The Japan International Cooperation Agency (JICA) is seeking clarification from Bangladesh regarding the criteria for government intervention in covering arrears or debt servicing issues of state-owned enterprises.
Additionally, JICA has expressed concerns about the financial health of state-owned enterprises, risks associated with public banks, impediments to Foreign Direct Investment (FDI) inflows, progress on reforms, growth projections, inflation, fiscal deficits, balance of payments, and policies aimed at safeguarding the economy from global economic crises.
A high-level delegation from Japan is scheduled to arrive on Wednesday (15 May) for a 7-day visit to investigate these issues, said officials of the Economic Relations Division (ERD) and the Ministry of Planning.
Led by JICA Macroeconomic Analysis Division Director Keiichiro Yuasa, the three-member team will engage with senior officials from various ministries and divisions during the visit.
Data from the Planning Commission states more than 80 development projects are ongoing in Bangladesh with the help of Japan.
The country has been at the top for the last couple of years among bilateral development partners in terms of foreign aid disbursement and new commitments, according to an ERD report.
Experts and economists believe the concerns of large lenders like Japan regarding the budget deficit, debt repayment capacity and the government's intervention regarding debt service have significant importance.
Apart from removing the concerns from the country, they also advised to take effective initiatives to solve the problems.
Sources indicate that JICA has already dispatched a letter, a tentative agenda for the meeting, and a questionnaire to relevant offices within the Bangladesh Government.
In a letter addressed to Planning Division Senior Secretary Satyajit Karmakar, , JICA said their Macroeconomic Analysis Division oversees the assessment and monitoring of macroeconomic developments in recipient countries as part of credit risk management for loan operations.
The letter read that the Government of Bangladesh showed its commitment to raising revenues to support higher spending on infrastructure and building human capital.
“What risks do you see to the government's commitment to keeping fiscal policy on a sustainable path? Are state-owned enterprises and public banks a risk?” asked the letter.
The letter also asked under what conditions the government would take responsibility for covering any arrears or debt servicing difficulties of state-owned enterprises.
The letter also revealed that Bangladesh has implemented various structural reforms in recent decades, with the government and institutions like the Asian Development Bank (ADB), International Monetary Fund, and the World Bank emphasising their importance.
Reforms suggested by the development partners aim to enhance climate resilience, human capital, physical infrastructure, business environment, and trade and FDI liberalisation, said the letter and asked about a realistic agenda and timetable to implement structural reforms.
JICA also asked about tentative pressures on fiscal deficit due to lack of absence of reforms.
The letter expressed concern over challenges on the global economy caused by conflicts in several areas, slower growth in China, and the risk of increased volatility in world commodity prices, especially for oil.
The letter asked for an assessment of the impact of the global economic environment on Bangladesh's outlook for growth, inflation, and the balance of payments.
It also asked if the government utilise other policy levers at its disposal, such as import tariffs, export duties and quotas, restrictions on capital flows, and macro-prudential policies, to help insulate Bangladesh from global economic developments.
Data from the programming division of the Planning Commission revealed that the combined costs for 56 ongoing infrastructure projects in Bangladesh is Tk3,00,080 crores, of which Tk2,055,52 crore is to be mobilised from Japan.
Japan has contributed significantly to the overall development of Bangladesh with financial support of more than $30.18 billion since independence in the form of loans and grants; against which, $20.25 billion have been disbursed, according to the report titled “Flow of external resources in Bangladesh” published by the ERD.
The debt outstanding from Japan to Bangladesh is $10.44 billion, the report further revealed.
So far 5,104 km of roads, 134 bridges and power plants with a total capacity of 2343 MW and 25000 km of distribution lines have been constructed with Japanese assistance, revealed the annual report of the ERD.
The report states Japan committed support worth $1514.24 million in the last fiscal year which is the highest among the bilateral partners and third highest among all of the development partners following the World Bank and the ADB.
Commitment from Japan in the FY-22 was $ 1728.75 million, second among all development partners.
At the same time, Japan topped the list among all the bilateral sources with the disbursement amount of $1901.61 million, while scoring second following the World Bank.
Disbursement from Japan to Bangladesh in the FY-22 was $2207.82 million, second following the ADB.
Some ongoing flagship projects with Japanese assistance are the Matarbari Ultra Super Critical Coal-Fired Power Project, Dhaka Mass Rapid Transit Development Project, Bangabandhu Sheikh Mujib Railway Bridge Construction Project, Hazrat Shahjalal International Airport Expansion Project, and Matarbari Port Development Project.
