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Then-Finance Minister Abul Maal Abdul Muhith told bdnews24.com, “The pace of BRICS Bank is very slow. We (the government) are not thinking much about that at the moment. We will think about it when it gains momentum. “
Six years later, the government of Bangladesh is responding positively to joining BRICS Bank; While the bank has accumulated a total capital of 100 billion, its initial capital is 50 billion pounds sterling.
At present, economic analysts think that the response of Bangladesh to the BRICS Bank is positive.
They say that it would be an advantage to obtain an infrastructure loan from this multinational bank; However, it does not differ much from other multinational banks in terms of loan terms and bank management.
The New Development Bank (NDB) was launched on July 21, 2015 at the initiative of BRICS, an economic alliance of Brazil, Russia, India, China and South Africa.
At the Virtual Summit on December 16, Prime Minister Sheikh Hasina was invited by NRI Prime Minister Narendra Modi to join the NDB.
On the same day, Foreign Minister AK Abdul Momen and the Indian High Commissioner in Dhaka Vikram Doraiswamy said that Prime Minister Sheikh Hasina had responded positively to the invitation.
The NDB authorities have already started the process of increasing the membership to broaden the range, and the membership policy has also been finalized.
The NDB is moving forward on the principle that any UN member state can become a member of the NDB. However, initially each member state was given the responsibility of nominating two member countries, according to a report by the Economic Times of India.
The joint statement from the BRICS Virtual Summit on November 18 also highlighted various aspects of membership growth.
There, BRICS leaders said they supported the bank’s decision to increase its membership, as decided by the NDB Board of Governors. It will strengthen the role of the NDB as a global development finance institution and will contribute to the financing of infrastructure and sustainable development projects in member countries.
The expansion process must be gradual and the membership must be balanced in terms of geographic representation, as well as in light of the NDB’s goals of achieving the highest credit rating and institutional development. In light of these principles, we welcome the initiation of formal discussions with potential membership candidates and the expansion of the NDB membership. ”
The NDB Board of Governors also made a list of countries that will be invited to become members at its second annual meeting in 2016.
In accordance with the terms of reference of the membership, the new member country will appoint a governor and an alternate governor. It will simultaneously select directors and their alternatives; However, the number of directors will not exceed 10 in any way.
At the BRICS summit in November, NDB President Marcos Troiho briefed BRICS leaders on various aspects of NDB’s activities over the past five years.
“We have accomplished more than our peers in decades,” he said.
“We have already received 75 projects, totaling £ 21 billion. We expect our project approvals to reach £ 26 billion by the end of the year.”
NDB has already received a ‘Double A Plus’ rating from Fitch and Standard & Poor’s, as well as a ‘Triple A’ rating from the Japan Credit Rating Agency and the Analytical Credit Rating Agency.
Zahid Hossain, a former chief economist at the World Bank’s Dhaka office, said the ratings put the NDB in a favorable position to raise funds at a competitive rate.
Mostafizur Rahman, an honorary member of the Center for Policy Dialogue (CPD), sees three benefits in joining BRICS Bank.
He told bdnews24.com: Second, we can participate in their rulemaking. Third, we will also have the advantage of obtaining loans, etc., if we participate in it. I see it positively. “
On the other hand, economist Zahid Hossain told bdnews24.com that the government has budgeted around £ 1 billion over 15 years to achieve the Sustainable Development Goals (SDGs). So the annual cost is about 20 percent of GDP. The World Bank, ADB, JICA and others have provided funds in this regard.
“Even if we put them all together, we can’t get anywhere near that. That’s why new funding is needed. It will fund long-term development. On the bright side, there is a need for a new window. There is room to work with them.”
Referring to the ratings, Mostafizur said: “I saw his ratings as ‘Double A Plus’ and AIIB has a good relationship with him. From there, we will have the advantage of obtaining loans for infrastructure, etc.”
42% of the world’s population lives in NDB member countries and these countries contribute more than 20% of total world GDP.
For this reason, at the time of its constitution it was said that the NDB could become an alternative to the World Bank and the IMF in financing infrastructure development and various development projects in these emerging economies.
When asked about the difference between them and BRICS Bank, Mostafizur said: “There is not much difference in the thick points. At first, a lot of people thought that it could be quite stingy in terms of supervision, rules, etc., but that This is not the case, it is more infrastructural and focused on developing countries, I don’t see much difference on that side.
“But on the other hand, there is no precaution here between the United States and Europe. It will be more development and infrastructure. Their attitude will be towards developing countries. As such, I think the political economy is on the right track.”
Economist Zahid Hossain also said that there is no difference between the BRICS Bank and the World Bank-IMF.
“Initially, they said that since developing countries are not important in the management of the IMF-World Bank, they are monopolized by Europe and America, and developing countries have no voice on the governing board,” he said. That is why we are building an alternative bank. So that developing countries lead in it and their needs are adequately addressed.
But the governance structure that they have made, the five founding countries, will dominate. And with that said, the shareholding cannot go below 55 percent. So the governance structure that they have created there is exactly like cut and paste at the World Bank-IMF. The same model “.
After the invitation and response, discussions will now take place to begin the membership process, said Indian High Commissioner Doraiswamy.
“We have invited Bangladesh to become a partner of the bank,” he told reporters on Thursday. This means that Bangladesh is having the opportunity to get a loan on easy terms and give an opinion on it. “
Highlighting the benefits of borrowing for large projects in Bangladesh, Foreign Minister AK Abdul Momen said: “The … 100 billion bank সরকার that the government of India has asked us to participate in. We agree, we will join.
“There are many types of projects in our country, megaprojects are the ones that we need the most money.”
Noting that the process for Bangladesh to become a member of the NDB is still unclear, Zahid Hossain, a former World Bank economist, said: The price of a share is one lakh of dollars. Now the question is how many shares do I need to become a member.
It also says that no one can be more than 6 percent shareholder outside of the founding member. That means you cannot own more than 60 shares. But if someone takes a part, will they become a member? That is not clear yet either. “
Regarding the interest rate, he said, “What they have said is that the interest rate is fixed. It will keep changing every six months. As long as they take interest, the dollar loans will be based on pound dollars and the euro on pound euros.
And they keep going up and down. Since the floating rate, therefore, will fluctuate. Outside of that, they charge some spreads. From what I saw in the spread, I thought I would add at least 1 percent more. They also have some commitment fees and will also charge some country risk premiums. “
NDB has also started investing in local currencies outside of the dollar-euro. Zahid Hossain sees this as a positive, as there is no opportunity to get a long-term local currency loan.
He said: “They will also finance only in local currency. So that the exchange rate does not fall on the recipient but also on the creditor. Now if we take the dollar and the exchange rate goes up, we have to increase our budget allocation. For the two of real interest.
To get rid of that, they have said that loans can also be taken in local currency. If they lend in local currency, they will issue bonds in the market. The money will be withdrawn from there. They are taking the risk of that bonus, you get the money in local currency. “
Read more-
India invites Bangladesh to join BRICS Bank
The ‘BRICS’ bank journey began
BRICS Bank and Asha Muhith will also take Bangladesh
Bangladesh’s Interest in China-Based ‘Asian Bank’: Muhith
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