WB withdraws commitment fee on loans not released in FY09
Friday, 1 October 2010
The World Bank (WB) has withdrawn commitment charges on loans approved, but not yet released in the fiscal 2008-09, following a request by the government, reports UNB. However, the multilateral lending agency will not withdraw such charges on loans that have already been released for Bangladesh, according to a WB letter sent to the Ministry of Finance recently.
The WB generally charges 0.5 per cent commitment fee on committed and unutilised disbursed loans. Every year the government has to pay a large amount of money as commitment fees due to its failure to spend money or for the donor's unwillingness to release committed money claiming faults in expenditure.Earlier in 1986, the WB had also withdrawn commitment fees fully, which was effective until 1998. It again attributed such fees in the following year.
The letter, sent by the WB Loan Service Group Division, said in 1988 the Executive Director (ED) of WB decided that the commitment charge levied by the International Development Association (IDA), the WB's concessionary arm, be made variable within a range of 0-0.50 per cent per annum.
It was further agreed that the applicable charge for each fiscal year would be reviewed and set on an annual basis. Officials concerned of the Ministry said Bangladesh demanded to withdrew commitment charge while a high level WB mission came to Dhaka in November last year. But, they did not say anything in this connection at that time.
Later, they abstained from addressing commitment charge in loan agreements.
Sources said commitment charges normally became effective 90 days after signing loan agreements. Sometimes the government has to pay commitment charge if the money is not released by the donor, showing glitches in the disbursement or project implementation procedures. An official of the Ministry said in many cases hard conditions imposed by the donor delay the disbursement process and also project duration..
The WB generally charges 0.5 per cent commitment fee on committed and unutilised disbursed loans. Every year the government has to pay a large amount of money as commitment fees due to its failure to spend money or for the donor's unwillingness to release committed money claiming faults in expenditure.Earlier in 1986, the WB had also withdrawn commitment fees fully, which was effective until 1998. It again attributed such fees in the following year.
The letter, sent by the WB Loan Service Group Division, said in 1988 the Executive Director (ED) of WB decided that the commitment charge levied by the International Development Association (IDA), the WB's concessionary arm, be made variable within a range of 0-0.50 per cent per annum.
It was further agreed that the applicable charge for each fiscal year would be reviewed and set on an annual basis. Officials concerned of the Ministry said Bangladesh demanded to withdrew commitment charge while a high level WB mission came to Dhaka in November last year. But, they did not say anything in this connection at that time.
Later, they abstained from addressing commitment charge in loan agreements.
Sources said commitment charges normally became effective 90 days after signing loan agreements. Sometimes the government has to pay commitment charge if the money is not released by the donor, showing glitches in the disbursement or project implementation procedures. An official of the Ministry said in many cases hard conditions imposed by the donor delay the disbursement process and also project duration..