$300m WB aid likely to meet budget deficit

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FE Report
The World Bank (WB) is likely to provide US$300 million as aid to Bangladesh in the current fiscal to support the government to meet its budget deficit and pursue reforms programme, official sources said.
A senior Economic Relations Division (ERD) official told the FE that the World Bank had agreed in principle to give the transitional budgetary support credit.
The WB is expected to extend the funding support at the request of the government following discontinuation of development support credit (DSC), a form of budgetary support, from last fiscal 2006-07, he said.
The Washington-based multilateral capital donor gave the DSC through its soft lending window - the International Development Association (IDA).
The official said the WB would hopefully release the new credit fund by the end of December next if the bank is satisfied with the country's ongoing reform measures.
He, however, hinted that the opening of the new credit line would largely depend on the government efforts in bringing institutional reforms, with major thrust on fighting corruption and continuing institutional reform measures particularly in energy and trade and industry sectors.
The ERD official said: "Although the World Bank has taken up a four-year lending programme (2006-2009) for Bangladesh with $300 million budgetary support each year from 2008 to 2009 after discontinuation of the DSC, it is now contemplating providing sectoral budgetary support this year."
"In the first phase, Bangladesh is likely to get $100 million budgetary support credit from the IDA this fiscal to continue with the ongoing reforms in the country's power sector," he said.
He said the World Bank might also provide another $200 million budgetary support credit for some other sectors this fiscal.
The official informed the FE that the ERD would soon start negotiation with the global lender to obtain the sectoral credit support aiming to reduce the budget deficit in the current fiscal.
The caretaker government unveiled a Tk 871.37 billion national budget for fiscal 2007-08, with deficit running at 4.8 per cent of the GDP (gross domestic product). The budgetary deficit was 3.3 per cent of the GDP in fiscal 2006-07.
The government's new push for the transitional budgetary loan also reflects its efforts to meet its projected foreign aid requirement at Tk 63.05 billion set for the current fiscal, a target considered high by many. The target was Tk 51.83 billion in the revised budget of last fiscal.