Govt seeks strings-free WB budgetary support credit

Dhaka,  Sun,  20 August 2017
Published : 02 Aug 2017, 00:53:08
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Govt seeks strings-free WB budgetary support credit

FHM Humayan Kabir


The government has sought from the World Bank (WB) budgetary support credit having no reform-related strings attached, officials said.

"We have sought budgetary-support credit in a 'new form' instead of the previously offered loan on 'policy-reform matrix'," a senior Ministry of Finance (MoF) official said Monday.

 "The government will not go for any large reforms before the next general election. So, it has recently requested the Bank to offer the long-pending budgetary support in another form instead of the earlier proposed reform-based credit," he told the FE.

More than three years ago, the Washington-based global lender had considered providing US$500 million worth of development-support credit (DSC) to Bangladesh government for bankrolling the national budget.

However, the government failed to conduct the structural and policy reforms and the possible budget-support credit got stuck.

The WB assured of the DSC based on some reform works that include automated fuel-price adjustment, implementation of the VAT law, enactment of the public-private partnership (PPP) law and formulation of its rules, corporatisation of some poor-performing power-distribution companies and strengthening the Load Dispatch Centre of the Power Development Board.

A mission from the Washington-based lender will sit with the Economic Relations Division (ERD) today (Tuesday) to discuss the proposed 'new form' of budgetary credit, as defined by the finance ministry.

An ERD official said the amount of the credit has yet to be discussed. "After some bilateral meetings, the amount could be finalised based on the demand of the government for job and employment creation."

Since job creation is a new challenge for the government, it could consider taking the budgetary-support credit from the WB in a new form instead of previously imposed 'policy reform matrix'-based loan, he added.

 Meanwhile, the WB-government talks two years ago in 2015 on the then proposed US$500 million DSC failed to reach a consensus as the government finds some of the reform proposals tougher to take, officials said.

The multilateral lending agency proposed some "policy reform matrices" for the Bangladesh government to do the restructuring within a certain period to obtain the then proposed $500 million budgetary-support credit meant for financing budget deficit.

The Bank had also asked for formulating market-based interest rates for the national saving certificates (NSCs) curbing government intervention in it and quickening handover of lands for the special economic zones (SEZs).

"Some of the World Bank reform proposals are really tough to comply with within the stipulated time. The government has already decided not to implement the uniform VAT system. Besides, some other reforms the WB proposed can also diminish government's image among the people before the election. So, the government will not go for those reform activities at this moment," the official said.

The ERD official said if the WB offers the budgetary-support credit for facilitating a better business and investment climate in Bangladesh which will help create more jobs and employment opportunities, the government will actively consider taking the loan.

The World Bank is the largest donor to Bangladesh. It used to make commitment to disbursing US$1.5 billion in assistance annually and disburse nearly $900 million.

It disbursed a record-highest amount of $1.0 billion in assistance in the financial year 2014-2015 for Bangladesh.

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