Bangladesh has asked the Asian Infrastructure Investment Bank for a $1.5 billion budget support loan to help steady public finances and push through important reforms, a practical step aimed at keeping the economy stable while funds are found to strengthen reserves and support the banking sector. The loan request is part of a climate policy-based programme and the bank signalled it will work with government agencies to assess the proposal, which could unlock timely funding for short term needs and for measures that improve financial resilience. Officials say the request complements other expected support from major lenders, with additional funds expected from the World Bank and Asian Development Bank that together could provide breathing space for public spending and reforms. Budget support like this is often used to cover fiscal shortfalls and to back programmes that modernise systems, restructure weak banks, and protect social services while the economy adjusts to slower revenue growth. Experts at the Economic Relations Division and independent policy analysts noted that recent years saw higher budget support levels after emergency shocks, and that careful use of new loans can help rebuild foreign currency buffers if spent on high priority needs. Because some loans carry market linked interest rates, officials stress the importance of balancing urgent needs with long term debt plans, noting loan terms may include lengthy maturities and grace periods and can have higher interest if tied to global reference rates. Analysts urged transparent planning so the funds support growth enhancing projects and banking sector fixes that boost confidence and reduce risk, rather than adding to unmanaged debt burdens that could strain future budgets. Practical steps suggested at recent briefings include clear criteria for project selection, tighter oversight of bank restructuring, and the use of part of the funds to shore up foreign reserves so trade and remittances flow smoothly. Observers pointed out improving tax collection and widening the revenue base remain central to reducing future borrowing needs, and pairing loans with domestic reforms helps ensure money is used efficiently and benefits households and businesses. Banking sector reforms remain a priority because weak institutions can ripple through the economy; sensible restructuring, targeted recapitalisation and measures to improve governance were highlighted as ways to restore stability, credit flow and create local jobs. Supporters say a mix of official loans, careful debt management, and policies that encourage private investment can set the stage for steady, inclusive recovery and more sustainable growth. The overall message from planners and economists was constructive: external budget support is a tool that, when used with clear rules, strong oversight and a focus on high-return reforms, can help a country navigate a tight fiscal moment and emerge with stronger foundations for the future.
