Bangladesh’s graduation to lower middle income country from low income bracket has improved the credit worthiness of the country, according to an official document. This has also opened new windows for financing of Bangladesh development projects by the World Bank and other development partners with slightly higher interest rates, says the document obtained by UNB. In line with the Public Money and Budget Management Act, 2009, the government aims at minimizing interest costs and risks by choosing an appropriate borrowing mix. Also read: International solidarity key to achieving DPoA for LDCs: Bangladesh The document says Bangladesh's concessional financing facilities from bilateral and multilateral development partners has shrunk slightly in the recent past as the country elevated itself into the lower middle income status. The government has been pursuing a medium term deficit financing strategy to strike a balance between domestic and external source as interest rate of foreign loans is still cheaper than that of domestic loans despite some foreign exchange risk. Further, the document mentions, global interest rate is likely to remain reasonably low as the global economic recovery might be delayed due to the advent of new variants of COVID-19 amid supply shortage of vaccine doses across the globe. Therefore, deciding on an appropriate borrowing mix between external and domestic source is critical to reduce overall financing cost and slowing down accumulation of debt stock. As the government meets the major share of its financing requirements from domestic sources, appropriate borrowing mix between bank and non-bank financing is critical to reduce domestic debt servicing cost, and hence the overall financing cost. The official document says the government has been trying to reduce the share of nonbank financing in its domestic portfolio towards relatively cheaper bank financing by implementing several reform measures in the National Saving scheme, postal saving scheme, and the postal banking system. For instance, it says, NID-based national database is being used to sell NSCs to ensure that any individual cannot cross his maximum allowable limit of investment in NSCs and the source tax on interest income from NSCs was raised to 10 per cent from 5 per cent since fiscal 2019-20. Besides, the postal savings scheme and the postal banking system have also been automated to improve efficiency in government financing. Also read: Bangladesh to enjoy DFQF market access to Australia in post-LDC period To widen the scope for domestic financing the government has been taking various reform measures to increase the depth of the domestic bond market, the document adds. The government has introduced a Shariah-compliant bond called 'Sukuk' in fiscal 2020-21. The fund raised by the Sukuk will be invested in a large infrastructure project titled "Safe Water Supply for the Whole Country". The Shukuk could be a new frontier for financing large infrastructure projects by the government and thus, could reduce government's dependence on foreign finance which is not always easily accessible. It could also ease pressure on the domestic market as the government might reduce its dependence on traditional financing such as bank borrowing or nonbank borrowing by issuing NSC.