Project preparation delays cost country a huge sum

World Bank's loan confirmation without project preparation creates a hiatus making Bangladesh pay interest and other fees before fund utilisation begins, officials say about the financial waste.

The mismatch has caused a financial gap of about US$1.5 billion between the active loans and the WB's total portfolio in Bangladesh, sources said Saturday.

On behalf of some project -implementing agencies, the Economic Relations Division (ERD) signs loan agreements. But the agencies fail to start their physical works in time, officials relevant with the developments have said.

The current interim government and the ousted Sheikh Hasina government signed some loan deals with the multilateral financier for implementing projects without proper feasibility study and project proposals, they mention.

However, the government signed loan deals with the global lender, World Bank, to show its performance "improperly', some officials allege.

"We already raised the issue before the WB high executives during the IMF-WB Annual meeting last month in Washington. Since there is a gap between the total portfolio and active loans, Bangladesh is being forced to repay those without utilisation," a senior Ministry of Finance (MoF) official told the FE.

If the government agencies prepare those projects first and then approach for the loans, the money could be utilised properly and the nation could benefit from the development, he says.

According to the MoF official, although the loan is not disbursed or utilised due to absence of project preparation, "we are forced to repay their interest and other fees".

According to the ERD officials, WB loan is activated from the date of board approval.

If the government agencies fail to implement the project in time, its outcome gets delayed and the government has to repay the interest from the date of activation.

Among the loans, the government in April this year signed a big deal worth US$850 million with the global lender for constructing Bay Terminal at the Chittagong Seaport.

The project has yet to start, say officials relevant with the works.

Two years ago, the global lender approved a $102-million loan to help Bangladesh improve riverbank protection and navigability in the Jamuna River, meant for saving people from being displaced, protecting their livelihoods, and spurring economic activities.

Under the "Jamuna River Economic Corridor Development Programme (JRECDP)" in Bangladesh, a multi-phase initiative was planned to improve flood management, enhance navigation, and spur economic activity in the region.

The "Jamuna River Sustainable Management Project-1" (part of the broader JRECDP programme) is yet to be started although it is scheduled to be completed by December 2028.

This will help revive inland water transport and boost regional connectivity and trade. It will also help protect about 2,500 hectares of land from riverbank erosion and flooding, safeguarding the livelihoods and assets of the local people and creating new economic opportunities, the WB has said.

This Jamuna River Sustainable Management Project-1 has also not been started yet, which also puts pressure on the Bangladesh loan-repayment accounts, officials say.

Another MoF official says, "We have estimated some $1.50 billion worth of loans which have already been signed but their fund disbursements are yet to be begun."

It has already created pressure on the country's loan -repayment accounts and on the debt-sustainability index of the government, he adds.

The government has also signed some couple of other loans for the development projects which created the gap.

The WB is the largest development partner of Bangladesh which provides nearly US$1.50 billion worth of assistance every year.

The Bank is currently financing US$13.37-billion funds for 48 active projects in Bangladesh, ERD data show.

The global lender has so far provided $43.77 billion for bankrolling development initiatives of Bangladesh.