WB’s budget support appears unlikely

The World Bank (WB) appears reluctant to come forward with a $500 million credit line under the budget support programme, to the frustration of the government policymakers who for nearly one year tried to persuade the bank into giving the budget support loan.

Slow pace of reforms in the overall economy, along with fund shortage of the bank are known to be the two principal reasons for the creditor’s unwillingness to sign the ‘budget support’ loan agreement with the government, a senior finance ministry official said.

wbAt least three or four meetings were held between the finance ministry and the WB senior officials over the last two months on the budget support programme, titled ‘Programmatic development policy credits series’ (budget support)’, the official added.

‘They [WB] are not interested now in the budget support programme. We failed to convince the lending agency, as they cite their fund shortage and lack of reform initiatives in the government,’ another top finance official, who attended a number of meetings with the WB officials, told New Age.

‘I see no reason the government should still expect budget support from the WB.’

The WB in October last year under the ‘Programmatic development policy credits series’ (budget support) submitted a raft of conditions and their priorities to the finance ministry for the proposed budget support programme underscoring their implementation.

The bank in its document asked the government to merge para-tariffs with import tariffs and reduce dispersion and reduce overall nominal protection rates, close tax loopholes, reduce delays in duty-drawback refunds to two months, review existing fiscal incentives with the objective of adopting more coherent, transparent, predictable, and time-bound policies and formulate and adopt a strategy for services trade.

The WB also highlighted specific areas such as tax system, public financial management, bank and financial sector, energy and power, transport sector, special economic zones, readymade garment and welfare of migrant workers for bringing them under dictated reforms to become eligible for its planned budgetary support.

Finance minister AMA Muhith on the sidelines of the WB-IMF annual general meeting in Washington DC in October, last year told Bangladeshi journalists that the WB had agreed to extend budget support for next financial year (FY 2015-20-15).

Under the WB’s budget support programme, the government can utilise the low-cost fund in implementing its budgetary expenditure, be it development oriented projects or involving revenue expenditure.

On the contrary, the government remained tied with strict conditions from lenders on spending donor-funded project loans, an official of the economic relations division of the finance ministry said.

The last WB-sponsored budget support programme, called ‘Development support credit-4’ was completed in 2008. Bangladesh received nearly $1.0 billion from the DSC that also spanned for three years.

Kazi Shofiqul Azam, additional secretary, economic relations division of the finance ministry, said negotiations were still under way with the WB on the budget support programme.

He, however, said the government was not hankering after budget support from the WB, as other programmes of the lender worth nearly $1.90 billion would be signed in the next fiscal year.

-New Age