$500m WB budget support likely next week

Bangladesh's foreign-exchange reserves are going to get a big boost as the World Bank (WB) is likely to confirm $500 million of budget support next week, officials said on Thursday.
"The government is likely to sign a loan deal with the global lender on December 22 in this regard, while the board of the latter might approve the budget support today," said an Economic Relations Division (ERD) official.
"After the board's approval, we will sign the deal. We are now preparing to ink the agreement," the official added.
Earlier on Wednesday, the Asian Development Bank confirmed a $600 million policy-based loan for Bangladesh. Along with it, the WB support will be a shot in the arm for the country's reserves that remain almost stagnant at some $20 billion over the last one year.
Since Bangladesh is an import-dependent country, its spending on foreign payments is higher than earnings from exports, remittances, and other sectors.
Besides, massive money laundering and bills paid to costly private power plants have affected reserves, analysts said.
Another ERD official said the WB would confirm the budget support from the green fund and it would be utilised mainly to implement reforms in various sectors.
Meanwhile, the Finance Division and ERD held negotiations with the WB last month to get the budget support aimed at helping the struggling economy recover.
The support, relating to green growth, will be the first of its kind received during the Professor Muhammad Yunus's interim administration, officials said.
"It is expected that the WB will disburse the credit within a couple of days after the signing of the deal next week," the ERD official said.
The WB has already expressed interest in working with the interim government, offering higher support for various policy and structural reforms as well as programmes.
The $500 million budget support would be the second tranche of the Green and Climate Resilient Development (GCRD) credit from the global lender.
On April 27 last year, the WB provided a loan of $500 million for Bangladesh under the first tranche of the GCRD Development Policy Credit (DPC) programme. The first tranche of GCRD DPC was a result-based policy loan that came with some conditions.
The conditions include ensuring 7 per cent of public procurement bids are coming from women-owned businesses; reducing the number of households using solid fuels as primary cooking fuel by around 5 per cent; cutting public expenditures on fuel subsidies for diesel, heavy fuel oil, and octane by 67 per cent; 1,000GWh of cumulative energy savings from DPC-supported energy efficiency policies; reducing the annual use of liquid fuel (HSD and HSFO) for power generation, and introducing water tariff models in 30 new municipalities.

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