Bangladesh Signs US$450 Million World Bank Loan to Reform Financial Sector
Bangladesh has signed a loan agreement of 450 million US dollars with the World Bank. The money will help strengthen the safety net of the country’s financial sector, improve supervision capacity and support the restructuring of the banking sector.
The Bangladesh government and the International Development Association (IDA), the World Bank’s soft loan arm, signed the financing agreement the day before yesterday. The deal falls under the project named Financial Sector Support Project 2. Mr. Md. Shahriar Kader Siddiqui, Secretary of the Economic Relations Division (ERD), signed for Bangladesh. Mr. Jean Pesme, World Bank Country Director for Bangladesh and Bhutan, signed for the World Bank.
The project will provide 328 million Special Drawing Rights (SDR), which equals 450 million US dollars. The project term is five years, starting in July 2026 and ending in June 2031. Bangladesh Bank will carry out the project under the supervision of the Financial Institutions Division (FID) of the Ministry of Finance.
The main goals of the project are to strengthen the safety net of the financial sector, increase the supervision capacity of financial sector regulators and support the restructuring of the banking sector.
Under the terms of the agreement, Bangladesh must pay 1.5 percent annual interest on the loan amount it draws. A commitment fee of up to 0.50 percent a year will apply to the amount it does not draw.
An ERD press release said the World Bank has waived this commitment fee for Bangladesh for a long time, including in the current fiscal year. The loan has a repayment period of 25 years. This includes a grace period of five years, during which Bangladesh does not need to repay the loan.
The ERD said the World Bank is the largest multilateral development partner of Bangladesh. Its funding plays an important role in many areas, including economic and social development, institutional reform, infrastructure development and progress in the energy sector.
The latest financing agreement reflects the ongoing cooperation between Bangladesh and the World Bank to strengthen the financial and institutional capacity of the country.
