Frontier Markets

Bangladesh To Launch Sovereign Wealth Fund To Help Finance Much Needed Infrastructure Projects

BangladeshBangladesh 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.


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