Staff Correspondent
The World Bank may lend Bangladesh US$500 million in budgetary support, pulling out funds from the country’s limping development projects, to meet an immediate need for financing budget shortfall, officials said Wednesday.
Earlier, the government requested the WB for approving two installments together worth US$500 million from a budgetary-support credit as it needs to minimise growing budget deficit.Responding to the government appeal, the WB at a recent meeting had given the green signal and assured of merging two installments, each of $250 million, for budgetary support from its planned programme on bankrolling the country’s development recipe.
As per the original plan, the $250 million worth of first installment of the assured $750 million fund was supposed to come from the WB’s Green, Resilient Inclusive Development (GRID) programme.
“Each of the $250 million funds was supposed to be provided in three installments in three years. But we requested the WB to provide two installments together worth $500 million under the GRID programme as Bangladesh is struggling with budget deficit,” said a senior Economic Relations Division (ERD) official.The remaining $250 million in the third installment is requested for providing sometime next fiscal, he added.
The government has taken up the Tk6.78 trillion national budget for the current fiscal year (FY) 2022-23 with an overall deficit of Tk2.42 trillion, or 5.4 percent of the GDP.
Meanwhile, the Bank has not agreed to provide the pending 2nd installment worth $250 million from the Development Policy Credit (DPC) scheme, for falling short on a set of dos.Since the government has yet to meet all the conditions for the DPC even after the release of the 1st installment amounting to $250 million from the assured
total $750- million programme, the Washington-based lender is not interested in providing the pending second tranche now.
If the government can meet all the 12 terms and conditions regarding structural and financial-sector reforms, the WB will consider releasing the remaining $500 million from DPC in next two installments, said a senior Ministry of Finance (MoF) official.
The government has more or less met the conditions for the GRID but has yet to meet any of the 12 dos tagged to DPCs, which encompass reforms in fiscal policy and the financial sector and setting guardrails to future shocks.
At a tripartite meeting among the ERD, the WB and project- implementing agencies in the first week March, the Washington-based lender warned of pulling out the funds from the WB-funded slow-moving projects, said the MoF official.
Eight slow-moving projects were discussed at the tripartite meeting where the WB warned of pulling out the funds from the most problematic and slow-moving projects.
The projects include $500 million-funded “Livestock and Dairy Development Project”, $700 million “Primary Education Development Programme-IV”, $340 million-funded “Dhaka Sanitation Improvement Project”, $100.50 million “Dhaka City Neighbourhood Upgrading Project”, $425 million “Operation for Supporting Rural Bridges project”, $356.70 million “Bangladesh Investment Promotion and Financing Facility Project II”, and $100 million-funded “College Education Development Project”.
Among the projects, the IPFF II is a $356 million project that was taken up in April 2017 for completion by June last year. As of June 2021, only $48 million was used, official sources said.
So, the World Bank is likely to kept side only $100 million for the project implementation and the remaining amount could be diverted into the GRID programme.
Similarly, the operation for supporting rural bridges is a $425- million project taken up in April 2017 for completion by August this year. As of June 2021, less than $15 million was spent.
So, the lender is likely to leave only $85 million for the project and the rest could be transferred to GRID programme.
Another MoF official said the proposed $500 million budgetary support under the GRID programme is likely to be placed before the WB board for its final seal of approval.

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