WB to consider $320m loans to Bangladesh

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The World Bank is going to consider two proposals for $320 million loan to Bangladesh in its next board meeting on June 17 as the government has fulfilled a number of conditions set by it.

A loan of $200 million is likely to be provided under the transitional support credit and another $120 million as policy support in the power sector development, sources in the Economic Relations Division (ERD) said. These loans will be given as budgetary supports.

Besides, the WB has showed interest in investing in the power sector of the country for the first time in the last 15 years, the sources said.

Process is underway for the WB loan of $330 million for the Siddhirganj Power project, they added.

About the $200 million transitional support credit, sources said the World Bank will provide the loan as the government had implemented a number of reform programmes.

The reforms are turning Biman Bangladesh Airlines, Bangladesh Telephone and Telegraph Board and state owned banks into public limited companies.

Besides, the government also separated judiciary from the executive, formed regulatory reform commission and has agreed in principle to enact fiscal responsibility act. Legalisation of the right to information is also under process.

ERD sources said the government made a commitment to donors for adjustment of prices of gas, electricity, petroleum products and fertiliser. “Price adjustment of petroleum products and others is not a direct condition of the World Bank for loans,” said an official of the ERD.

“They [WB] told us that we need to stabilise the macro economy to get the loans and subsidies in petroleum products and other are hampering the macro economy,” he added.

Turning to the power policy development support credit, the ERD official said the World Bank suspended its investment in power sector for a long period due to corruption in the field.

About the power sector situation in Bangladesh, the WB appraisal report for loans says investment has lagged for years while recent power and gas sector master planning work identified a need for investment of greater that 2 percent of the GDP or about $1.5 billion per year. The actual investment for the last few years has been only about one-third of that level.

The WB has set a number of conditions for investing in the country’s power sector.

These are procurement of privately financed power generation, institutional strengthening of the Bangladesh Energy Regulatory Commission, corporatisation of South Zone Power Distribution Company, strengthening the Rural Electrification Board and stabilising the finances of the Bangladesh Power Development Board.

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