WB Offers $2.8b, Seeks Faster Approvals Before Polls

Greenwatch Desk Economy 2025-09-16, 10:11am

The World Bank has proposed $2.77 billion in loans for 10 projects over the next two fiscal years, urging Bangladesh to approve as many as possible before December 2025—well ahead of the national elections slated for February 2026.

In a letter dated 26 August to Finance Adviser Dr. Salehuddin Ahmed, Jean Pesme, the Bank’s Director for Bangladesh and Bhutan, stressed the urgency. "With a 90-day pre-election moratorium on government decisions expected, time is short to prepare projects for FY2026," he wrote.

The proposal falls under the International Development Association’s 21st Replenishment (IDA21) framework, which runs from July 2025 to June 2028. A tentative pipeline shared by the World Bank outlines priority projects and a total commitment of $2.771 billion to be finalised by year-end, according to officials at the Economic Relations Division (ERD).

Key proposed projects include:

Financial Sector Support Project-2 ($400 million)

Dhaka Water Security and Resilience Program ($350 million)

Dhaka Metro Line-2 Institutional Strengthening ($70 million)

Jobs and Growth DPC (Budget Support) ($500 million)

Fuel Import Guarantee ($500 million)

Digital Service Transformation ($300 million)

Health Emergency Preparedness (One Health) ($225 million)

Informal Sector Employment Support ($201 million)

In addition, the World Bank has provided a preliminary assurance of SDR 2.184 billion (around $3.2 billion) under IDA21. However, this figure is lower than the IDA20 allocation of SDR 2.4527 billion—down by about 15%. The decline is attributed to Bangladesh choosing fixed-rate loans over floating-rate ones.

For the first time, part of Bangladesh’s core IDA allocation will come with a market-based floating interest rate, capped at 5%. Terms include a 25-year maturity with a 5-year grace period. Opting for fixed-rate loans would reduce available allocations.

Under IDA20 (FY2023–FY2025), the World Bank committed $6.63 billion to Bangladesh through a combination of grants, guarantees, and concessional loans. Of that, $4.87 billion was core IDA financing.

Dr. Zahid Hussain, former lead economist at the World Bank's Dhaka office, noted that Bangladesh’s transition from IDA Gap to IDA Blend status reduces its access to concessional funding. However, he added, "The country now has greater access to the IBRD window. While borrowing costs are slightly higher, they remain well below commercial or bilateral rates."

Officials also highlighted expanded access under IDA21 to the Private Sector Window (PSW) and the Host Community and Refugees Window (WHR), where 50% of funding will come as grants.

The IDA21 theme, “Ending poverty on a livable planet,” reflects a focus on impactful, urgent development amid evolving global and domestic challenges.