Bangladesh is planning to launch¬†a sovereign wealth fund (SWF) with its foreign currency reserves to help invest in much needed infrastructure projects, according to reports from Asian news media outlets.
A sovereign wealth fund is a pool of money derived from a country’s reserves, which is set aside for investment purposes that are believed to benefit the country’s economy.
The fund will¬†be launched in the next few months, at the earliest, and will have an initial size of between $1 billion to $2 billion, Bangladesh’s Central Bank Governor Atiur Rahman told the Nikkei Asian Review.
“Our economy¬†could achieve double-digit” growth if it overcomes a lack of modern infrastructure and other problems, he told Nikkei.
The country’s¬†foreign exchange reserves reached an all-time high of $25 billion at the end of the fiscal year through June 30 — which is the equivalent of seven months’ worth of imports — boosted¬†by a record $15 billion in remittances from its workers¬†abroad.
With remittance inflows¬†rising, the country’s foreign exchange reserves should¬†climb¬†by $1 billion over the next three months, Rahman estimated.
Aside from¬†launching a sovereign wealth fund, Bangladesh will also put $200 million of its reserves towards a new refinancing program for exporters. An existing credit facility that provides long-term, low-interest loans for infrastructure projects is set to be expanded from $350 million to $500 million next year.
For the past decade, Bangladesh’s economy has been stuck in the 6 percent growth trajectory, the main cause of which is due to the lack of conducive infrastructure.
Its¬†economy grew by 6.5¬†percent¬†in the fiscal year that ended June 30, however it¬†has the¬†potential to reach a growth rate of 10 percent¬†or more with¬†greater political stability and energy security, more diverse export markets, and infrastructure development to achieve it, according to Rahman.
By some estimates, the country will need to spend around $10 billion a year on infrastructure.
Bangladesh has managed to shed its low-income status as ¬†its per capita gross national income crossed the $1,046 threshold, which prompted the World Bank to reclassify it as a lower-middle-income country in July.