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Biz World - World wide - March 1, 2023

Second installment of WB budget support uncertain

Conditions have not met up

Bangladesh has asked the World Bank for a total of $125 million or about Tk 13,000 crore of budget assistance to deal with the crisis caused by the Ukraine-Russia war. This includes a new $ 100 crore or about Tk 10,400 crore.

Zarif Mahmud: The previous condition is not fulfilled. Therefore, the second installment of the World Bank’s promised budget support of $250 million or about Tk 2600 million is stuck up.
This amount was expected to be released by the government in the month of March. Although the World Bank did not directly say anything in this regard, several related sources said that there is no possibility of getting the second installment for the time being as the conditions have not been met.
However, $500 million or about Tk 5,200 crore can be received from another fund as a new budget support. But it is still limited to discussion.
According to sources, Bangladesh has asked the World Bank for a total of $125 million or about Tk 13,000 crore of budget assistance to deal with the crisis caused by the Ukraine-Russia war. This includes a new $ 100 crore or about Tk 10,400 crore. And the previous promised $25 million. However, no response has been received from the World Bank yet.
Although more than 6 months have passed since the application was sent, the organization has not given any decision in this regard.
When asked about this, Economic Relations Department (ERD) Secretary Sharifa Khan refused to comment. According to multiple reliable sources of ERD, the World Bank promised $500 million as budget support for the government’s corona recovery program in the last financial year. Of this, $250 million have been released in the fiscal year 2021-22. The remaining $250 million is scheduled to be released in the current fiscal year 2022-23. The World Bank was requested to release this $250 million in the first quarter of the fiscal year (July-September-2022). Budgetary assistance usually comes subject to fulfillment of several conditions.
The budget support given since the last financial year for the transition from Corona epidemic is under the ‘Bangladesh Fast Recovery and Resilience Development Policy Credit (DPC-1) program.
The World Bank is providing this loan from the International Development Agency (IDA). At that time, the condition was to reform the government’s revenue and financial sector. In this case, for the banks to create such a policy so that the defaulted loans are reduced. Along with that, the amendments in the Bank Company Act and SEC Act are mentioned.
Besides, making building codes environment friendly, modernizing social security programs, reforming VAT laws and expanding e-GP (e-tendering) etc. The first installment is waived subject to these conditions. But most of those conditions have not yet been met. In particular, the government has not taken effective steps to amend the Bank Companies Act and the Securities and Exchange (SEC) Act. Therefore, the World Bank is not going to discuss the second installment.
Therefore, the World Bank is not going to discuss the second installment. As a result, there is uncertainty as to whether the remaining $250 million will be available quickly or not.
According to the sources, the World Bank has been asked for urgent budget assistance to deal with the increase in commodity prices in the world market, the pressure of inflation in the country and to overcome the dollar crisis. In this case, the new demand is 1 billion or 1 billion dollars. But no result is known in this regard yet. In the meantime, several World Bank missions and high-level officials have visited Dhaka.
Last September, World Bank South Asia Vice President Martin Riser visited Bangladesh. It was his first visit to the country. During the three-day visit, Riser met important people at various levels. During his visit, the issue of budget support from the government was discussed. Apart from this, World Bank Managing Director Axel Van Trotsenberg came to Dhaka on a three-day visit on January 21.
He came to Dhaka to celebrate 50 years of Bangladesh-World Bank Group partnership and Bangladesh’s remarkable development achievements. But the issue of budget support came up in discussions at different levels of the government. At that time, Martin Riser, Vice President of South Asia region of the organization was also with him.
According to several sources of ERD, intensive efforts are underway to get $500 million as a new budget support from a fund called ‘Green Fund’. Talks about getting $250 million of that have progressed a long way. Discussions are also going on about getting another $25 million with this.
When asked to know, a reliable source from the World Bank Dhaka office told that the budget support system is that if the conditions are met, the money will be automatically waived.
But since the government has not done that yet. Especially if the Bank Company Act is not reformed, the second installment will not be exempted. However, the government has informed the World Bank that the amendment of the Bank Company Act is underway. It will take some time. New budget support is being worked on.

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