The government is set to buy more stakes in the International Bank for Reconstruction and Development (IBRD) to make its footing strong and pave the way for ensuring credit after graduating to middle-income country, sources said.
IBRD, one of the five arms of the World Bank, lends the middle-income countries to develop infrastructure and support other development activities by raising most of its funds in the world’s financial markets.
“The prime minister has already given consent to the plan of raising the stake by purchasing additional 1,364 shares worth $9.87m,” said a high official at the Economic Relations Division (ERD).
Currently, Bangladesh holds 4,854 shares, which accounts for nearly 0.37% of the IBRD’s total stake.
He said now, the government is preparing to hand over money through a formal agreement to be made soon.
Recently, the World Bank’s hard-term lending arm has decided to raise its capital base by proportionately selling 484,102 shares to its 188-member countries in line with the reform plan of the World Bank Group.
Bangladesh is expected to become a middle income nation by 2021 and will lose its eligibility to receive soft-loan support from the international lender.
“At that time, the country will need to get financial support from the IBRD too,” said another ERD official.
Bangladesh is one of the biggest borrowing countries of the World Bank Group, as it takes credit worth nearly $1.2bn every year. Presently, as the low-income country, it borrows from the International Development Association (IDA), the soft lending arm of the World Bank Group.
The IBRD’s service charge is comparatively higher than the IDA as it lends at the market rate to the borrowing countries.
Established in 1945 as the original institution of the World Bank Group, IBRD is structured like a cooperative that is owned and operated for the benefit of its members.
The income that IBRD has generated over the years has allowed it to fund development activities and to ensure its financial strength, which enables it to lend at low cost and offer clients good lending terms.
The IBRD’s annual funding volume varies from year to year and it is currently around $10bn-$15bn.
The five largest of IBRD’s 188 shareholders are the United States (with 15.02% of the total voting power), Japan (8.13%), China (5.25%), Germany (4.56%), and France and the United Kingdom (with 4.06% each).
Besides IBRD, Bangladesh has already decided to join the $100bn Asian Infrastructure Investment Bank (AIIB), a new lender initiated by the world’s second largest economy, China, to create opportunity to get financial support for its infrastructure development,
It also plans to join another proposed global lending institution, formed by the BRICS nations to spread up scopes for the poor and middle income countries, to get more funds for developing their infrastructure and cutting poverty.
Bangladesh needs to spend $100bn by 2020, which is more than 10% of its gross domestic product, to improve its infrastructure to serve its growing population, according to the World Bank Report released in April this year.
