WB okays $320m budget support loans for Bangladesh

The Daily Star, June 18, 2008. Dhaka, Bangladesh

The World Bank (WB) yesterday approved two budget support programmes worth $320 million to assist the government implement its wide-ranging governance and economic policy and energy reforms. 

Of the funds, $200 million will be provided as Transitional Support Credit (TSC) to help lessen pressure on the budget for 2007-08 fiscal year and the rest for the power sector, said a statement issued by the WB, Dhaka office.

With approval of these projects, WB’s total concessionary lending to Bangladesh in FY 2007-08 stood at $683 million, which is 80 percent more than $379 million in FY 2006-2007.

Of the total lending for the outgoing fiscal year, $495 million was in the form of budget supports.

“Extensive damage from successive floods followed by the devastating cyclone in 2007 and the unabated increases in global commodity prices have put the Bangladesh economy under considerable strain,” Xian Zhu, WB country director for Bangladesh, said. 

“The TSC will help the country’s overall fiscal situation by reducing the pressure on the budget due to rising spending on oil and food,” he observed.

The approval of the TSC programme would allow the government to protect its expenditures on core developmental priorities while maintaining fiscal sustainability as well, the WB statement said. 

The Power Sector Development Policy Credit programme has been aimed at enhancing governance and accountability and promoting financial stability in the sector to deliver better service.

The move will support the government’s overall power sector reform programme, including procurement of privately financed power generation, corporatisation of state-owned operating companies and institutional strengthening of the Bangladesh Energy Regulatory Commission.

WB senior energy specialist and team leader for the power project Alan F Townsend said: “The reforms supported by this credit will strengthen accountability in the sector by improving governance of state-owned service providers, bolstering regulatory effectiveness, and attracting private investment in new power generation capacity.”

Bangladesh’s power sector has suffered from poor governance and failing service quality, the WB statement observed.

Over the past decade, the country has doubled the access to electricity to over 40 percent, with most of these new connections in rural areas. In addition, over 200,000 solar home systems have also been introduced. 

However, amidst deteriorating governance and finances in the sector, power generation capacity has not kept pace with electrification, resulting in serious shortages of power and constrained economic growth, the WB statement added.

Further resource:

Read the World Bank media release.

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