$75m WB budgetary support announced
Tuesday, 11 September 2007
FE Report
The World Bank (WB) has agreed, in principle, to lend US$75 million to Bangladesh as emergency budgetary support in the wake of floods.
In addition to the budgetary support, the multilateral lender is expected to take up a post-flood restoration and rehabilitation project shortly, for which it is yet to commit any specific amount.
The announcement came after government and WB officials Monday wrapped up their two-day talks in the city for the proposed loan meant for aiding Bangladesh to cope with the floods.
WB's Dhaka office organised a press briefing immediately after the negotiations in the afternoon.
Country director of the World Bank Xian Zhu, economists Binoy Sourov and Zahid Hussain were present at the press briefing held at the Bank's Dhaka office.
Zhu said the bank has agreed to extend the $75 million loan to help Bangladesh reduce the pressure on budgetary resources.
"The credit is expected to be disbursed by the end of September, provided the bank's board approves the loan proposal," he added.
"The loan will help the country withstand any unforeseen pressure on the foreign exchange reserves, particularly for imports related to flood," the Bank's local chief added.
In June, the present caretaker government unveiled a Tk 871.37 billion budget for fiscal 2007-08, with the budgetary deficit running at 4.8 per cent of GDP (gross domestic product) as against 3.3 per cent in the last fiscal.
The additional loan is also needed to meet the government's foreign aid requirement worth Tk 63.05 billion as set for the current fiscal. The target was Tk 51.83 billion in the revised budget for the last fiscal.
The bank's interventions will mainly be in two phases, the first one being in the form of budgetary support and the second as restoration and rehabilitation project, its officials said.
The project amount will be decided in consultation with the government once the flood damage assessment report is completed, Zhu noted.
Economic Relations Division officials say, although the credit is being processed as supplementary financing for the development support credit (DSC), the Washington-based lending agency has attached no reform agenda.
The latest loan package is said to be supplementary to the policy-based DSC, which has been released in four installments since 2003. Including education DSC, such credits totalled $1.2 billion and the immediate past BNP government had implemented a string of reform measures, including fuel price hike and further trade liberalisation, for obtaining the credit.
The interim administration has stepped up its aid diplomacy since unveiling a hefty budget in June, as it needed to bridge the budgetary deficit. Later, the need for foreign assistance became more pressing when the floods struck in 39 districts, mostly located in the country's north and north-eastern parts, causing extensive damage to crops and infrastructure.
Officials pointed out that the global lender had considered a couple of factors, notably floods, political instability and the recent inflationary pressure, while processing the loan in a faster manner.
Bangladesh had received post-flood recovery assistance from the World Bank in the past, particularly during the devastating deluges in 1998 and 2004.
The International Development Association (IDA), the bank's soft-lending arm, responded to the country's devastating flood in 2004, extending $154 million as post-flood recovery assistance. The bank also lent out $200 million in emergency aid after the 1998 floods.
The post-flood loan package in 1998 was designed to aid Bangladesh in maintaining macroeconomic stability, while helping to contain pressure on balance of payments.
Bdnews24.com adds: The 2007 floods, according to WB, affected 39 of the country's 64 districts resulting in the loss of over 600 lives, rocked shelters of millions, damaged standing crops and affected the infrastructure including roads and embankments.
An outbreak of diarrhoea due to a lack of safe drinking water and damage to latrines also created health problems in the flood-affected regions.
"The government relief effort is putting a strain on its fiscal year 2008 budget. Expenditures earmarked for the development activities and being redirected for flood relief," Zhu said.
He said WB had assessed the damage caused by the floods.
"We are regularly monitoring the flood situation. We have put forward a two-pronged financial assistance strategy to contribute flood relief effort," he said adding that the agency would first provide support for budget and then start working for rehabilitation.
The maturity period of the interest-free credit is 40 years with a 10-year grace period.
The World Bank (WB) has agreed, in principle, to lend US$75 million to Bangladesh as emergency budgetary support in the wake of floods.
In addition to the budgetary support, the multilateral lender is expected to take up a post-flood restoration and rehabilitation project shortly, for which it is yet to commit any specific amount.
The announcement came after government and WB officials Monday wrapped up their two-day talks in the city for the proposed loan meant for aiding Bangladesh to cope with the floods.
WB's Dhaka office organised a press briefing immediately after the negotiations in the afternoon.
Country director of the World Bank Xian Zhu, economists Binoy Sourov and Zahid Hussain were present at the press briefing held at the Bank's Dhaka office.
Zhu said the bank has agreed to extend the $75 million loan to help Bangladesh reduce the pressure on budgetary resources.
"The credit is expected to be disbursed by the end of September, provided the bank's board approves the loan proposal," he added.
"The loan will help the country withstand any unforeseen pressure on the foreign exchange reserves, particularly for imports related to flood," the Bank's local chief added.
In June, the present caretaker government unveiled a Tk 871.37 billion budget for fiscal 2007-08, with the budgetary deficit running at 4.8 per cent of GDP (gross domestic product) as against 3.3 per cent in the last fiscal.
The additional loan is also needed to meet the government's foreign aid requirement worth Tk 63.05 billion as set for the current fiscal. The target was Tk 51.83 billion in the revised budget for the last fiscal.
The bank's interventions will mainly be in two phases, the first one being in the form of budgetary support and the second as restoration and rehabilitation project, its officials said.
The project amount will be decided in consultation with the government once the flood damage assessment report is completed, Zhu noted.
Economic Relations Division officials say, although the credit is being processed as supplementary financing for the development support credit (DSC), the Washington-based lending agency has attached no reform agenda.
The latest loan package is said to be supplementary to the policy-based DSC, which has been released in four installments since 2003. Including education DSC, such credits totalled $1.2 billion and the immediate past BNP government had implemented a string of reform measures, including fuel price hike and further trade liberalisation, for obtaining the credit.
The interim administration has stepped up its aid diplomacy since unveiling a hefty budget in June, as it needed to bridge the budgetary deficit. Later, the need for foreign assistance became more pressing when the floods struck in 39 districts, mostly located in the country's north and north-eastern parts, causing extensive damage to crops and infrastructure.
Officials pointed out that the global lender had considered a couple of factors, notably floods, political instability and the recent inflationary pressure, while processing the loan in a faster manner.
Bangladesh had received post-flood recovery assistance from the World Bank in the past, particularly during the devastating deluges in 1998 and 2004.
The International Development Association (IDA), the bank's soft-lending arm, responded to the country's devastating flood in 2004, extending $154 million as post-flood recovery assistance. The bank also lent out $200 million in emergency aid after the 1998 floods.
The post-flood loan package in 1998 was designed to aid Bangladesh in maintaining macroeconomic stability, while helping to contain pressure on balance of payments.
Bdnews24.com adds: The 2007 floods, according to WB, affected 39 of the country's 64 districts resulting in the loss of over 600 lives, rocked shelters of millions, damaged standing crops and affected the infrastructure including roads and embankments.
An outbreak of diarrhoea due to a lack of safe drinking water and damage to latrines also created health problems in the flood-affected regions.
"The government relief effort is putting a strain on its fiscal year 2008 budget. Expenditures earmarked for the development activities and being redirected for flood relief," Zhu said.
He said WB had assessed the damage caused by the floods.
"We are regularly monitoring the flood situation. We have put forward a two-pronged financial assistance strategy to contribute flood relief effort," he said adding that the agency would first provide support for budget and then start working for rehabilitation.
The maturity period of the interest-free credit is 40 years with a 10-year grace period.