Bangladesh is in talks with China over a US $ 5 billion loan to boost the country’s declining foreign exchange reserves, according to the central bank governor, bringing the South Asian country closer to Beijing.
The funds would be denominated in yuan and will provide exporters with funding to pay for much-needed raw material imports from China, Governor Abdur Rouf Talukder said in an interview in Dhaka. He said that the discussions are still at a technical stage.
Bangladesh’s imports from China exceed its exports by more than 10 times, putting a huge strain on the country’s reserves. “If we get this loan, it will help us in two ways: we can settle some of the Chinese payments in yuan and it will help to build our reserves because renminbi is a reserve currency” approved by the International Monetary Fund, he said.
The country’s foreign reserves have progressively dropped since the outbreak, mostly due to decreasing exports. Garment shipments account for around 10 per cent of the GDP, and commodity prices are increasing. Bangladesh obtained US $ 4.7 billion in IMF loans last year, allowing it to avoid the type of economic calamity that Sri Lanka experienced. Exports continue under strain, while importers are struggling to obtain currency. Fitch Ratings downgraded the nation’s credit rating in May due to declining reserves.
Reserves stood at US $ 21.8 billion as of 30th June, enough to cover 2.5 months of imports, according to central bank data. The IMF has set a target of 3.6 months of import cover by June 2027. Imports from China stood at US $ 16 billion in 2023.
Prime Minister Sheikh Hasina is scheduled to visit Beijing next week, where she will most likely discuss funding support. Bangladesh has extensive commercial and defence connections with China, the South Asian country’s largest trading partner.
