World Bank budget support locked in terms and conditions

The World Bank promised to assist Bangladesh with $750 million as budget support to ensure multi-dimensional job creation, the participation of backward people in the job market, and to improve the quality of employment.

The global lender set nine conditions in the process. Bangladesh received the first tranche of $250 million in early 2019. The remaining two tranches are supposed to be released in the current fiscal year and the next one.

The conditions of the agreement, signed on January 19 last year, include minimising the time for starting a new business, cutting the cost of setting up a business, increasing business registrations, taking less time to complete customs clearance formalities, and raising the number of bond licensed companies outside the apparel sector.

But there has been no visible progress in these areas.

The conditions of using digital platforms to pay pensions to 80,000 retired government employees, cutting the average cost of workers' migration, and setting up day care centres under a new regulatory framework have not been met as well.

Burdened with such terms and conditions, the second tranche of the $750 million is yet to get the nod of the World Bank. Although the multilateral donor had an initial deadline to place the budget support proposal at its board meeting in December last year, it has not yet been moved forward.

Sources at the World Bank's Dhaka office said the donor organisation had revised its target of releasing budget aid in the current fiscal year and extended it to the next one. The Bangladesh government had been working in line with that to meet the World Bank's conditions in carrying out reforms. However, as

Covid-19 outbreak has sent the country's economy into a tailspin, discussions are underway for the release of the loan within this fiscal year.

Along with project assistance, the multinational donor lends budget support to its member countries, stakeholders say. Recipient countries can spend such loans in any sector.

Economists believe that budget support could play a major part in countering the economic shock of coronavirus and help Bangladesh's economy rebound.

Economic Relations Division (ERD) Secretary Fatima Yasmin said, "Terms and conditions are attached to every budget support programmes which ultimately delays the disbursement process. Considering the demand for vast amounts of money to fight Covid-19 outbreak, ERD has requested the World

Bank to relax some of its conditions so that we can get the money within this fiscal year."

For his part, ERD Additional Secretary Md Shahabuddin Patwary said, "We have been having discussions with the organisation upon receiving its policy approval. The World Bank has some legal procedures to follow. But we hope to finalise the negotiations in the next one or two weeks.

"The World Bank has been somewhat flexible about the government's request to meet conditions. The government has said that there is no way to amend the law at the moment as theJatiyaSangsad is not in session due to the coronavirus outbreak. So, it is not possible to amend and implement the Companies Act and Customs Act now.

"The World Bank has relaxed some conditions. But it wants to know about progress at the policy level and asked for relevant documents. We hope it will release budget support in the current fiscal year considering the government's initiatives."

To create quality job opportunities, the World Bank has set the condition of introducing insurance and pension benefits for private sector workers. The government has also promised to form an integrated pension control authority and reform the pension system for government employees.

Under this condition, the government is supposed to conduct a feasibility study to introduce job security insurance in the apparel sector on an experimental basis and have a legal framework in place for launching such insurance based on the results of the experiment.

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, said: "Budget support is the most flexible loan as the recipient country can spend it for any purpose. However, the recipient has to reform some areas of its economy to get the loan.

"The Bangladesh government has undertaken several reforms to get budget support. While progress in some areas is in low gear, it is slow in the other ones."

"Implementation Status and Result Report" of the World Bank to evaluate its budget support programmes found that it took 19 and a half days, on average, to start a new business in Bangladeshup to November 2018. The Bangladesh government is supposed to minimise the average time to 14.60 days by 2022.

However, there was no improvement in this area up to last December.

Despite the target of raising the rate of new business registrations from 0.4 per cent to 5 percent, there has been no improvement in this area.

Additionally, 100 percent of shipments are now inspected at the import stage, but the target was to bring it down to 70 percent to release imported goods in just three days. But it is still taking seven days as usual.

The number of bond licensed companies outside the apparel sector was supposed to be raised to 891, but it remains limited to 594.

The target was to bring down the male workers' average migration cost from Tk4.18 lakh to Tk3.14 lakh, and female workers' from Tk2.53 lakh to Tk1.90 lakh. Progress in these two areas has also been zero.