$100m WB budgetary support credit for power sector reforms
Sunday, 12 August 2007
FHM Humayan Kabir
The World Bank has agreed in principle to provide Bangladesh US$100 million transitional budgetary support to minimise the deficit financing in the current fiscal and to continue the reform works in the country's power sector.
Following a formal appeal made by the government in late July, the Washington-based lender sent a letter to the Economic Relations Division (ERD) last week saying it would start the process to release the budgetary support credit for the power sector reforms, sources in the ERD said.
According to the sources, the multilateral donor in the letter last week said that ERD that it intends to send a mission to Bangladesh early September for reviewing the ongoing policy reforms in the power sector.
Since there is a substantial budget deficit in the current fiscal, the interim government moved to attract foreign aid for minimizing the deficit financing of the national budget.
In the Tk 871.37 billion national budget for the fiscal current 2007-08, the overall budget deficit is Tk 298.36 billion, which is 5.6 per cent of the gross domestic product (GDP). The budgetary deficit was 3.3 per cent of the GDP in last fiscal 2006-07.
A senior ERD official told the FE that after completion of appraisal by the WB mission next month, the ERD would be able to complete the negotiations for the power sector budget support credit by November this year.
"If the negotiation is completed by November, the Bank will likely disburse the $100 million credit within December this year and the amount will be directly added to the national budget," he said.
The government earlier requested the donor to continue their budget support in the fiscals beyond 2006-07 since the development support credit (DSC) has been discontinued.
The ERD official said: "Although the WB undertook a four year lending plan (2006-2009) for Bangladesh where it proposed $300 million budgetary support each year in 2008 and 2009 after discontinuation of DSC in 2007, the donor is now contemplating to provide sectoral budgetary support on the basis of government's initiative on reforms in different public sectors."
"If the reforms works in different public sectors attract the global lender, it can provide another $200 million budgetary support credit for other sectors within this fiscal," he added.
The source hinted that 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 World Bank has agreed in principle to provide Bangladesh US$100 million transitional budgetary support to minimise the deficit financing in the current fiscal and to continue the reform works in the country's power sector.
Following a formal appeal made by the government in late July, the Washington-based lender sent a letter to the Economic Relations Division (ERD) last week saying it would start the process to release the budgetary support credit for the power sector reforms, sources in the ERD said.
According to the sources, the multilateral donor in the letter last week said that ERD that it intends to send a mission to Bangladesh early September for reviewing the ongoing policy reforms in the power sector.
Since there is a substantial budget deficit in the current fiscal, the interim government moved to attract foreign aid for minimizing the deficit financing of the national budget.
In the Tk 871.37 billion national budget for the fiscal current 2007-08, the overall budget deficit is Tk 298.36 billion, which is 5.6 per cent of the gross domestic product (GDP). The budgetary deficit was 3.3 per cent of the GDP in last fiscal 2006-07.
A senior ERD official told the FE that after completion of appraisal by the WB mission next month, the ERD would be able to complete the negotiations for the power sector budget support credit by November this year.
"If the negotiation is completed by November, the Bank will likely disburse the $100 million credit within December this year and the amount will be directly added to the national budget," he said.
The government earlier requested the donor to continue their budget support in the fiscals beyond 2006-07 since the development support credit (DSC) has been discontinued.
The ERD official said: "Although the WB undertook a four year lending plan (2006-2009) for Bangladesh where it proposed $300 million budgetary support each year in 2008 and 2009 after discontinuation of DSC in 2007, the donor is now contemplating to provide sectoral budgetary support on the basis of government's initiative on reforms in different public sectors."
"If the reforms works in different public sectors attract the global lender, it can provide another $200 million budgetary support credit for other sectors within this fiscal," he added.
The source hinted that 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.