The World Bank's Board of Executive Directors has approved two projects totaling $900 million to aid Bangladesh in bolstering fiscal and financial sector policies, as well as enhancing urban infrastructure and management for sustainable and climate-resilient growth.
“Decisive reforms will help Bangladesh sustain growth and strengthen resilience to climate change and other shocks,” said Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan. “These new financing operations will help Bangladesh in two critical areas – the financial sector and urban management — to achieve its vision of upper middle-income status.”
The Second Recovery and Resilience Development Policy Credit ($500 million), the last in a series of two credits, supports fiscal and financial sector reforms aimed at accelerating sustainable growth and building resilience against future shocks, including climate change. The program facilitates the transition from trade taxes to consumption and income taxes, which is expected to enhance Bangladesh’s competitiveness as it prepares for LDC graduation. Additionally, it aims to institutionalize the public procurement authority responsible for the electronic government procurement (e-GP system), reducing the average e-GP procurement lead time from 70 days to 55 days. It also supports stronger banking sector oversight, improved management of National Savings Certificates, enhanced efficiency in cash-based social protection programs, and increased investments in climate adaptation and mitigation.
“A well-functioning financial sector is critical for Bangladesh to increase investment and improve access to finance for those left out of formal banking systems,” said Bernard Haven, World Bank Senior Economist and Task Team Leader for the program. “The government has adopted strong macroeconomic reforms to address external imbalances and a new legislative framework to strengthen the financial sector.”
The financing will streamline the bank recovery framework by implementing a prompt corrective action framework for undercapitalized banks. It will also bolster social protection programs, safeguarding vulnerable populations during economic downturns and natural disasters.
The Resilient Urban and Territorial Development Project ($400 million) aims to improve climate-resilient and gender-responsive urban infrastructure along with urban management capacities in seven city clusters along an economic corridor stretching over 950 kilometers from Cox Bazaar in the south to Panchagarh in northern Bangladesh.
In 2021, approximately 38% of Bangladesh's population resided in urban areas, a figure projected to rise to 60% by 2050. Rapid manufacturing sector growth in Dhaka has driven much of this urbanization, making it one of the most densely populated cities globally. Developing secondary cities with climate-resilient infrastructure is seen as essential for absorbing climate migrants while alleviating congestion in Dhaka. The project emphasizes coordinated investment across city clusters rather than individual city plans.
Investments under this project are intended to support strategically important corridors and city clusters by creating jobs, enhancing rural-urban linkages, strengthening food supply chains, improving connectivity through better roads and bus terminals, boosting tourism facilities, developing open spaces, among others. Infrastructure designs will consider female users' needs alongside green building features such as rainwater harvesting.
“This will be the first in a series of projects helping build resilience to climate change and create new opportunities and jobs in secondary cities through spatially targeted investments,” said Kwabena Amankwah-Ayeh, World Bank Senior Urban Development Specialist and Task Team Leader for the project. “Developing secondary cities as growth hubs will be critical for the country’s sustainable growth.”
Selected municipalities will receive subgrants for investing in climate-resilient infrastructure with an expected revenue increase of 20%. Town-Level Coordinating Committees with at least one-third female members will be formed within these municipalities.
Since its independence, Bangladesh has received about $41 billion from the World Bank through grants and interest-free credits. In recent years, it has been one of the largest recipients of such credits from the institution.
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