World Bank to provide $1 billion loan with four conditions
The World Bank has decided to provide a $1 billion loan to Bangladesh and the global lender has set four conditions to the Bangladesh Bank.
The money must be used specifically for reforming the country’s banking and financial sectors and strengthening the central bank.
In this regard, the World Bank officials held a meeting with Bangladesh Bank governor Ahsan H Mansur on Sunday.
Sources said $750 million of the loan must be allocated to policy reforms. The central bank expects to receive this assistance in December.
The conditions for securing this loan are: establishing a framework for asset management companies to recover non-performing loans from banks and financial institutions; formulating policies to determine the actual beneficiaries of loans; defining the scope of forensic audits for banks and financial institutions; and creating a separate department within Bangladesh Bank for regulatory enforcement.
The remaining $250 million of the loan will be available for investment loans and guarantee facilities.
Meanwhile, the Asian Development Bank (ADB) has expressed interest in providing a $1.5 billion loan. An ADB delegation met with the governor on Sunday, and the funds will be disbursed in three phases.
However, this requires redefining the criteria for non-performing loans and developing new projects for lending in the SME sector.
Bangladesh Bank executive director and spokesperson Husne Ara Shikha told journalists on Sunday that Bangladesh must meet certain conditions to access these loans.
She said these include establishing a private-sector loan management company, redefining non-performing loans according to international standards, and setting the scope for forensic audits under a newly formed task force.
However, initiatives have already been taken to address 50 per cent of these conditions, Husne Ara added.
Meanwhile, Bangladesh Bank governor Ahsan H Mansur met with Brent Neiman, the US Treasury Department’s assistant secretary for international finance on Sunday.
They discussed ways to improve the country’s macroeconomy, including controlling inflation, repatriating illicitly transferred funds, and promoting growth. The governor was assured of US support for financial sector reforms.
After the fall of the Awami League government on 5 August, the interim government has focused on reforming the banking sector.
Following the appointment of a new central bank governor, the boards of 11 banks and one financial institution have been reorganized.
Among these, nine were under the controversial S Alam Group’s ownership and control. The group has allegedly siphoned off nearly Tk 2000 billion from these banks, leading to concerns about recovery.
As a result, normal transactions at these banks have already come to a halt due to liquidity crises.