World Bank supports infra development Bangladesh
Washington, United States of America – The World Bank approved today a US$50 million credit to support the Government of Bangladesh accelerate private sector-led growth by providing finance and building capacity for the private provision of infrastructure.
The Investment Promotion and Financing Facility Project seeks to increase competition and transparency in infrastructure finance through supporting private sector participation and market-based solutions. It will supplement the resources of Bangladesh’s financial markets to provide long-term finance for infrastructure projects beyond the capacity of local financial institutions.
The World Bank’s 2003 Investment Climate Assessment (ICA) in Bangladesh identified lack of access to finance, cost of finance, and poor infrastructure as primary obstacles to private sector development in Bangladesh. Bangladesh continues to have one of the lowest infrastructure performance indicators in the world. Erratic public sector services are imposing significant costs on the country and power shortages reduce industrial output by an estimated US$1 billion per year.
“Capital markets in Bangladesh are undeveloped and cannot effectively meet the financing needs of the infrastructure sector,” said Christine Wallich, World Bank Country Director for Bangladesh. “Increasing access to infrastructure services and improving their quality will be important factors in reducing poverty in Bangladesh.”
The project is designed around two main components:
– Infrastructure Development Lending Component: This component provides a funding mechanism that adds transparent levels of control and market-based incentives to the existing methodology for allocating public funds to priority infrastructure projects identified by the government and developed on the basis of public-private partnerships.
– Technical Assistance Component: This component will assist Bangladesh Bank in the implementation of the project by developing capacity in the financial markets, and, more broadly, will enhance the long-term sustainability of private infrastructure finance
The Facility will provide long-term financing to eligible financial institutions at a margin of 0.5 percent above the relevant government bond rate. Funds will be allocated to infrastructure projects endorsed by government.
The credit from the International Development Association (IDA), the World Bank’s concessionary arm, has 40 years to maturity with a 10-year grace period; it carries a service charge of 0.75 percent.