World bank loan: $4.9b next fiscal
Bangladesh will get $4.9 billion in loan from the World Bank for a dozen projects in the next fiscal year, given that those are ready on time for implementation as stipulated by the global lender.
The loan is expected to be used for projects in the education, health, youth, rural and urban infrastructure and water resources development sectors. The two health sector projects alone will get $1.2 billion.
"This is an indicative plan of the World Bank," said an official of the Economic Relations Division, the finance ministry wing that manages foreign loans.
He said the loan approval in the 2023-24 fiscal year will depend on the timely preparation of the project documents and the subsequent nod from the Executive Committee on National Economic Council.
The funding will be provided under the WB's five-year (fiscal 2022-23 to 2026-27) Country Partnership Framework (CPF).
The WB board approved the CPF on April 27 ahead of Prime Minister Sheikh Hasina's visit to its headquarters in Washington DC marking the lender's 50 years of partnership with Bangladesh.
The CPF report pointed out that project preparation and approval follows "a very complex and slow process" and it's a major challenge in implementing the framework.
"The country's complex political economy, including its intricate decision-making process, has over time resulted in delays in the approval and implementation of the World Bank Group-financed projects," the WB observed.
Project readiness means a project is ready for development and implementation as planned.
Of the 12 projects, the health, population and nutrition sector development programme (HPNSDP) will get $900 million. The loan approval date for the project is March 27, 2024, according to the CPF.
This is the fifth HPNSDP being prepared by the health ministry.
Health ministry officials said the programme will account for more than Tk 1 lakh crore. Apart from the WB, the ministry was looking for other donors for funding, they added.
The fourth HPNSDP at a cost of more than Tk 40,000 crore is underway. The revised deadline for project implementation is June 2024, the officials told The Daily Star.
Urban health, nutrition and population project, involving $300 million, is the other health sector project.
The WB will finance $300 million for restoring ecology of the Dhaka rivers, a landmark scheme aimed at breathing life back into the five rivers surrounding the capital.
"This will only be an initial funding from the World Bank for the around $20-billion project, a feasibility study of which is now underway. This project will be implemented in phases," said a finance ministry official.
He said Bangladesh has already received $2 billion under the CPF in the current fiscal year, and more than $1 billion is in the pipeline for two more projects in the same fiscal.
The WB has identified some risk factors in implementing the CPF.
The multilateral lender in its report said that while the security situation in the country has improved since the 2016 Holey Artisan Bakery terrorist attack, the weakness of policy and institutions keeps the governance risks elevated in terms of preparation and implementation of reforms and investments supported under the CPF.
"The World Bank Group will closely monitor political economy risks and developments and consider adjustments to the CPF programme as needed," it said.
Macroeconomic risk is rated substantial given the growing uncertainties in the global economic outlook, the CPF said.
"The heightened global commodity prices have already put pressure on the country's external balance as well as on its fiscal balance, while the financial sector remains vulnerable," it observed.
A delay in phasing out the current multiple exchange rate arrangements and continued restrictions on foreign exchange rates would not only affect the macroeconomic condition, but also affect the implementation of projects under the CPF, the report said.
Given the existing weakness in policy coordination across ministries, institutional capacity for implementation and sustainability risk is also substantial, said the WB.
According to the report, engagement in reforms in public investment management will be crucial in going forward.
With the ongoing foreign exchange restrictions, many commercial banks are not able to process payments, including opening letters of credit for selected World Bank-financed operations, said the CPF report, adding that the delay in paying the contractors is resulting in a slowdown of project implementation.
It said the WB will lower the foreign currency direct payment threshold from $1,000,000 to $500,000 on a case-by-case basis.