WB mission in town to discuss $750m budgetary credit line

Govt's no to reforms-linked support before polls

FHM Humayan Kabir | Published: July 26, 2018 10:17:48 | Updated: July 29, 2018 13:13:17

Reuters file photo

The World Bank (WB) has decided to provide US$ 750 million in budgetary support after fielding a mission in Dhaka to discuss the potential lending, officials said on Wednesday.

Officials said a mission from the bank's headquarters is now discussing with government agencies to work out the way of fulfilling the new indicators for securing the loan.

The mission, which started on July 19, will complete its work on July 31 before sitting for negotiations with the government, expected to be held in October this year.

"The bank's team is mainly working on the newly-developed indicators, to be fulfilled by the government for getting the policy credit. Then it will sit for negotiations in October this year," said a senior Economic Relations Division (ERD) official.

The proposed $ 750 million funds will be disbursed in three equal tranches in three years up to the fiscal year (FY), 2020-2021, he told the FE.

The budgetary support titled "Development policy credit" will mainly be utilised in areas which will foster jobs in Bangladesh, the official added.

Meanwhile, the government has recently sought budgetary support from the WB for facilitating job creation instead of its previous stance on policy and structural reform activities.

Following the government's request, the Washington-based lender has prepared some new policy matrix focusing on more employment generation instead of its earlier 'policy reform matrix'.

A senior Ministry of Finance (MoF) official said that they had sought budgetary support credit in a "new form" instead of the previously offered loan tagged with "policy reform matrix".

The WB and the government has recently prepared a fresh policy matrix, which is easier for the country to implement in view of the next general elections, expected to be held in December 2018, he said.

"The government will not go for any large reforms before the next general election. So, it had requested the bank to offer the long-pending budgetary support to facilitate more employment generation," the official said.

More than three years ago, the Washington-based global lender considered providing $ 500 million worth of development support credit (DSC) to Bangladesh government for bankrolling the national budget.

However, the government failed to conduct the structural and policy reforms, thus delaying the credit availability.

The lender assured Dhaka of the credit line based on some reform work including automated fuel price adjustment, implementation of the VAT law, enactment of the public-private partnership (PPP) law and the formulation of its rules, corporatisation of some poorly-performing power distribution companies and the strengthening the load dispatch centre of the Power Development Board.

The bank has asked the government to formulate a market-based interest rate for the national saving certificates (NSCs) slashing the government's intervention on it and quicken handing over of the lands for the special economic zones (SEZs).

"Some of the World Bank reform proposals are really tough to comply within the stipulated time. The government has already decided not to implement the unified VAT system," said the finance ministry official.

"Besides, some other reforms, the WB proposed reforms that can also tarnish the government's image among the people before the election. So, the government will not go for those reforms activities at this moment," he added.

The official said if the bank offers the budgetary support credit for facilitating a better business and investment climate in Bangladesh, which will create more jobs and employment opportunities, the government will actively consider the loan.

The World Bank is the largest multilateral donor of Bangladesh.

It usually makes commitment for disbursing $ 1.5 billion assistance annually and disburses nearly $900 million annually.



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