Jumbangla Desk: World Bank and Asian Development Bank (ADB) are preparing to submit a budget support proposal of one and a half billion dollars for Bangladesh to the board, said officials of the Ministry of Finance.

 

They also said that discussions on loans to speed up reforms in the country and reduce pressure on reserves have already been completed.

 

 

Through these proposals, Bangladesh expects 500 million dollars from the World Bank and 600 million dollars from ADB.

 

These loan proposals may be taken up by the respective boards of the two companies in December. ADB's loan may come under the Strengthening Economic Management and Governance programme.

 

 

ADB originally planned to provide this loan in preparation for moving from the least developed country list to the developing country list.

 

However, Finance Advisor Salehuddin Ahmed hinted a few days ago that the interim government is considering delaying the inclusion of developing countries for a few more years.

 

 

Last November 11, Salehuddin told reporters that it may take more time to finalize the decision on the goal of becoming a developing country in 2026. Therefore, ADB is now providing this loan under the new program to support the government's reform initiatives.

 

Finance Ministry officials say that the government has to fulfill several conditions under this loan. Most of the conditions are about budget management and revenue raising.

 

 

Among these are more—the government needs to strengthen tax compliance as well as reform the VAT system mainly through automation. Several initiatives should be taken to increase non-tax revenue.

 

Other conditions include making the existing e-TDS (Electronic Tax Deducted at Source) system more efficient, regularly evaluating the performance of state institutions and improving the services of the Bangladesh Investment Development Authority.

 

 

The World Bank is providing budget support under the Second Green and Climate Resilient Development Credit Program.

 

This loan is being paid in three installments. The first installment was paid in March last year. A number of climate-related conditions have been laid down in the programme. Many of these have already been filled, Finance Ministry officials said.

 

 

The World Bank and other organizations consider Bangladesh highly vulnerable to climate change. The World Bank has set conditions to reduce climate risks. For example, increasing specific budget allocations to address climate-related risks.

 

 

According to the World Bank's 2023 report, Bangladesh's climate-related budget allocation is only seven and a half percent of the total national allocation. In addition to increasing this allocation, according to the terms of the loan, Bangladesh has to ensure proper spending and maintenance of the money.

 

The World Bank report also states that environmental pollution and depletion of natural resources in Bangladesh are mainly the result of poor environmental governance.

 

 

To solve these problems, the World Bank has given conditions to reduce the negative impact on the environment by implementing strict control measures.

 

After assuming power, the interim government sought budgetary support from multilateral and bilateral agencies to stabilize the economy and increase dollar reserves due to high inflation and dwindling reserves.

 

 

Usually, development partners provide project-based loans. The loan is disbursed in installments depending on the project implementation progress.

 

In contrast, budget assistance loans are program-based and conditional. The loan is disbursed as soon as it is approved. It helps to increase reserves.

 

 

Thomas Helbling, deputy director of the IMF's Asia-Pacific division, was asked whether the interim government's request for budget support from development partners is correct and what the impact could be on the economy.

 

 

In a press conference in Tokyo on November 1, he said that the economic instability and the subsequent crisis have hindered the payment of import bills. He said, 'Budgetary assistance will provide some relief. It will give the interim government time to reform.'

 

A top Bangladesh Bank official told the Daily Star on condition of anonymity, "The organizations have taken the government's initiative to seek budget support as positive."

 

 

He expects more budgetary support from some development partners in the coming months of the current financial year.