AfDB Approves $ 250 Million Loan for Bangladesh Economic Recovery Program


The Asian Development Bank on Friday approved a $ 250 million loan to support Bangladesh’s economic recovery from the Covid-19 pandemic.

This is the first sub-program of the $ 500 million sustainable economic stimulus program.

The goal of the Sustainable Economic Recovery Program is to facilitate a rapid and sustainable recovery from the COVID-19 pandemic, generate jobs and expand economic activities for micro-entrepreneurs and small businesses.

This will be pursued through policy reforms that will create fiscal space to increase public spending and support the recovery and growth of small and medium craft, micro, small and medium enterprises, a press release said.

The loan will support planned public investments by the government in education, health, social protection and infrastructure and help stimulate economic activities and economic recovery.

It is also aligned with the core goals of the country’s eighth five-year plan and supports Bangladesh’s aspiration to become an upper middle-income country by 2031.

“The fiscal space created under the program will allow the government to prioritize spending and large-scale investments in social and economic infrastructure,” said AfDB senior financial management specialist Srinivasan Janardanam.

“The program is expected to increase the efficiency of public investment management and create an enabling environment for access to credit, especially for the poor and vulnerable. Srinivasan added.

To promote fiscal sustainability, the program will help the government overcome two major constraints to public investment in critical physical and social infrastructure.

These are the poor mobilization of national resources and the inefficient use of public resources. The program aims to broaden the tax base, improve compliance and strengthen enforcement, streamline tax exemptions and modernize tax administration.

The Covid-19 pandemic has also severely affected micro-entrepreneurs and small businesses across the country.

Improving access to credit for CMSMEs will reduce borrowing costs, protect this important segment of the economy, support inclusive growth and absorb the demographic dividend.

The program will expand access to finance for women entrepreneurs, especially those who run CMSMEs, by introducing or modifying refinancing programs and credit guarantee programs with a section reserved for women entrepreneurs.

The program will also encourage more women-led start-ups by allocating 10% of new seed funding to them.

AfDB support coincides with the finalization of Bangladesh’s eighth five-year plan and the launch of the new AfDB Country Partnership Strategy for Bangladesh, 2021-2025.

The Policy Support Loan program reaffirms the AfDB’s commitment to the economy of Bangladesh. The AfDB provided a $ 500 million counter-cyclical support facility (pandemic response option) in 2020, towards immediate budget support to the economy following the Covid-19 pandemic to partially fund spending additional health, social and economic benefits of the government.


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