The World Bank has approved $250 million in financing to help Bangladesh strengthen its policies to support post-pandemic growth and build resilience to future shocks.
Bangladesh’s first Recovery and Resilience Development Policy Credit – the first in a two-credit series – supports fiscal and financial policies aimed at strengthening macroeconomic stability and supporting growth.
It supports the expansion and modernization of social protection programs and energy sector policies to improve efficiency and reduce greenhouse gas emissions. These actions will help the country build resilience to future shocks, including climate change, the World Bank said in a statement.
“Since 2020, the World Bank has provided more than $3 billion to Bangladesh to support emergency response, vaccination and other Covid-19 recovery efforts,” said Mercy Tembon, Country Director of the World Bank for Bangladesh and Bhutan.
“This credit will further accelerate the government’s efforts to strengthen its policies and regulatory framework to pave the way for a green, resilient and inclusive recovery and low-carbon growth.”
This program supports the development of the National Tariff Policy, which will help modernize trade taxes. New policies also allow foreign companies, including non-resident digital service companies, such as search, social media and cloud services companies, to submit VAT returns and make payments.
Expanding the coverage of the national e-procurement system will increase the efficiency of public spending. The financing will also help streamline the bank recovery framework. All scheduled banks will prepare recovery plans, which will be updated annually.
New legislation will be prepared to strengthen the stability and efficiency of payment and settlement systems, which will also promote digital and mobile financial services, according to the World Bank.
The program also supports adjustments to the interest rates of several public savings instruments, bringing them closer to the market to reduce distortions.
This program will help the government rapidly scale up cash transfer programs to respond to future shocks and expand the use of the government-to-person payment platform for cash-based schemes.
This will allow the government to respond more quickly to climate-related crises, including floods and cyclones, by identifying and targeting new and existing recipients of emergency assistance.
It will also help Bangladesh in its transition to a low-carbon economy. The revised National Building Code will improve the energy efficiency of buildings, while the cancellation of 8,451 MW of planned investment in coal-fired power generation projects supports progress towards Bangladesh’s 2021 Nationally Determined Contributions .
“This funding will help Bangladesh harness digital technology to deliver green and resilient growth,” said Bernard Haven, World Bank Senior Economist and Team Leader for the project.
“Fiscal and financial policies will help support growth, while improving the coverage and effectiveness of social protection programs will protect the poor and vulnerable during economic shocks and natural disasters.”
The credit comes from the World Bank’s International Development Association, which provides concessional financing, has a term of 30 years, including a five-year grace period. Bangladesh currently has the largest ongoing IDA program, totaling over $14.5 billion.