Hard-term World Bank lending window beckoning Bangladesh

Bangladesh is asked to borrow from the International Bank of Reconstruction and Development (IBRD), a hard-term lending arm of the World Bank, which extends costlier market-based loan that the country can ill afford at this stage of its graduation process, officials said.

The World Bank has suggested the country to take certain quantum of funds under the newly devised IDA-21 aid package through a window of the IBRD in addition to its ongoing IDA facilities, they said.

This segmentation of funding has designated Bangladesh's status as 'Blend Country' that signifies its transitional state in-between an LDC and an MIC.

However, government authorities are noncommittal on borrowing the costly funds at this moment apart from the ongoing IDA and some other concessional facilities from the global lenders, a Ministry of Finance (MoF) official says.

"The WB has suggested that Bangladesh borrow loan from the IBRD in the upcoming three-year IDA-21 aid package as the country needs more investments from foreign sources. But Bangladesh is unwilling to enter into the IBRD lending window," says a senior Economic Relations Division (ERD) official.

Currently, Bangladesh has been placed as a 'Blend Country' in the WB borrower category under which the country can borrow concessional credits from the International Development Association or IDA and a small portion of that from market- based option like Scale up Facility Window (SFW).

The Washington-based global lender, WB, charges 1.0-percent interest, 0.75-percent service charges and 0.25-percent commitment fee under the IDA facilities. The maturity of the loan is 30 years, including 7-10 year of grace period.

On the other hand, the IBRD loan bears market-based rates wherein SOFR-plus a spread of 2.5 per cent to 2.6 per cent will be added up.

On top of that are a front-end-fee of 0.25 per cent and a commitment fee of 0.25 per cent applicable to each of the loans.

Also, the maturity of an IBRD credit is determined by short maturity loan (SML) where the final maturity period is maximum 7 years, with a chasing 4- year grace period, according to the WB website.

For the IBRD Special Development Policy Loans, the ending rate would be reference rate + applicable adjustment spread + minimum of 2.00 per cent. Besides, the front-end fee is 1.0 per cent of the principal loan amount, the website reads.

The final maturity of the loan will be up to 10 years and 5-year grace period.

Since Bangladesh's economic status has been upgraded to a Lower-Middle Income Country with effect since 2015 and it is going to graduate from the least-developed country (LDC) status to developing nation, the WB now begins beckoning Bangladesh into its harder lending arm -- IBRD, a senior MoF official told the FE writer.

From the next IDA-21 aid- package period, the WB has offered Bangladesh the IBRD loan, he added.

ERD Secretary Shahriar Kader Siddiki told the FE that they would prefer concessional loans in the coming years, too, as the country's economy has been on the cusp of transition before graduating into a developing nation in 2026.

"Bangladesh may not be in a position to enter into the IBRD loan facility of the WB at this moment," he opines.

The World Bank Group has already formed a three-year aid package under its IDA-21 replenishment where it announces a $100 billion worth of basket for the borrowing countries across the globe.

The World Bank's International Development Association or IDA has secured a record $100- billion aid package for its 21st replenishment (IDA21) spanning from July 2025 to June 2028.

The ERD official says Bangladesh is availing the facility of IDA loan where at least 10 per cent of the total borrowing would now have to be market-based.

In that case, he adds, Dhaka is willing to get the loan (10 per cent) from the SUW rather than getting into the IBRD window in next three years.

"Upon getting pressure from the WB, we would request the global lender for considering us for the IDA loan with 10-percent market-based share as Bangladesh is passing a transitional period before becoming a developing nation," the MoF official says.

Bangladesh is the largest borrower from the WB's IDA coffers as it has made a commitment of more than $10.0 billion in aid in last three years under the IDA-20 package between FY2023 and FY2025.

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