The World Bank is likely to resume their budgetary support to Bangladesh after a decade to help mitigate the country’s budget deficit.
Finance Minster AMA Muhith on Friday spoke of the development to Bangladeshi media on the sidelines of the annual meeting of the World Bank and International Monetary Fund (IMF).
He said the bank has agreed to provide a support of US$500 million from the next fiscal year (2015-16) in addition to other development assistance.
“This type of support is coming to Bangladesh after a decade,” he said.
Earlier last month, the minister had also hinted about the development and said: “We will sign an agreement with the World Bank this fiscal.”
He said one of the major conditions would be to reform the local government plus the country’s banking sector.
The strain relationship between the bank and Bangladesh government over Padma Bridge corruption allegations came to an end during his last visit to the bank’s headquarters in Washington at the beginning of this year.
Former finance adviser to the past caretaker government AB Mirza Azizul Islam told the Dhaka Tribune that Bangladesh needed budgetary support to keep the deficit lower as the National Board of Revenue failed to achieve the revenue target last fiscal year.
Of the Tk1.55 trillion target, NBR earned Tk1.12 trillion last fiscal year.
Economic Relations Division sources said the WB budgetary support would help reduce the deficit. Last August, a WB team visited the country for reviewing the necessary support credit.
The credit is named as Programmatic Development Policy Support, and the WB will set some indicators for the government on the financial and policy reforms which will be required to get the proposed credit, according to sources.
The WB had last provided Bangladesh with the budgetary support to mitigate the aftermath of a devastating cyclone and two consecutive floods in 2007.
The WB in June 2008 approved two budgetary support programmes worth $320 million to help the government implement its wide-ranging governance and economic policy and energy reforms.
Of the fund, $200 million had been provided as Transitional Support Credit to help lessen pressure on the budget for 2007-08 fiscal and the rest for the power sector.
An ERD official said the government would have to undertake reforms in various sectors to receive the proposed budgetary support for three years.
Initially, the policy and institutional reforms in Bangladesh had been supported by the World Bank through a series of budgetary support operations, known as Development Support Credits (DSC).
As part of the series, four credits totaling $900 million have been provided to Bangladesh since 2003. The last credit – DSC IV – was approved by the World Bank in May 2007.