WB extends $75m budgetary support credit to Dhaka

FE Team | Published: September 29, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
The World Bank (WB) has approved an International Development Association (IDA) credit of US$75 million to assist the Bangladesh government bridge the resource gap incurred as a result of recent floods.
The additional financing to the Fourth Development Support Credit (DSC IV) is designed to meet the unanticipated gap in the government budget that is arising out of flood-related spending, said a WB press release Thursday last.
It will also help absorb unforeseen pressure on the foreign exchange reserves that may occur as a result of emergency imports, particularly those related to food.
"The magnitude and devastation of the flood and the required response from the government are creating pressure on the budget," said WB's Country Director Xian Zhu.
"This quick disbursing financing will provide resources at a time when the full impact of the disaster on government revenues is unknown, and there is an urgent need for additional government expenditures. It will assist the government in covering immediate needs for relief, livelihood support, and reconstruction by accessing financial assistance necessary to mitigate the impact of the floods," Xian Zhu added.
These resources will restore a part of the regular non-wage operation and maintenance budget of several ministries that is being used for flood-related restoration and rehabilitation activities. Most of the regular maintenance work programmed for this year will suffer if this is not done, with adverse developmental consequences particularly for the roads, public works, education, and health sectors.
A formal damage and needs assessment is expected after the flood waters recede completely, which will provide an estimated measure of total economic losses. From available information, it is already clear that the human, social, and economic impacts are sizeable. Preliminary and incomplete figures indicate an estimated 11 million people affected, and damage to 1.0 million homes, 1.1 million hectares of crop, and more than 23,000 kilometres of road.
"Early estimates suggest that the reconstruction costs of the lost and damaged infrastructure are likely to be at least half that of the 2004 floods, implying more than US$1.0 billion," said WB's Senior Economist and project co-team leader Zahid Hussain.
"Emergency import needs, particularly in rice and other food items, and inputs for agriculture and construction can adversely impact the balance of payment position," he added.
Policy and institutional reforms in Bangladesh have been supported by the WB through a series of budget support operations, known as Development Support Credit. As part of this series, four credits totaling US$900 million have been provided to Bangladesh since 2003.
The last credit - DSC IV- was approved by the WB in May 2007. The Additional Financing will allow the government to continue moving forward on the policy and institutional reform agenda supported by the DSCs.
The credit from the IDA, the World Bank's concessionary arm, has 40 years to maturity, including a 10-year grace period. It carries a service charge of 0.75 per cent.