MIGA pledges $500m to revive Bangladesh’s export development fund

In a significant boost to Bangladesh’s export sector, the Multilateral Investment Guarantee Agency (MIGA), a key arm of the World Bank Group, has committed $500 million in loan guarantees to relaunch the country’s Export Development Fund (EDF).

Finance Secretary Dr Md Khairuzzaman Mozumder announced it on Tuesday, October 14, during the International Monetary Fund–World Bank Annual Meetings in Washington DC.

The announcement marks a pivotal shift in how Bangladesh will finance its export-driven growth. For years, the EDF operated by drawing directly from Bangladesh Bank’s foreign exchange reserves, offering low-interest foreign currency loans to exporters, primarily in the ready-made garment (RMG), knitwear, and light manufacturing sectors, to import raw materials like cotton, yarn, and accessories. But as reserves dwindled amid global economic turbulence, the government was forced to suspend EDF disbursements in 2023, triggering widespread concern among exporters who rely on timely access to affordable credit.

“The temporary closure of the EDF created real hardship,” Dr Khairuzzaman acknowledged. “Exporters faced higher financing costs, delays in raw material procurement, and reduced competitiveness in international markets.”

The new arrangement with MIGA represents a structural innovation in public finance. Instead of tapping into national reserves, the government will now access $500 million in guaranteed financing, likely from international commercial lenders, backed by MIGA’s political risk insurance. This means lenders will be protected against non-commercial risks such as currency inconvertibility, expropriation, breach of contract, or war-related disruptions, making them more willing to provide long-term, low-cost loans.

“This is not a grant or direct aid, it’s a guarantee that unlocks private capital,” Dr Khairuzzaman clarified. “MIGA’s involvement de-risks the lending environment, allowing us to restart the EDF without adding pressure to our foreign reserves. It’s a sustainable model for the future.”

The funds will be managed through the Finance Division, in close coordination with Bangladesh Bank, ensuring that disbursements align with macroeconomic stability goals. Exporters will once again be able to secure foreign currency loans at concessional rates, enabling them to import inputs efficiently, maintain production cycles, and meet global delivery deadlines, critical in an industry where just-in-time manufacturing is the norm.

While the $500 million pledge has been widely welcomed, industry leaders caution that it falls far short of the fund’s former scale. At its peak, the EDF stood at $7 billion, serving thousands of exporters across multiple sectors.

“This amount is not large, but it’s a start,” said Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). “We’ve been urging the government for months to restore the EDF. Even a modest restart will ease cash flow pressures. But we must keep negotiating to expand it, $500 million won’t meet the full demand of our $55 billion export economy.”

Enamul Haque Bablu, Senior Vice President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), echoed this sentiment: “The EDF isn’t just a financial tool. It’s a safety net. In times of crisis, like during the pandemic or post-2022 forex crunch, it kept factories running and workers employed. MIGA’s support is good news, but we need proper implementation, transparent allocation, and a clear roadmap to scale.”

The EDF revival is part of a broader deepening of Bangladesh’s partnership with MIGA. Dr Khairuzzaman revealed that discussions are also advancing on the second phase of the Petrobangla LNG infrastructure project, following the successful completion of its initial phase. “They will soon send us the term sheet,” he said, indicating continued World Bank Group support for strategic energy investments.

MIGA’s role is particularly vital for countries like Bangladesh, where perceived political or regulatory risks can deter private investment. By offering political risk insurance, MIGA lowers the cost of capital and attracts foreign direct investment aligning with its core mission of poverty reduction through inclusive economic growth.

The Export Development Fund is more than a credit facility, it’s a cornerstone of Bangladesh’s export-led development model. By enabling exporters to source high-quality inputs at competitive prices, it directly enhances product quality, delivery reliability, and price competitiveness in global markets. For the RMG sector—which accounts for over 84% of national exports—access to the EDF can mean the difference between securing a major European order or losing it to Vietnam or India.

Moreover, the fund supports diversification efforts, aiding emerging exporters in leather, footwear, jute goods, and pharmaceuticals.

While $500 million may seem modest in the context of Bangladesh’s $40+ billion annual export target, experts view it as a catalyst—a proof of concept that international financial institutions are willing to back Bangladesh’s trade resilience through innovative instruments.

The real test, however, lies in execution: ensuring timely disbursement, fair access across small and large exporters, and robust monitoring to prevent misuse. If successful, this model could pave the way for larger guarantees from MIGA or other multilateral agencies in the future.

As Dr Khairuzzaman put it: “This isn’t just about restarting a fund. It’s about building a resilient, reserve-friendly architecture for export finance—one that protects our macroeconomic stability while empowering our businesses to compete globally.”

For Bangladesh’s millions of garment workers, factory owners, and global buyers, that balance could not be more critical.