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The Financial Express

Mending fences with World Bank

| Updated: October 17, 2017 04:06:28


Mending fences with World Bank

Bangladesh's decision to finance a massive 6.2 kilometre bridge over the Padma River, the local name for the Ganges, from internal resources was indeed a watershed in the country's history. The under-construction bridge is set to connect the capital with the country's 16 south-western districts. The bridge is to have a highway and a railway track. 
This was for the first time in Bangladesh that the government decided to pool domestic funds for such a mega project as the Padma Bridge due to strong political will of Prime Minister Sheikh Hasina. It is expected that the country would be doing away with foreign aid tied to stringent terms and conditions and mobilising domestic funds instead to finance vital projects in the future.          
The bitter experience with the World Bank's suspension of aid has seemingly opened up eyes of the country's policymakers for meeting even foreign exchange component of a project. Finance Minister AMA Muhith at the Bangladesh Bank remittance award distribution ceremony recently favoured borrowing from the country's foreign currency reserves from next fiscal year and using the amount in mega projects. 
"Serious thoughts are being given to the idea and it can be said with certainty that a clear-cut framework will be placed in the next budget", Muhith announced. When the present government assumed power, the foreign currency reserves stood at $4.0 billion to $5.0 billion. Now, it has crossed the $31-billion mark. 
For borrowing from the foreign exchange reserve, the central bank will not have to bear any risk; the government will bear it. The Bangladesh Bank will be given a profit against the amount borrowed, he said. The next budget will spell out the terms and conditions and the type of projects for which the amount will be used.
When a country has to rely on loans from international agencies, it has to comply with their terms for borrowing. This is a stark reality. Even if Bangladesh avoids taking loans from the World Bank and other global lenders only to get funds from other agencies, it has to oblige them by meeting their terms. 'Accept it or leave it' is what lenders strictly follow. Relaxing terms, however, depends on negotiating skills of the recipient countries.
Recalling the past happenings, Bangladesh's relations with the World Bank worsened over the latter's suspension of $1.2 billion loan for the Padma Bridge project for 'intent for corruption'. A World Bank probe team, led by Luis Moreno Ocampo, former chief prosecutor of the International Criminal Court, had a meeting with the Law Minister in the office of the Anti Corruption Commission (ACC) in Dhaka and sought from him a definition of 'corruption' under Bangladesh's laws and punishment provided therein. Then the panel wanted to know the meaning of 'intent to corruption' in the country's law and its punishment therein. The law minister reportedly told the panel members that the country's law clearly says 'intent to corruption' is as good as 'corruption'. 
The World Bank, based on the panel's recommendations, went ahead with probe into 'intent to corruption.' The Bank had never said that corruption really took place but found strong evidence of an 'intent'. The WB suspended the aid. And at the last moment, Bangladesh itself refused to accept the loan although the World Bank only froze it pending settlement of the issue. 
Happily, the two-day fruitful visit of World Bank President Jim Yong Kim to Bangladesh has not only effectively removed the strains in relations over suspension of fund for the Padma Bridge, but also took partnership between the South Asian country and the global lender to a new dimension.  Finance Minister AMA Muhith himself clarified the issue. He said: "As you know when he (Mr Kim) took his presidency in the WB, we have problems with it. And I personally believe that through his intervention, we at last resolved the problem and went forward. And in this period our relationship is very good." Mr Muhith went on to say that all the money earmarked for the bridge had later been shifted to different projects in Bangladesh. 
Mr Kim, during his visit, saw in his own eyes great strides the country has made in different fields of the economy. Two vital issues - malnutrition and climate change challenges - drew his attention. That was why he announced the WB's commitment of $1.0 billion for addressing child nutrition and $2 billion dollars for facing the fallout of climate change.
The World Bank's commitment to provide $2.0 billion over the next three years in fresh funding to help the country tackle the negative impacts of climate change has highlighted the international recognition of grave situation the South Asian country faces today. "Bangladesh is one of the most vulnerable countries in the world to climate change and we must do all we can to support the government in its efforts to adapt to this growing threat," said Mr Kim making the announcement at a press conference. The World Bank assistance will convince the industrialised countries to do the needful on their part in terms of mitigation and adaptation. 
Bangladesh has in fact been experiencing colossal tidal surges, unreasonably high level of monsoon rainfall lately, landslides and heavy river erosions. Besides, in dry season, absence of seasonal rain has been causing desertification in the north, and shrinking water flow of rivers resulting in salinity intrusion in the south. The International Strategy for Disaster Reduction has thus placed Bangladesh as most vulnerable to floods, third most to tsunamis, and sixth most to cyclones, in terms of human exposure.
Scientific findings indicate a metre rise in sea level due to global warming would inundate a fourth of Bangladesh, including the world's largest mangrove forest, the Sunderbans, also an UNESCO World heritage site. Most alarming is the rapid melting of Himalayan glaciers by as much as 23 metres annually affecting over two billion people of South Asia, China and Indo-China. 
This scale of meltdown has increased frequency of floods and would cause rapid climate shift resulting in acute water shortage in long term. Experts say such a situation would swell Bangladesh's cities, causing social disorders, infrastructural crisis and increase poverty. Already climate change conditions are costing the country's GDP to the extent of 0.5 per cent to 1.0 per cent.
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