World Bank Supports Bangladeshs Reform Efforts
WASHINGTON, 17 June, 2008: The World Bank Monday approved two budget support operations worth 320 million US dollar to assist the Government of Bangladesh implement its wide-ranging governance, economic policy, and energy reform agenda.
A 200 million dollar Transitional Support Credit (TSC) is designed to help reduce pressure on the poor South Asian countrys current budget, staggering under the impact of the twin natural disasters of flooding and cyclone Sidr last year as well as the shocks of rising commodity prices, particularly oil, food, and fertilizer.
This credit will allow the Government to protect its expenditures on core developmental priorities while maintaining fiscal sustainability. It will also support deepening economic reforms in a number of areas, including macroeconomic stability, streamlining of the regulatory environment, restructuring of state-owned enterprises, and strengthening of public financial management.
A 120 million dollar Power Sector Development Policy Credit aims to enhance governance and accountability, and promote financial stability in the power sector, leading to better service delivery.
It will support the Governments overall power sector reform program, including procurement of privately financed power generation, corporatization of state-owned operating companies, and institutional strengthening of the Bangladesh Energy Regulatory Commission.
– Extensive damage from successive floods followed by the devastating cyclone in 2007 and the unabated increases in global commodity prices have put the Bangladesh economy under considerable strain, said Xian Zhu, World Bank Country Director for Bangladesh, adding:
– The transitional support credit will help the countrys overall fiscal situation by reducing the pressure on the budget and ensuring the continuation of the Governments reform program, which is focused on tackling weak governance.
– Similarly, our power support project will help strengthen governance in the power sector, which in turn will build a more robust investment climate, leading to economic growth and poverty reduction.
The Caretaker Government (CTG) in Dhaka has pursued a wide-ranging governance reform agenda to improve the core institutions of accountability, such as the judiciary and the Anti-Corruption Commission, with clearer mandate and increased operational autonomy.
– If sustained, these measures promise to demonstrably improve the governance situation in Bangladesh, which is critical for reviving private sector business confidence, raising income levels, and improving human development, said Sandeep Mahajan and Vinaya Swaroop, World Bank Economists and co-team leaders for the TSC.
Bangladeshs power sector has suffered from poor governance and deteriorating service quality. Over the past decade, the country has doubled access to electricity to over 40 percent, with most of these new connections in rural areas. Over 200.000 solar home systems have also been introduced.
However, amidst deteriorating governance and finances in the sector, power generation capacity has not kept pace with electrification, resulting in serious shortages of power and constrained economic growth.
– The reforms supported by this credit will strengthen accountability in the sector, by improving governance of state-owned service providers, bolstering regulatory effectiveness, and attracting private investment in new power generation capacity, said Alan F. Townsend, World Bank Senior Energy Specialist and team leader for the project.
With approval of these projects, the World Banks total concessionary lending to Bangladesh in 2007-08 was 753,5 million dollar as compared to 379 million in 2006-2007. Of the total resources provided by the World Bank in 2007-08, 495 million dollar was in the form of budget support.
This increase in lending has been designed to help the government manage its finances, particularly following successive floods, cyclone Sidr, and increasing global food and petroleum prices.
The credits from the International Development Association (IDA), the World Banks concessionary arm, have 40 years to maturity with a 10-year grace (afdragsfri) period; they carry a service charge of 0.75 percent.
For more information on the WB in Bangladesh, visit: www.worldbank.org/bd
Kilde: Verdensbankens website
