Rejaul Karim Byron and Refayet Ullah Mirdha

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Bangladesh’s export earnings and the flow of concessional foreign financing and grants will decline once it becomes a developing country, according to a government study.

The projected loss of exports and grants and higher debt service costs would lead to higher current account deficit, said the study styled “Impact assessment and coping up strategies of graduation from LDC status for Bangladesh” prepared by the General Economics Division (GED), a wing under the planning ministry.

The study was prepared before the coronavirus pandemic hit the country.

In August, it was sent to all ministries to come up with strategies to make up for the losses caused by the crisis, said Prof M Shamsul Alam, a member of the GED.

The ministries will incorporate the risk factors in their strategies. For example, the commerce ministry has taken steps to sign trade agreements with various countries as Bangladesh would lose duty-free market access following the graduation, he said.

The biggest blow will emerge in the form of the loss of duty-free market access. The projected export loss from garment products in the European Union and non-EU markets estimated to be about 5 per cent of the total exports in the fiscal year of 2017-18, the study said.

This amounts to a loss of $7 billion in FY27, which would steadily increase to $13 billion by FY31.

“Policy actions will be necessary to counter these projected losses,” the study said.

The proportion of concessional assistance will continue to fall while the proportions of non-concessional loans will increase in the coming years.

This is not the direct result of the LDC graduation, but a continuation of the ongoing trend owing to the increase in per capita income.

The concessional debt is already declining: the ratio came down to 51.3 per cent of the total external debt in FY16. Bangladesh has accessed a significant amount of non-concessional financing in recent years.

DOWNSIDES OF LDC GRADUATION

Biggest blow will come from the loss of duty-free market access

Loss in exports to stand at $ 13 b in FY31

Absence of concessional loans will lead to increased debt servicing costs

Loss of grants will be $ 700 m per annum

Current account deficit may swell to 0.9-1.4 % of GDP in FY27