Bangladesh government has requested the World Bank (WB) to confirm a budgetary-support loan worth US$1.0 billion and release the second tranche of a loan, approved earlier, expeditiously to help it navigate economic headwinds stemming from global turmoil, officials say.
In a meeting recently with the Washington-based lender, the Economic Relations Division (ERD) placed the request for firming up the assured policy-based loan, they add, as the country struggles to foot mounting import bills for global price rises and adopts cost-cutting measures.
"We have requested the WB to release tranche-2 of the Covid recovery-related $250 million policy credit and to confirm $1.0 billion worth of budgetary support," says a senior ERD official.
Earlier, the government had sought the billion-dollar budget support from the WB to ward off the impact of the pandemic on the economy.
"Now the Russia-Ukraine war and global economic slowdown affected Bangladesh's economy further. So the budgetary support from the WB will be very helpful to the economy," says an ERD official.
A Ministry of Finance (MoF) official says they are actually trying to get some budgetary support confirmed immediately so that the funds could be used in cushioning the country's economic slowdown amid global instability.
The government is firstly trying to take help of Bangladesh's traditional donors like the WB, ADB, Japan, and AIIB regarding the budget financing.
"We have also sought another $1.0 billion budgetary support from the Manila-based ADB," he adds.
The senior MoF official mentions that Bangladesh has been affected for the Covid-19 pandemic, and for the recent global price push for the Russia-Ukraine war.
"Actually, we are trying to get $250 million worth of the tranche-2 of the Covid recovery policy loan immediately from the WB. The WB disbursed the first tranche worth $250 million in the last fiscal year, 2021-22. Now we want the second tranche within a couple of months," he says.Besides, the MoF in last FY2022 had written to the WB requesting another $1.0 billion amount of funds as the budgetary support which is yet to be confirmed.
"So, we have requested the Washington-based lender to confirm the loan for recovery from the recent macroeconomic slowdown," the MoF official adds.
Meanwhile, the government has sought $4.5 billion worth of budgetary-support credit from the International Monetary Fund (IMF), too, which is proposed to be available in next three years in a bid to tackle the income-expenditure gap in the national budget.
The budget deficit for the FY2023 is Tk2.45 trillion, more than one-third of the total Tk 6.78-trillion national budget and 6.2 per cent of the GDP.
In the last FY2022, the deficit was 5.5 per cent of total GDP.
Another MoF official said: "The government is preferring budget support from the traditional donors like the WB and the ADB first as the donors have already assured us of those credit facilities. In different meetings, we have also discussed with the WB its budget support. So, it is easy to get their support immediately."
On the other side, getting the loans from the IMF will take time as formal discussions regarding the credit facilities have yet to start.
"There will be some reform proposals and fresh conditions from the IMF before confirming their loan. Bangladesh has to conduct those reforms and to comply with the conditions for getting the IMF facilities. So, it could take some time for the IMF loan."
When the IMF in April 2012 confirmed $987 million worth of budget support-titled Extended Credit Facility (ECF)-to restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth, Bangladesh government needed to comply with many terms and conditions.
The budget support was taken when the country was hit hard by the global financial meltdown, which started in 2007 and swept across the globe.
