Bangladesh to ask WB for $250m more in budget support

Highlights:

• FY23 budgetary support from WB was $250m

• Initial budgetary support request from WB in FY24 was $250m

• Now Finance Division wants to increase the amount to $500m

• Finance Division instructs ERD to negotiate with WB

• Finance Division wants the budgetary support confirmation by Dec

Bangladesh is going to seek an additional $250 million in budgetary support from the World Bank under its Recovery and Resilience Development Policy Credit (DPC) programme. 

The government had proposed a loan of $250 million in the current financial year 2023-24, but it is now considering increasing it to $500 million, according to officials at the Finance Division and Economic Relations Department (ERD).

In a recent letter sent by the Finance Division, the ERD has been asked to negotiate with the World Bank in this regard and confirm the financial assistance by December.

Earlier, the World Bank provided $250 million in budgetary support to Bangladesh under the same programme in FY22.

The ERD has already started preparatory work in this regard and will submit a proposal to the World Bank soon for additional $250 million, officials said.

The letter from the Finance Division outlines the rationale for receiving an additional $250 million in budgetary support. The letter states, "It is very encouraging to see that almost all the reform measures targeted in the second R&R DPC have already been achieved. Adoption of the National Tariff Policy, implementation of the A-challan system, incorporating necessary amendments to the Bank Companies Act, enactment of the Secured Transaction Act and adoption of the Mujib Climate Prosperity Plan are just a few to name.

"These reforms are a manifestation of the deep commitment of the Government of Bangladesh to keep the country on the right track of sustainable development. Although there are only a few reform measures targeted under the second R&R DPC that remain to be completed, the volume of reform measures already implemented under the first R&R DPC as well as under the second R&R DPC are quite significant.

"The Finance Division would like to draw kind attention of the World Bank to the fact that despite not being a contributor to the rise of GHG across the globe, Bangladesh firmly aligns itself with the global campaign to combat the adverse impacts of climate change and remains deeply committed to secure a sustainable future for the global community.

"To fulfil that goal, Bangladesh is making best efforts to implement necessary reforms in close collaboration with the development partners. Therefore, taking into consideration Bangladesh's commitment and contribution towards building a resilient and sustainable future and the progress achieved so far, the Economic Relations Division is kindly requested to make necessary arrangements leading to negotiation and disbursement of funds allocated for the second R&R DPC by December 2023."

Given the present economic situation and in response to the forex reserve crisis, apart from the World Bank, discussions with the Asian Development Bank and the Asian Infrastructure Investment Bank for a total of $800 million — $400 million each — are underway. ERD officials say there is a possibility of signing a loan agreement with the two institutions this month.

Due to the economic crisis caused by the Covid-19 pandemic, the government emphasised budgetary support from various development partners to buy vaccines. Later, the budgetary assistance programme was expanded to deal with the economic challenges arising from the Ukraine-Russia war.

In the past fiscal year, Bangladesh received $1.7 billion in budgetary assistance from various development aid agencies. The amount was $2.59 billion in FY22, $1.09 billion in FY21, and $1 billion in FY20.