Macro Analysis /

Multilateral agencies support Bangladesh with US$1.7bn pandemic loan

  • Bangladesh has received US$732mn from the IMF, US$600mn from ADB, US$250mn from AIIB & US$100mn from IDA as credit

  • Having an outstanding external debt of 12.5% of GDP, the government has flexibility to source foreign loans

  • This will help fund budget deficit resulting from slower revenue growth and strengthen it BoP position

Multilateral agencies support Bangladesh with US$1.7bn pandemic loan
Shopnil Paul
Shopnil Paul

Research Associate

IDLC Securities
2 June 2020
Published byIDLC Securities

The economic impact of Covid-19 is weighing on the Bangladesh government, with the country having had a 66-day long ‘general holiday’ ie lockdown. Simillar to other countries, the government has already announced a package of BDT1.03tn (US$12.13bn), equivalent to 3.6% of GDP, to stimulate the economy. Evidently, the government’s revenue collection has slowed in recent months. In 10M FY 20, the government’s total revenue grew by only 0.6% yoy and it is logical to assume that growth will continue to be sluggish. To meet its budget expenses, the government now needs liquidity more than ever. Though internal debt can be a source of financing, unlike other external-debt-ridden countries, Bangladesh only has US$38bn (12% of GDP) of external debt, which gives the government the flexibility to use foreign loans.

Source: CEIC Data

Multilateral agencies such as the ADB, IDA and AIIB have all sanctioned US$1.68bn of loans to Bangladesh. This credit will help the government meet its budgetary expenses. It will also address the Balance of Payment issue, which has been impacted by a fall in export earnings (24.2% yoy drop in the first four months of 2020) and a decline in remittances (6.1% yoy drop in the first four months of 2020).

Source: Bangladesh Bank Annual Report

The Bangladesh government has also secured US$1.7bn of foreign loans from different multilateral agencies as a part of the Covid-19 funding support in recent times (see summary below). 

Summary of credit

Lender Name

(USD mn)







BoP and budgetary support




Cash and food assistance, Infrastructure support, subsidised loan




Same as above

IDA (World Bank)



Public Health Emergency, equipment support




Same as above

UK Government



Containment of Covid-19

Source: IMF, ADB, AIIB, IDA, UK government 

The Executive Board of the IMF has approved a total of US$732mn in disbursement. The fund comes under two IMF financing arrangements:

  1. The board has granted SDR 177.77 million (US$244mn) under a Rapid Credit Facility (RCF). This represents 16.67% of Bangladesh’s SDR quota of 1,066 million. RFC funding is accessible to low-income countries (LIC) and carries no ex-post conditionality. This credit facility has a 0% interest rate along with a 5.5-year grace period. RFC financing has 10 years of final maturity.
  2. SDR 355.53 million (US$488mn or 33.3% of SDR quota) will be purchased under the Rapid Financing Instrument (RFI). As of 31 May 2020, Bangladesh’s outstanding purchase and loans stand at SDR 502.83 million. Usually, the RFI financing carries 3.25-5 years of final maturity.

The Asian Development Bank (ADB) approved USD500mn to Bangladesh on 7 May 7 2020 to address the public health and economic situation from the Covid-19 impact. This financial assistance is a part of ADB’s Covid-19 Active Response and Expenditure Support (CARES) programme. It includes food and cash assistance, subsidised lending facility to MSMEs, extended salary support to 1.5 million workers of the export-oriented industry and special honorarium to health workers of govternment-run hospitals. In addition, ADB has also provided US$100mn concessional loan, US$1mn technical assistance grant, US$1.3mn cash assistance and US$350,000 emergency grant from the onset of a pandemic.

Co-financed with ADB, the China-led Asian Infrastructure Investment Bank (AIIB) approved US$250mn loan to Bangladesh under the ‘Covid-19 Crisis Recovery Facility’. This project will benefit the poor and vulnerable population.

World Bank’s International Development Association (IDA) has also sanctioned US$100mn for public health emergency projects. This credit facility has a 30-year maturity with a 5-year grace period. The money will be spent on the purchase of diagnostic equipment, testing kits and reagents and training of technical staff.

The UK government has committed GBP21mn (US$26mn) to Bangladesh and assistance will be provided through UNICEF, UNDP, UN and NGO partners. The grant is targeted to contain the spread of viruses primarily in Rohingya camps.