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Recouping fiscal deficit

WB halves BD budgetary aid

Another half of requested $500m kept for next fiscal

FHM HUMAYAN KABIR | January 15, 2022 00:00:00

After prolonged negotiations, the World Bank has agreed to lend half the government-requested US$500 million in budgetary support within this financial year to recoup fiscal deficit, officials say.

In response to a government wish-list placed more than one and a half years ago, the Washington-based lender has at last agreed to provide the truncated amount of assistance by March this year, they said Friday.

"We have completed preliminary discussions with the WB. The negotiation is likely to be completed by next month," says a senior Economic Relations Division (ERD) official.

And the loan deal is expected to be signed by March.

Earlier, the government had sought the $500 million budgetary support from the World Bank to help finance the annual public expenditure after the first attack of the Covid-19 in March 2020.

The ERD official says since the government needs more cash to minimise the negative impact of the pandemic on the economy, the ERD has sought the funds.

In April 2020, in a videoconferencing with WB senior officials, Finance Minister AHM Mustafa Kamal sought extended support from the lender.

Another ERD official says: "We have been discussing with the WB for more than one and a half years the budget support. The lender was not confirming us for long. Now, it has agreed to provide half of the $500 million budget support within this fiscal."

The second tranche of $250 million is likely to be disbursed in the next fiscal year (FY) 2022-23), he adds.

The WB had provided another $514 million loan in November 2020 for emergency Covid-19 response to Bangladesh, which is being used by the government for procuring vaccines and improving health services.

Meanwhile, the government has announced billions of dollars worth of funds as stimulus packages to support the local cottage, micro, small and large enterprises in order to cope with massive blots cast by the pandemic on the national economy.

Besides, the government has announced a Tk 6.03-trillion national budget for the current FY2022 where the overall budget deficit is estimated at Tk 2.14 trillion or 35.5 percent of total budget outlay.

"Since the pandemic could deal a blow to the economy, we need huge investments to weather the crisis. So, we have sought the budgetary support from the bank," says a senior official at the ministry of finance.

He finds no alternative to securing external resources to meet the financing gap in the budget as the government had no plans to cut back on its development expenditure.

"The WB is one of our best partners in supporting government development plans. We are hopeful of getting the support soon," says the official.

Meanwhile, another big multilateral donor has already provided $940 million as programme loan to Bangladesh for procuring vaccines and improving health services.

It has also held out an assurance of giving another sum of $940 million for procuring vaccines and improving the health services system in the country.

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