The International Finance Corporation (IFC) plans to fortify its footprint in Bangladesh through extending its investment portfolio to nearly $5.0 billion in the next five years.

IFC wants to expand investment for the private sector in Bangladesh. They’ll double the investment in the next five years.

Bangladesh was a potential place for investments as the economy was growing at a faster rate prompted by the private sector’s contribution.

In the past five years, the IFC, an arm of the World Bank Group, has lent some $2.0-billion loans to the private sector here for business development. Bangladesh’s economy has grown a lot in the last 15 years. The RMG is playing a vital role in boosting the economy.

Moreover, a growing but dynamic population has helped to move the country to a situation where it is closer to graduating from a low-income country. But the current development model… is not enough to go to the next level.

And here is where the private sector needs to play a critical role. The amount of investments that the country needs, the amount of infrastructure that the country need, the amount of attraction for foreign capital the country needs requires a strong private sector. The public cannot do it alone.

About the challenges behind Bangladesh’s weak private-investment portfolio, Bangladesh will be an $800 billion economy by 2030. The only way to enhance its investment-GDP (gross domestic product) ratio to more than 30 per cent is to mobilise capitals.

The current fiscal constraint is not giving you the capacity… Three issues here are critical. Firstly, you need to attract foreign direct investment (FDI). You need to open your economy for external investments. You need to flexibilise your economy to attract capital from the outside.

Secondly, you need to have a strong financial sector that complies with international standards. The financial sector here has many regulations that constrain the capacity. Bangladesh has only some 8.0 per cent credit growth, much lower even compared to the similar level of countries.

Developing countries like Bangladesh should have the credit growth at least between two and three times than the nominal GDP growth. The credit should grow at 20 per cent at least.

Actually, many existing regulations are the constraints to the enhancement of the credit growth of this country which you have to resolve first, the Spanish-origin IFC executive told the FE.

The public-private partnership (PPP) is a good model for attracting more capital in energy, healthcare, housing, transport and telecom sectors here. But you need to have a very strong, robust and credible PPP framework with international standards that can attract more FDI.

The banking sector here is facing another challenge that is interest rate cap. You want to reduce the higher rate so that people can avail the bank loan, right? But problem is—you have forced the bank to cut the rate. But the bank cannot lend the credit at 9.0 per cent if its cost of fund remains higher. So you need to reform the financial sector first.

About heavy dependency on single-export economy, Bangladesh should create a competitive environment for other export-oriented sectors too.

The higher investment plan is to help Bangladesh for market diversification in the international trade market. We want to help a number of projects which can facilitate market diversification.

Since 2000, it has invested more than $3.5 billion to help Bangladesh’s private-sector growth.

Some key sectors for future investment opportunities include transport and logistics, energy, financial services, light manufacturing, agribusiness, healthcare and pharmaceuticals.

Bangladesh Taka (BDT) has depreciated by Tk 1.0 against the US dollar (USD) in nearly three months despite selling of the greenback by the central bank to the banks for keeping the market stable.

The US dollar was quoted at Tk 85.80 each in the inter-bank foreign exchange market on Wednesday against Tk 84.80 on August 17 last. It was Tk 85.75 on Tuesday.

The local currency started depreciating since August 18 last amid growing demand for the US dollar in the local market, according to market operators.

The growing demand for the greenback has been created mainly due to higher import payment obligations following big purchases of textile products along with an upward trend in various commodities including fuel oil in the global market, they explained.

Economists and market operators said that the continued depreciation of the local currency against the US dollar has pushed up prices of imported items in the domestic market.

They, however, added that the exporters and remitters were being benefited from the loss of value of the local currency against the greenback.

Higher depreciation of the local currency against the US dollar may hit the low-income people. Bangladesh Bank should continue with its foreign currency liquidity support to the banks to ease the demand for the greenback in the market.

The gradual depreciation of the local currency will put extra pressure on the price level of imported commodities, according to a former managing director of a state-run bank.

Such depreciation helps boost export earnings and inflow of remittance. But imports will be costlier in the near future.

The BDT’s latest depreciation came against the backdrop of higher outflow of foreign exchange than inflow in recent months, the market operators explained.

Actually, the lower inflow of remittance and higher import bills have built up pressure on the country’s forex reserves, leading to a steady devaluation of the BDT, they added.

The flow of inward remittances dropped by nearly 20 per cent to $7.05 billion during the July-October period of the current fiscal year (FY 2021-22) from $ 8.81 billion in the same period of the previous FY, the BB data showed.

Meanwhile, the actual import in terms of settlement of letters of credit (LCs) jumped by 47.18 per cent to $11.02 billion during the July-September period of FY’22 from $9.90 billion in the same period of FY’21.

However, the opening of LC, generally known as import order, rose more than 49 per cent to $ 19.90 billion during the period under review from $13.31 billion in the same period of FY’21.

The central bank has continued its foreign currency support to the banks for settling import payment obligations particularly of fuel oil, fertiliser and capital machinery.

As part of the move, the BB sold US$20 million directly to a state-owned commercial bank (SoCB) on Wednesday. In FY’22, it has so far sold $1.63 billion from the reserves directly to the commercial banks.