Bangladesh signs $450m WB financing agreement for financial sector reforms

Bangladesh has signed a $450 million financing agreement with the World Bank to strengthen the country's financial sector safety net, enhance supervisory capacity and support restructuring of the banking sector.

The financing agreement under the 'Financial Sector Support Project II' was signed between the Government of Bangladesh and the International Development Association (IDA), the World Bank's concessional lending arm, on 30 October.

Economic Relations Division (ERD) Secretary Md Shahriar Kader Siddiky and World Bank Division Director for Bangladesh and Bhutan Jean Pesme signed the agreement on behalf of their respective sides.

The project will receive 328 million Special Drawing Rights (SDR) or equivalent to $450 million and will run from 1 July 2026, to 30 June 2031.

The Bangladesh Bank will implement the project under the supervision of the Financial Institutions Division (FID) of the Ministry of Finance.

The project aims to strengthen the financial sector safety net, improve the supervisory capacity of the financial sector authorities and support restructuring of the banking sector.

Under the financing terms, the loan carries an annual interest rate of 1.5% on the withdrawn credit balance. It also includes a maximum commitment fee of 0.50% per annum on the undisbursed financing balance.

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However, the World Bank has waived the commitment fee for Bangladesh for many years, including the current fiscal year, according to the ERD press release.

The financing has a maturity period of 25 years, including a five-year grace period.

The ERD said the World Bank remains Bangladesh's largest multilateral development partner, with its financing supporting a wide range of sectors, including economic and social development, institutional reforms, infrastructure development and energy sector advancement.

The latest financing agreement reflects continued cooperation between Bangladesh and the World Bank in strengthening the country's financial and institutional capacity.