Why is the Aid Community Optimistic About the Bangladesh Economy?


Corresponding with the vice president of the World Bank’s assertion, Bangladesh’s economy has grown well during the last decade. As a result, Bangladesh is well on its way to becoming the next Asian TigerStability in both the economy and the political sphere is the primary force propelling it forward. Consequently, international investment has also begun to rise over the course of the years. Recently, developing nations are confronting tremendous social unrest, political violence, and other socio-economic issues. At this stage, the aid community is searching for a strong social and economic framework that can make use of their assistance as well as an economy that is stable. Bangladesh’s economic sector continues to thrive, prompting donor organizations to adopt an optimistic stance towards the country.

Optimistic Bangladesh: A trustworthy partner for the donors

Martin Raiser, head of the World Bank in South Asia, remarked, “Other countries can learn from Bangladesh’s development experience,” The World Bank will continue to support efforts to keep the nation growing in a way that benefits everyone”.

Astonishingly, the International Development Association (IDA), the lending window of the World Bank, will provide Bangladesh with $18 billion over the next five years. There is now a $14.7 billion IDA program in Bangladesh, making it the biggest of its kind. Also, the Multilateral Investment Guarantee Agency (MIGA) will provide annual guarantees of $695 million for external loans in the energy and industrial sectors, and the International Finance Corporation (IFC) will finance $4.5 billion for the growth of the private sector. To further strengthen local urban institutions in Bangladesh to react to and recover from the COVID-19 epidemic, the government has inked a $300 million funding arrangement with the World Bank. The ADB is anticipated to give about $2.5 billion a year on average from 2023–2025, with a total of around $9.5 billion planned for Bangladesh. In addition, the Asian Infrastructure Investment Bank has proposed new loans totaling $1.51 billion for five initiatives. As a whole, between 2021 and ’22, foreign aid to Bangladesh increased dramatically.

During a period of economic instability on a global scale, Bangladesh is able to establish its worth by receiving this aid. Bangladesh has managed to amaze funders by reaching the required prosperity at a time when other Asian nations are undergoing severe economic downturns.

Why donors are optimistic about Bangladesh? 

A healthy economy with moderate growth

In FY2020, Bangladesh’s growth rate plummeted to 3.4%. The next fiscal year, FY2021, it roared back with a roaring 6.9 percent expansion. The country’s high growth rate throughout the years has been sustained. As a result, it may still develop at a healthy rate despite the turmoil in the world economy. Bangladesh’s foreign exchange reserves have averaged above $30 billion annually over the last seven years. In the 2022 fiscal year, exports reached a record high of $52.1 billion.

Stable GDP and low debt to GDP ratio 

Bangladesh’s debt-to-GDP ratio has consistently been one of the lowest in the world, and this trend has not changed. Bangladesh’s economy is still the 41st biggest in the world. Given the size of Bangladesh in terms of both its population and its economic production, this is rather amazing. Even at its current level of 40%, the company’s loan ratio is still much lower than the globally recognized maximum limit of 77%. Exports have increased by 34% this year compared to previous year. Recently, HSBC Bank made a prediction that Bangladesh will be the twenty-sixth biggest economy in the world by the year 2030.

Constant and substantial infrastructural development

Bangladesh is witnessing a revolution in infrastructure. The Padma Bridge, for instance, would increase Bangladesh’s yearly GDP by 1.3 to 2 percent and connect the country’s southwest to its northern and eastern areas, therefore cutting greatly the travel time between Dhaka and key economic locations such as Khulna, Jashore, and Barisal. In only a few short months after its construction, Padma Bridge has garnered the government more than $10 million in income.

Uninterrupted flow of remittances

At the beginning of the pandemic, many people anticipated that the amount of money being sent back home by expatriates would diminish since so many of them lost their jobs. There is an increase in the number of Bangladeshis working and sending money back home at rates comparable to those witnessed before the outbreak. The amount of money that was sent back home rose to $2.03 billion in August 2022, a 12.57 percent rise over the $1.81 billion that was sent back in July of the fiscal year 2021-22.

The growth of the middle class in 2022

The country’s middle-class population is expanding rapidly—an average of 10.5 percent annually. That compares with 7.8 percent in Indonesia, 7.9 percent in Myanmar, and 4.9 percent in Thailand. It is one of Asia’s most untapped growth markets, and it’s expected that by 2025, the overall population will reach 34 million. On the other hand, the growth of the middle-income class has a direct positive link with increasing levels of foreign investment.

Massive urbanization

Bangladesh is undergoing a fast urbanization process as a direct result of the revolution in the country’s infrastructure and transport connectivity. According to one projection, metropolitan regions would be home to 50 percent of the world’s population by the year 2040. This indicates that a significant portion of the country will, at some point, have the opportunity to grow their businesses. Mercy Tembon, World Bank country director said “Bangladesh is rapidly urbanizing. With around 36 percent of the population living in urban areas the city corporations and the municipalities can play a critical role in helping the urban poor recover from the pandemic as well as prepare to handle future shocks”.

Innovative digital economy

In Bangladesh, there are around 47.61 million individuals who have access to the internet, and over 45 million people regularly use social media. Because of the massive participation, a new platform for the digital economy has been established. On the other hand, international assistance and investment also looking for an economy which has already make a considerable amount of development in the cutting-edge technological platform.

Education, Youth and Women 

In comparison to the average literacy rate of 86.3% seen throughout the globe, Bangladesh’s percentage is at 74.70%. If a country has a greater literacy rate, then any kind of foreign investment or help will be able to flourish to its maximum potential. There are over 2.3 million young professionals who join the workforce every year in Bangladesh, and approximately 45% of the population in Bangladesh is under the age of 24 years old. Bangladesh’s economic expansion has provided jobs for millions of people, particularly women. According to the World Economic Forum, Bangladesh has the highest rate of female enrolment in primary and secondary schools among South Asian countries. Furthermore, women’s labor-force participation in Bangladesh increased to 34.7 percent in 2021, up from 15.8 percent in 1996.

Geographical proximity and advanced domestic connectivity 

Bangladesh has a coastline of 580 kilometers, and its Chittagong and Mongla ports handle 90 percent of the country’s foreign commerce. Bangladesh also has 10 operational land ports that connect several states in the country’s neighbor, India. Additionally, in order to strengthen its geostrategic position, Bangladesh is now constructing deep-sea ports in the cities of Matarbari and Payra. On the other hand, a seamless connection network was comprised of three international airports, five domestic airports, 22,418 kilometers of motorways, a wide network of roads of a high quality, and 2,955 kilometers of railroads.

Connectivity across regions

The Asian roads AH1, AH2, and AH41, which link India and Myanmar, pass through the country of Bangladesh. In addition to this, regional highway corridors such as SAARC, BIMSTEC, and SASEC encircle Bangladesh on all sides. All of these features of connectedness are also strongly reliant on the success of Bangladesh due to the country’s exceptional geographic location. In addition to this, Bangladesh is making significant investments in the construction of its infrastructure in order to link itself with the regional bottleneck

The wealthiest individual in Asia, Gautam Adani, has devised a strategy to begin supplying Bangladesh with energy generated at a coal-fired power plant with a capacity of 1,600 megawatts by the end of 2022. The investment and energy collaboration from Asia’s wealthiest man has also sent a strong signal that Bangladesh is an investment-friendly and stable economy. Hence, donors and investors provide a strong message to the world that Bangladesh remains a robust and durable economy amid consequences of COVID-19 pandemic, the Ukraine War and a host of geopolitical challenges.

[Photo by Nahian Bin Shafiq, via Wikimedia Commons]

S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA), Dhaka, Bangladesh.

Published in The Geopolitics [Link]