ADB Extends $744 Million to Bangladesh for Economic Recovery, Policy Reforms

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending $744 million in loans to Bangladesh to help the Government overcome the impact of the global economic crisis and implement public policy reforms.

ADB's Board of Directors today approved a loan of $500 million under the countercyclical support facility (CSF) and three loans totaling $244 million under the public expenditure support facility (PESF) for Bangladesh.

The $500 million CSF loan will support the Government's efforts to mitigate the worst effects of the global economic crisis in the short term and to continue its development programs.

The $244 million PESF loans will support government measures to introduce economic and social policy reforms essential for achieving higher and more inclusive long-term growth and strengthening social safety net programs.

"The CSF loan will provide crucial support to the Government as it acts to stimulate Bangladesh's economic recovery and push ahead with its social safety net programs to cushion the impact of the crisis on the poor and vulnerable while maintaining macroeconomic stability," said Kunio Senga, Director General of ADB's South Asia Department. "The PESF is equally vital to help the Government deliver key public policy reforms to improve service delivery, enhance the efficiency of social safety net programs, especially for the poorest and most vulnerable, including women, promote public-private partnerships and improve the investment climate, and strengthen management of scarce public resources."

Sound economic management has enabled Bangladesh to weather major external shocks and sustain its growth momentum, even if it has not been spared from the adverse effects of rising petroleum and commodity prices, and natural disasters such as floods and cyclones. The loans will contribute to the Government's efforts to achieve higher growth and improve living standards given the country's exposure to external shocks.

The loans follow a visit to Bangladesh in July by ADB President Haruhiko Kuroda, where he offered to provide additional ADB assistance to the Government to counter the impact of the global economic crisis and maintain its development programs to reduce poverty and promote growth. While Bangladesh has made significant progress in reducing poverty, an estimated 56 million people, or 40 percent of the population, still live below the poverty line.

The Countercyclical Support Facility, established in June 2009, supports ADB's developing member countries (DMCs) needing to increase fiscal spending to counter the global economic crisis. To be eligible to access the CSF, DMCs must be adversely affected by the global economic crisis, demonstrate sound macroeconomic policies, and have a countercyclical program in place.

Today's CSF approval for Bangladesh brings total CSF loans to $2.5 billion. Previous CSF loans have been approved for the Philippines, Kazakhstan, Viet Nam and Indonesia. The CSF loan has a five-year repayment term, with a three-year grace period, and will cost around 200 basis points over ADB's financing cost, pricing that reflects spreads prior to the onset of the global economic crisis.

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