The World Bank’s Board of Executive Directors approved two significant projects on Friday, totaling $900 million, aimed at bolstering Bangladesh’s fiscal and financial sector policies and 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 $500 million Second Recovery and Resilience Development Policy Credit, the final in a series of two credits, is designed to support fiscal and financial sector reforms. These reforms will accelerate sustainable growth and bolster resilience against future shocks, including climate change. The program aims to transition from trade taxes to consumption and income taxes, strengthening Bangladesh’s competitiveness and preparing for its graduation from the Least Developed Country (LDC) status.
Key components of this initiative include institutionalizing the public procurement authority responsible for the electronic government procurement (e-GP) system, which is expected to reduce the average procurement lead time from 70 days to 55 days. The program will also enhance banking sector oversight, improve the management of National Savings Certificates, and increase the efficiency and targeting of cash-based social protection programs. Additionally, it aims to scale up public and private 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. He highlighted that the financing will help streamline the bank recovery framework and implement a prompt corrective action framework for undercapitalized banks. It will also strengthen social protection programs, ensuring support for the most vulnerable during economic downturns and natural disasters.
The $400 million Resilient Urban and Territorial Development Project will focus on improving climate-resilient and gender-responsive urban infrastructure and management capacities in seven city clusters along the economic corridor stretching over 950 kilometers from Cox’s Bazar in the south to Panchagarh in the north of Bangladesh. With urbanization expected to increase from 38 percent in 2021 to 60 percent by 2050, this project is crucial for accommodating climate migrants and reducing congestion in Dhaka, one of the most densely populated cities in the world.
The project emphasizes coordinated investments in infrastructure and planning across these cities, ensuring a comprehensive approach rather than isolated city plans. It aims to develop strategically important corridors and city clusters, create jobs, enhance rural-urban linkages, strengthen food supply chains, and connect to domestic markets and global value chains. Improved connectivity between selected cities and surrounding Union Parishads will be achieved through better roads and bus terminals, along with new economic opportunities in tourism and open spaces. Infrastructure designs will also incorporate the needs of female users and green building features like 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. He emphasized the importance of developing secondary cities as growth hubs for the country’s sustainable growth.
Selected municipalities and city corporations will receive subgrants to invest in climate-resilient and gender-responsive infrastructure, with the goal of increasing revenues by 20 percent. Town-Level Coordinating Committees will be formed, ensuring that at least one-third of the members are women.
Since its independence, Bangladesh has received about $41 billion in grants and interest-free credits from the World Bank, making it one of the largest recipients of the Bank’s interest-free credits in recent years.
