Forecasting a rise in infrastructural activity in 2019, the Asian Infrastructure Investment Bank (AIIB) identified high cost and projected currency volatility as risk factors for Bangladesh.
"High costs pose an ongoing structural challenge to infrastructure development in Bangladesh," the AIIB said in its latest Asian Infrastructure Finance report on Tuesday.
However, currency volatility could affect project financing, although multilateral development banks are expected to help with the hedging challenge, it added.
According to the report, Bangladesh will remain a priority market for the AIIB in 2019 despite infrastructure stakeholders' concerns about inflationary pressure and depreciation of taka.
It also said there would have significant infrastructure investment opportunities across Asia, including in Bangladesh, amid current market uncertainty and short-term challenges.
In contrast to other countries, a marginal reduction in infrastructure borrowing costs over the next 12 months is expected here for a more competitive domestic financing environment, said the report.
However, lending spreads are expected to narrow as the financial sector strengthens due to more long-term lenders in the market, it mentioned.
"Bangladesh is a fast-growing economy and its improving economic conditions present a great opportunity to address infrastructure shortfalls," a press statement quoted AIIB Vice-president (policy and strategy) Joachim von Amsberg.
"We remain committed to working with the Bangladesh government and other partners to identify infrastructure projects that are financially sound and have the potential for significant economic impact."
The AIIB is actively reviewing multiple projects in the transport, energy and water sectors like Mymensingh Kewatkhali Bridge Project and Sylhet-Tamabil Road Upgradation Project, said the statement.
To date, its board of directors has approved up to $274 million for three projects in the energy sector. Governments grapple with the need for macroeconomic stability and sustaining a high level of infrastructure investment to meet growing demands, the statement said.
The AIIB is thus developing strategies to help its members respond to short and long-term challenges in infrastructure development, it added.
"There is a growing awareness of Bangladesh's economic potential," it quoted AIIB principal economist Dr Jang Ping Thia.
"Improving on construction costs and project implementation would further accelerate private-sector investments," Dr Thia added.
The AIIB is a multilateral development bank with a mission to improve socio-economic outcomes in Asia.
Based in Beijing, it began operations in January 2016 and has now grown to 93 approved members worldwide.
