The Bangladesh government has asked the World Bank’s ‘Second Recovery and Resilience Development Policy Credit’ for a $500 million loan to stabilise the economy and strengthen its foreign exchange reserves.
The Ministry of Finance recently asked the World Bank for an additional $250 million in budget support for the current fiscal year for a total of $500 million to deal with the ongoing economic challenges of the country.
The World Bank had previously entered an initial agreement to provide budgetary assistance of $250 million from fiscal year 2021-22 to deal with the impact of the Covid-19 pandemic and post-pandemic economic challenges and stability.
A senior official of the Economic Relations Department (ERD) of the finance ministry said that a letter was sent to the ERD from the Finance Department late last month recommending the government apply for the additional $250 million.
A letter was then sent from the World Bank at the start of the month asking for $500 million in assistance in total, the official said.
The finance ministry official noted that three loan agreements had recently been signed to bolster reserves and the government budget.
On Dec 12, the government signed a $400 million agreement with the Asian Development Bank’s Inclusive Development Programme (Sub-Programme-1). This amount has already been added to Bangladesh’s forex reserves.
On Dec 18, South Korea completed a $90 million dollar cross-agreement with the ERD under the same project. It is expected that these funds will be added soon too.
Another multilateral donor, the Asian Infrastructure Investment Bank is set to provide $400 million for a project to combat the effects of climate change in Bangladesh.
Bangladesh’s request for loan assistance of $500 million, including an extra $250 million, from the World Bank can be finalised soon with the approval of a board meeting at World Bank headquarters.
Similarly, if there is a final agreement with the World Bank, that money can also be added to the forex reserve, he said.
Asked about the matter, World Bank Dhaka office spokeswoman Mehrin A Mahbub told bdnews24.com, “The approval of the ‘Second Recovery and Resilience Development Policy Credit Project’ to stabilise the country’s overall economy in the current fiscal year of 2023-24 is to be considered by the World Bank Board.”
“It is expected that if a final decision is reached, the agreement will be finalised within the current financial year. But that will be at some point after this month and before next June,” she added.
An ERD official said that several policy reform measures were supposed to be taken to strengthen Bangladesh’s overall economy under the previous agreement with the World Bank in the fiscal year 2021-22. The letter sent to the international lender highlighted Bangladesh’s progress on those fronts.
These reforms are an expression of the government’s deep commitment to putting the country on the right track for sustainable development, the letter said.
In fiscal year 2022-23, Bangladesh received $1.7 billion dollars in budget assistance from various development aid agencies. The amount was $2.59 billion in FY 2021-22, $1.09 billion in 2021-21, and $1 billion in 2019-20.
