan to Payra Port authorities at 2 percent interest rate.

The repayment period is 10 years, excluding a three-year "grace period", finance ministry documents said.

The prime minister said, "Instead of borrowing from others repeatedly, we have to develop our infrastructure with our own money… It will also benefit the country and give us confidence. We can show the world what we can do.

"As a developing country, we have to be self-reliant. We have to work with our own funds. We will improve our country and that is our goal. We need to do a lot more to achieve that goal."

The prime minister said the government's endeavour was to find ways to utilize the surplus forex reserve in profitable development works. "That's why we have thought of forming a fund from where the investors can take loans."

The country's reserve touched a new milestone of $43 billion riding on robust flow of remittance, a fall in imports caused by the pandemic and a recent uptick in exports.

Bangladesh Bank Governor Fazle Kabir said, "Since we are graduating from the LDC to a developing nation, we need to keep a substantial amount in the reserve. Therefore, we must be vigilant in spending the fund."

He said the interest rates and other hidden costs of the loans that the country takes from foreign countries are quite large.

"If the fund from the forex reserves is used carefully, it will help the country save on foreign currencies," the governor said.

On July 6 last year, Sheikh Hasina talked about taking loans from the forex reserves at a meeting of the Executive Committee of the National Economic Council (Ecnec).

She ordered preparing a guideline or roadmap based on detailed analysis of the viability of using a portion of the forex reserves to provide loans for profitable projects.

In September, the central bank submitted a concept paper to the finance ministry on using the foreign exchange reserve.

After scrutinising the proposal, the government approved the BDIF.

During the signing ceremony, Finance Minister AHM Mustfa Kamal said the BDIF will make the country's economy more self-reliant.

State Minister for Shipping Khalid Mahmud Chowdhury, Prime Minister's Principal Secretary Dr Ahmad Kaikaus, Sonali Bank Limited Chairman Ziaul Hasan Siddiqui, Senior Secretary of Finance Division Abdur Rouf Talukder, and Payra Port Authority Chairman Commodore Humayun Kallol were also present at the agreement signing ceremony.

DREDGING OF RABANABAD CHANNEL

On January 14, 2019, an agreement was signed between Payra Port authorities and Belgium-based Jan De Nul over the dredging of the Rabnabad channel.

However, the deal was scrapped on September 3, 2020, on the basis of the proposals of the Prime Minister's Office and Finance Division. The government decided to complete the dredging with its own fund instead.

As the dredging project would now be implemented with BDIF, its cost has reduced by Tk 5,608 crore, showed the documents of the finance division.

With the new funding, the depth of the channel would be increased to 10.5 metres. Once the dredging work completes, large vessels with the capacity of 3,000 TUE (twenty-foot equivalent unit) or 40,000 DWT (Deadweight tonnage) would be able to anchor at the port.

The Payra port is being constructed with an aim to develop the country's southern parts. The operational activities in the port started on a limited scale on August 13, 2016, and operation began formally in 2019.