The World Bank (WB) has approved US$ 250 million financing to help Bangladesh strengthen its fiscal policies to sustain growth following the Covid-19 pandemic as well as to enhance resilience to future shocks.
In a press release issued on Friday, the WB said the Bangladesh Recovery and Resilience Development Policy Credit - the first in a series of two credits - will support fiscal and financial sector policies to enhance macro-economic stability and sustain growth.
It will also support expanding and modernising social protection programmes along with energy sector policies to improve efficiency and reduce greenhouse gas emissions.
These actions will help the country build resilience against future shocks, including climate change, according to the press statement.
"Since 2020, the WB has provided over $3.0 billion to Bangladesh to support emergency response, vaccination and other Covid-19 recovery efforts," said Mercy Tembon, WB Country Director for Bangladesh and Bhutan.
This credit will further accelerate the government's endeavours to strengthen its policies and regulatory framework to pave the way for a green, resilient and inclusive recovery as well as low-carbon growth, she added.
This programme will support development of the National Tariff Policy, which will help modernise trade taxes. New policies will also enable foreign firms, including non-resident digital services companies, such as the search, social media, and cloud services firms, to submit VAT returns and make payments.
Expanded coverage of the national e-Government Procurement (e-GP) system will increase the efficiency of public expenditure, the press release said.
The financing will help streamline the bank recovery framework. All scheduled banks will prepare recovery plans, which will be updated annually.
New legislation will be prepared to strengthen stability and efficiency of the payment and settlement systems, which will also foster digital and mobile financial services.
The release mentioned that the financing will support adjustments to the interest rates of several public savings instruments, bringing them closer to the market to reduce distortions.
It will help the government rapidly scale up cash transfer programmes to respond to future shocks, and to expand use of the government-to-person payment platform for cash-based programmes.
The programme will allow the government to respond more quickly to climate-related crises, including floods and cyclones, by identifying and targeting new and existing beneficiaries for emergency assistance.
It will also help Bangladesh in its transition to a low-carbon economy. The revised National Building Code will improve energy efficiency in buildings, while cancelation of the planned investment in 8,451-MW coal-fired power generation projects will support progress towards Bangladesh's Nationally Determined Contributions (NDC) 2021.
"This financing will help Bangladesh harness digital technology to ensure a green and resilient growth," said Bernard Haven, WB Senior Economist and Task Team Leader for the project.
"Fiscal and financial sector policies will help sustain growth, while enhancing coverage and efficiency of the social protection programmes will protect the poor and vulnerable during economic shocks and natural disasters."
The credit is given from the International Development Association (IDA), which provides concessional financing. It has a 30-year term, including a five-year grace period.
Bangladesh currently has the largest IDA programme, totalling over $14.5 billion. The WB was among the first development partners to support Bangladesh, and has so far committed $35 billion in grants as well as interest-free and concessional credits to the country since its independence.
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