Govt requests World Bank to raise budget support to $750m

The government has requested the World Bank to increase the amount of budget support by $250 million to $750 million to deal with the current economic challenges and the reserve crisis.

Sources at the finance ministry said Bangladesh made the proposal during bilateral talks on the sidelines of the spring meetings of the World Bank and the International Monetary Fund (IMF) in Washington on 15-20 April.

The Bangladesh delegation held meetings with a WB delegation headed by its South Asia Region Vice President Martin Raiser on 17 April and had discussions again on 18 and 19 April with the delegation headed by its Country Director for Bangladesh Abdoulaye Seck.

Officials at the Finance Division and the Economic Relations Division (ERD) said the multilateral lender initially consented to provide $250 million in budget support in the current fiscal year under the Second Recovery and Resilience Development Policy. However, in a letter sent to the bank on 27 November, the government proposed increasing the amount to $500 million.

Following the initial approval, progress has been made in the creation of the policy matrix, and the loan agreement with the Washington-based lender is expected to be signed by next June.

As Bangladesh's economy is still facing challenges due to the global situation, including the Russia-Ukraine war, recent crises in the Middle East, and instability in fuel prices, officials in the Washington meetings made the proposal for the additional $250 million in budget support.

Meanwhile, the government has sought another $300 million from the Asian Development Bank (ADB), $400 million from the Asian Infrastructure Investment Bank, and €300 million ($325.51 million) from the French government's development aid agency Agence Française de Développement (AFD) for budget assistance loans in the ongoing fiscal year.

Since July last year, the government has received a budget support commitment of $490 million from the ADB and South Korea and has already signed a $400 million deal with the Manila-based lender and a $90 million deal with Korea.

The budget support loan agreement titled "Promoting Climate Resilient Development Programme (Subprogram 1)" was signed with the ADB, and the "Climate Resilient Inclusive Development Programme" loan agreement with Korea was signed in December last year.

Usually, development partners impose certain conditions for receiving budgetary support. Under the aid of ADB and Korea, the government will implement various reform programmes related to climate.

According to ERD data, the government has received a total of $11.09 billion in budget assistance up to the last financial year that ended on 30 June 2023. Mainly post-Covid, the amount of government budgetary support has increased to purchase vaccines and facilitate economic recovery. Additionally, the government strengthened the budget support programme due to the economic situation caused by the Ukraine-Russia war.

The government received budgetary assistance of $1.769 billion in FY23, $2.597 billion in FY22, $1.09 billion in FY21, and $1 billion in FY20. In the previous fiscal year, the budget assistance was $0.251 billion.