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WB budgetary support credit
The government has recently completed negotiations with the World Bank (WB) over US$750 million budgetary support credit to narrow its fiscal deficit, officials said on Monday.
Within this fiscal year (FY) 2018-19, the government is likely to get $250 million worth of funds from the total $750 million development support credit (DSC) that the government has sought from the global lender, Economic Relations Division (ERD) officials said.
The remaining $500 million credit is expected to be disbursed within next two fiscal years depending on fulfilment of the conditions set by the WB, they added.
"We've completed negotiations with the WB last week for getting the first tranche of proposed $750 million DSC. The WB has agreed to disburse the first tranche of the credit by this fiscal year," a senior ERD official told the FE.
"We are hopeful of signing the credit deal within a couple of months," the official said.
The DSC from the global lender this time will mainly be spent on creation of job opportunities in Bangladesh as many people still remain unemployed in the country, the official added.
After a long stalemate over a complex policy matrix involving the loan, the WB has finally agreed to provide it.
The WB had initially set some "policy reform matrix" like automated readjustment of fuel oil, gas and electricity prices, implementation of the VAT law and formulation of rules under it, corporatisation of a number poorly performing power distribution companies and strengthening the load dispatch centre at Power Development Board.
It also asked the government to formulate a market-based interest rate for the national savings certificates (NSCs) slashing the government's intervention in it and quicken handing over of the lands for the special economic zones (SEZs) as preconditions for getting the proposed budgetary support credit.
Later, following the request from the government, the WB relaxed its earlier matrix and added a few new conditions, focusing more on employment generation.
A senior finance ministry official said they had sought budgetary support credit under a "new arrangement" instead of the previously offered loan on "policy reform matrix".
The government in FY 2014-15 had sought the budgetary support from the Washington-based lender aimed at offsetting its fiscal deficit.
The ERD official said the proposed DSC will help boost employment opportunities through necessary policy and institutional reforms of trade and investment, enhanced systems that protect workers and build resilience and improved policies and programmes for increasing access to jobs for vulnerable populations.
He said if Bangladesh could comply with the suggested policy reforms in the coming years, the WB will provide $250 million each for the next two consecutive fiscal years up to FY 2021.
The official said, the WB and the government have recently prepared a fresh "policy matrix" that might be easier for the government to implement against the backdrop of the next general election to be held in December next.
"The government will not go for any major reforms before the next general election. So, it had requested the Bank to offer the long-pending budgetary support to facilitate more employment generation," the official said.
The World Bank is the largest provider of fund to Bangladesh. It usually makes commitment to disbursing US$1.5 billion assistance annually and disburses nearly $900 million on an average.