WB budgetary support loan becomes uncertain

FHM Humayan Kabir Prospect of receiving the World Bank's US$1.0 billion budgetary support has become uncertain as the lender is unwilling to finalise the assured loan before completion of the ongoing investigation into alleged graft in the Padma bridge bidding process, officials said Saturday. The World Bank high officials in Washington made their views known to a Bangladesh delegation on the sideline of the World Bank-International Monetary Fund (IMF) annual meeting last month, a top official said. Bangladesh delegation, led by the Finance Minister AMA Muhith, sought support from a World Bank (WB) Vice President and a Director to facilitate its promised $1.0 billion worth of budgetary support. Since the government has come under fiscal pressure due to soaring subsidies on power and energy sector, the team sought the $1.0 billion budgetary support from the Bank, the official who was also a Bangladesh delegation member, told the FE. Since WB and IMF are unlikely to make available the budgetary support loan and the extended credit facility (ECF) respectively soon, it is most likely that both fiscal management and the balance of payment (BoP) would come under stress and strain, according to analysts. WB high officials said the donor is not in a position at this moment to extend the assistance to Bangladesh until the allegation of corruption in the multi-billion-dollar Padma Bridge project is resolved, he said requesting anonymity. The Washington-based lender last year assured Bangladesh of providing one billion dollar assistance to support its national budget which is now under pressure for bulging subsidies to power and oil sector. The WB integrity department has started investigation into allegation about a Canadian bidder, which is among the short-listed firms for doing consultancy job for the Bangladesh's $2.9 billion Padma Bridge construction work. The WB, one of the key lenders for 6.15-kilometre Padma Bridge project with confirmation of its $1.2 billion credit, has already started the investigation into the alleged graft. Bangladesh's national budget in the current fiscal 2011-12 has come under pressure due to the absence of expected foreign aid flow and soaring amount of subsidies. The resource constraints has forced the government to borrow heavily from the country's banking system. The government until first week of last month has borrowed Tk69.32 billion from the country's banking system, against the annual bank borrowing target of Tk189.57 billion set in the budget. The Bank earlier committed to provide $1.3 billion assistance on an average per year to Bangladesh. It is very hard at this moment to consider such a huge sum of money after a single largest commitment of $1.2 billion for Padma Bridge project, he added. Meanwhile, the IMF's $1.0 billion support under its Extended Credit Facility has also become uncertain as the lender is not happy over the low pace of reforms including revision of tax laws, lack of further energy price adjustments and cuts in subsidies, which were tagged as conditions. The Bangladesh team also met the IMF high officials in Washington during the WB-IMF annual meeting, where the lender gave such an indication. A finance ministry official said the government targets $300 million loan from the WB and another $300 million from the IMF this fiscal to support the budget and reduce the fiscal pressure.