WB to give $500 million as budget support

After the IMF's loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

This will ease pressure on the country's dwindling foreign currency reserves.

The Washington-based multilateral lender's budget support is part of a $1.15 billion loan package, of which $650 million will be spent on building the Bay Terminal in the port city of Chattogram.

The WB in the last fiscal year had planned that it would give $250 million cash-based policy support under the Bangladesh First Recovery and Resilience Development Policy Credit (DPC).

The lender is now going to double the amount following the Bangladesh government's request as it is trying to rebuild the forex reserves.

The development comes at a time when the International Monetary Fund's (IMF) board is set to approve a $1.15 billion loan in the third instalment under its $4.7 billion loan programme in the last week of June.

Once the budget support from the WB and the IMF loan is approved, Bangladesh will receive a total of $1.65 billion.

The country's reserves stood at $18.72 billion on Wednesday from $41 billion in August 2021.

Bangladesh was supposed to receive the WB's budget support in the last fiscal year, but the release of the fund was delayed due to the government's inability to fulfill 12 conditions, including the implementation of the revised Bank Company Act, the development lender had tagged.

After meeting the conditions, the government sent the progress report to the WB requesting it to release the fund earlier this fiscal year, finance ministry officials told The Daily Star.

As the government fulfilled the condition of implementing the revised bank company law, the WB asked for an English draft of it.

The WB reviewed the draft and the implementation status for the other conditions of the reform programme. It also evaluated the measures taken by the Bangladesh Bank to bring reforms to the banking sector.

The central bank and the government took some bold steps, including introduction of a market-based interest rate policy by replacing the fixed interest rate policy, and launching the crawling peg system to determine the exchange rate of foreign currencies.

As the reforms took place, the WB is now set to place the loan proposal before its board.

Abdoulaye Seck, WB country director for Bangladesh and Bhutan, earlier told The Daily Star that the Recovery and Resilience Development Policy Credit series supports a wide programme of fiscal and financial sector policies set out by the government to enhance macroeconomic stability and sustain growth.

Another loan proposal of $650 million for setting up the Bay Terminal is also likely to be placed before the WB board by the end of next month for approval, finance ministry officials said.

The government took the initiative to build the Bay Terminal as the Chattogram Port's anchorage area is surrounded by much shallower waters compared to its regional competitors, and for this reason the port cannot serve large vessels.

The proposed Bay Terminal project's site is on the coast of the Bay of Bengal. It will be able to serve vessels with a draft of up to 12 metres.