A sum of US$500 million is expected from the World Bank for bridging huge gap between income and expenditure targets in the current Bangladesh budget, officials say.
In the first tranche, the Washington-based development financier is set to disburse US$250 million in budget support by next month, Economic Relations Division (ERD) officials said Thursday.
The government of Bangladesh had recently completed negotiations with the WB for the budgetary support as the country needs recovery from the economic losses inflicted by massive attack of the coronavirus over the last couple of years.
The government is now deemed under pressure following the offering of higher incentives for the industries and businesses, lower revenue collection against targets, waiver of VAT and taxes on different products and sectors, and expenditure for stimulus packages.
However, the government has taken a higher public-spending target in the current FY2022 to help the economy recoup the losses under Covid-19 impact.
It kept aside an income gap of 6.2 per cent of gross domestic product (GDP) compared to the expenditure, and the overall budget deficit for FY2021-22 amounts to Tk 2.15 trillion.
The ERD official says since the government is offering different incentives for the industries and businesses and conceding waiver of taxes and VATs, the overall revenue-collection target might get under further pressure.
"The proposed $500 million budgetary support will help the government minimse the income-expenditure gap," he says.
In addition to the WB dollop of budget aid, the Asian Development Bank has also confirmed another $500 million budgetary support to minimise the deficit, he adds.
Although the National Board of Revenue (NBR) collected nearly 14 per cent higher revenue at Tk 1.53 trillion during July-January period of the current FY, the internal-resource mobilisation falls short of target.
The senior ERD official says the proposed $500 million worth of WB budget support titled 'Resilience and Recovery Development Policy Credit (DPC)' has been offered after a prolonged stagnancy in such kind of support.
"The budget-support proposal is likely to be placed before the WB board end of this month. After approval for the assistance, we are ready to sign a loan deal for getting the $250-million aid within next month," says another senior ERD official.
The second tranche of $250 million is likely to be provided by the next FY2023.
Bangladesh is one of the worst victims of the Covid-19 pandemic as millions of people lost their jobs, especially in the informal sector.
The government has already announced trillions of taka worth of stimulus packages for micro, small, medium and large industries to facilitate the recovery from the impact of the pandemic.
The ERD official says it has already been agreed in the last negotiation meeting with the WB that the global lender would provide the DPC-1 within this FY2022.
"The second tranche, DPC-2, will be disbursed in the next FY2023 if the government fulfills some terms and conditions regarding policy reforms," he adds.
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