Highlights:
- Funding will support LNG imports and food security.
- Energy financing aims to ease pressure on foreign exchange reserves.
- LNG imports are crucial for power generation and industrial production.
- Food security financing will help meet fertiliser import needs.
- Global conflicts threaten fuel supplies, raising import costs and financial pressures.
Bangladesh has formally sought $2.77 billion (approximately Tk34,000 crore) in project financing and an additional $1 billion (approximately Tk12,000 crore) in direct budget support from the World Bank for the current financial year. The funds are aimed at stabilising the financial sector, restoring high economic growth, and strengthening institutional capacity.
According to senior Ministry of Finance officials, the proposed immediate funding will cover crucial liquefied natural gas (LNG) imports, comprehensive banking sector reforms, and major transport infrastructure projects.
In addition to the current financial year's requests, the government has sought $10 billion in loans over the next three years beyond its regular project allocations. The ambitious request falls under a proposed Resilience, Reform, and Investment Partnership (RRIP) framework.
The proposal was first raised by the prime minister during a bilateral meeting with the World Bank president on 22 September on the sidelines of the UNGA in New York.
The agreement was further discussed along with project outlines during the IMF-World Bank annual meetings held in Bangkok on 12-18 October. Following the summit, a ministry report confirmed that Bangladesh and the World Bank have agreed to establish a joint technical team – comprising representatives from the Economic Relations Division (ERD), the World Bank, and relevant stakeholders – within 60 days to shape the partnership. The government aims to finalise the agreement by June next year.
Finance Minister Amir Khosru Mahmud Chowdhury, who led a 12-member delegation to the Bangkok meetings, confirmed that negotiations are progressing.
"Discussions are ongoing with the World Bank, and we will continue talks," he told The Business Standard in Bangkok, clarifying that no final decision has yet been reached.
Commenting on the reliance on external funding, Dr Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), noted that the government lacks the necessary fiscal space to address the nation's pressing economic needs.
However, she warned against expanding national debt without adequate safeguards: "To prevent adding to the burden of existing debt, funds must be spent transparently and efficiently, with clear, measurable outcomes."
$2.77b pipeline includes LNG, banking reforms
During the summit, the Bangladeshi delegation held separate bilateral talks with World Bank Managing Director for Operations Anna Bjerde and South Asia Regional Vice President Joelle Buerli. Official accounts described the discussions on the 10 pipeline projects for FY27 as positive.
The government has sought $350 million in International Development Association (IDA) guarantees to facilitate long-term LNG imports at comparatively lower costs.
It has also requested $450 million for the Financial Sector Support Programme-2, aimed at reforms in the banking and broader financial sectors, and $300 million for an Emergency Support for Food Security project.
Three infrastructure projects have also been identified as priorities: Dhaka-Chattogram rail chord line, Dhaka-Chattogram expressway, and Dhaka Inner Circular Ring Road.
The government has also held preliminary discussions with the World Bank on financing an umbrella investment project to restore rivers and canals around Dhaka and tackle pollution.
How Bangladesh plans to use the additional $10b
Under the proposed RRIP framework, the government has formally sought $10 billion in additional financing over three years, beyond the World Bank's regular project support.
According to the finance ministry report, the proposed financing would be allocated across four broad areas.
The government plans to spend $4 billion on urgent imports, including energy and fertiliser, to meet immediate financing needs.
Another $1.5 billion would support enterprise trade and employment continuity, including assistance for micro, small and medium-sized enterprises.
A further $3 billion would go towards financial sector recovery and banking sector reforms, while the remaining $1.5 billion would be allocated to contingent, catalytic and co-financing instruments.
The report said Bangladesh and the World Bank had agreed to incorporate the RRIP framework into the country's next Country Partnership Framework.
It added that discussions at the annual meetings had covered the strategy for developing the proposed framework, alongside ongoing and pipeline projects financed by the World Bank.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, told TBS that Bangladesh's annual allocation under the World Bank's three-year country-based IDA programme had never exceeded $4.5 billion.
The additional $10 billion sought under the RRIP may therefore have to come through other World Bank financing channels. "It is too early to determine the sources and amounts of financing or the reform conditions that may be attached," he said.
He further said financing for major proposed projects, including a Dhaka-Chattogram rail corridor and expressways, would depend on their design and implementation capacity.
IMF stresses tax revenue, bank capital reforms
While in Bangkok, the delegation also held negotiations with International Monetary Fund (IMF) officials regarding Bangladesh's requested $4.5 billion loan package.
The IMF stressed the urgency of structural policy reforms, particularly boosting the nation's tax-to-GDP ratio and resolving severe capital shortfalls across the banking sector.
The finance minister acknowledged that the IMF facility will come with stringent performance criteria. "Some issues will be resolved through discussions and mutual understanding," he stated, noting that IMF staff-level teams will arrive in Dhaka over the next fortnight for further talks.
IFC, global financial institutions discuss investment
On the sidelines of the annual meetings, the Bangladesh delegation also met IFC officials to discuss reforms and recapitalisation in the banking and financial sectors, trade financing, and ways to increase private sector investment.
Meetings with global banks and other institutions also covered banking reforms, exchange rate flexibility and monetary policy.
A separate delegation led by Tanvir Shariar Gani, the prime minister's special assistant for investment and capital markets, held bilateral and multilateral meetings with representatives of Euroclear, Citi, Fitch Ratings, global and Asia-Pacific sovereign analytical teams, the Federal Reserve Bank of New York, HSBC, TCX, Clearstream Banking, Bank of America, JPMorgan and Google.
The discussions focused on Bangladesh's credit ratings, potential sovereign bond issuance, improving the investment climate, and measures to address macroeconomic challenges, according to the report.