Govt seeks spl budgetary support from World Bank

---

A Z M Anas
The caretaker authority is courting the World Bank for an "interim budget support," mainly to help narrow down the deficit financing in fiscal 2007-08.
"The interim administration has asked the bank for providing such help in the form of a short-term loan on special consideration," a competent source said Sunday.
"The short-term loan will be similar to the Development Support Credit, which was extended in several tranches. And the World Bank is currently exploring the mechanism under which such a loan can be processed against the request of Bangladesh," the source added.
Although it is too premature to say about the size of the loan, the source indicated that the amount would be no less than US$ 200 million.
If approved, Bangladesh is set to become the first South Asian nation or perhaps the first Asian country to receive the short-term credit from the International Development Association (IDA), the bank's concessional lending arm, the sources noted.
They said Chief Adviser Fakhruddin Ahmed requested the bank's vice president for South Asia region Praful C Patel to extend such a specially-tailored loan to Bangladesh during his recent visit to Bangladesh.
The global lender, headquartered in Washington, is currently exploring the possibilities of extending the transitional loan to the country, enabling it to minimise the budget deficit and meet the foreign aid target.
"It's possible to extend such an interim support, although it will require reviewing the bank's lending policy," a source told the FE, quoting Patel as saying.
He said: "If the bank is satisfied with the policy reforms the credit is likely to be released at the end of December next."
Finance adviser AB Mirza Azizul Islam, a former United Nations economist, last week unveiled a Tk 871.37 billion deficit budget. The deficit runs high at 4.8 per cent of GDP (gross domestic product) as against 3.3 per cent of the outgoing fiscal.
The government's new push for the transitional loan reflects its frantic attempt to meet its ambitious foreign aid requirement worth Tk 63.05 billion as set for the next fiscal. It was Tk 51.83 billion in the revised budget of the outgoing fiscal.
The sources said the bank credit would mainly be contingent upon the policy and institutional reforms, with major thrusts on fighting corruption and furthering reforms in the energy sector and trade.
"The bank may ask for quick delivery of several high-profile corruption cases and setting a new gas pricing and restructuring of import duties, particularly supplementary duties," the source hinted.
The sources pointed out that although power sector reforms topped the list on negotiations for the fourth tranche of DSC, the bank might press the government for carrying forward the reform in the energy sector, in general, and the power sector, in particular.
Other areas of reform such as judiciary and public financial management are likely conditions for the loan.
The source, who was involved in the DSC negotiations, said the bank would also take the views of the International Monetary Fund (IMF) on the country's macroeconomic management and exchange rate policy.
He said if approved, Bangladesh would be among a handful of the countries in the world to benefit from the transitional bank support, already enjoyed by some African countries.
The source pointed out that the global financial institution is working on what should the eligibility and requirements of the proposed credit like the previous development support lending.
The bank, the country's major donor, has provided US$1.1 billion in policy-based credits to Bangladesh since 2003, including US$200 million credit in support of education sector reforms. Another US$ 100 million development support credit for education sector will be channeled this month.
Rolled out in 2003, the latest DSC is the fourth in a series and is usually disbursed as a budgetary support loan.