Context:

Recently, the Asian Development Bank (ADB) and the World Bank have announced to provide a total loan assistance of more than $ 1.5 billion to Bangladesh.

Key points:

• The Asian Development Bank (ADB) has approved a total assistance of $ 900 million to Bangladesh, out of which $ 500 million is being given as policy-based assistance to strengthen the banking sector.

• Its objective is to improve governance, asset quality and overall stability in the banking system. This step will help bring transparency and accountability in Bangladesh's financial sector.

• Additionally, ADB has also provided loan assistance of $400 million for the second phase of the Climate-Resilient and Inclusive Development Program (CRIDP).

• The project aims to deal with the effects of climate change, reduce greenhouse gas emissions and promote inclusive economic growth.

• The World Bank has also approved a total assistance of $640 million for two important projects. One of these projects is related to improving gas supply, while the other aims to improve air quality.

Both these projects are linked to the objectives of Sustainable Development Goals (SDGs).

Why does Bangladesh need this financial assistance?

1. Pressure on foreign exchange reserves

Bangladesh's foreign exchange reserves have been continuously declining for the last few years. The main reason for this is—

• Increase in import bill, especially increase in import of fuel and food grains.

• No expected increase in exports and remittances (migrant income).

• Devaluation of local currency Taka against dollar.

In this situation, the country needed additional foreign currency for imports and debt repayment, which could be partially met with the help of ADB and World Bank.

2. Structural problems in the banking sector

Bangladesh's banking sector has several institutional weaknesses:

• Increasing NPAs (Non-Performing Assets) or bad loans.

• Ineffective governance in government banks and lack of transparency in loan disbursement.

• Lack of financial discipline.

To address these challenges, ADB has provided a policy-based loan of $500 million which is planned to improve the banking sector.

3. Deep impact of climate change

Bangladesh is a climate-sensitive country, which is badly affected by problems like sea-level rise, floods, cyclones and coastal erosion.

• Agriculture and rural life are most affected.

• There is a risk of displacement of millions of people.

In this context, ADB has provided assistance of $400 million for climate adaptation, sustainable development and inclusive infrastructure building.

4. Energy and environmental challenges

• Instability in gas supply and energy shortages in the industrial sector were hampering growth.

• Air pollution has increased to dangerous levels especially in cities like Dhaka.

To deal with these problems, the World Bank approved $640 million in aid for gas supply and air quality improvement projects.

About Asian Development Bank and World Bank-

The Asian Development Bank (ADB) was established in 1966, headquartered in Manila, Philippines. Its objective is to promote poverty alleviation, infrastructure development and sustainable development in the Asia-Pacific region.

The World Bank was established in 1944 and is headquartered in Washington D.C. This organization provides loans and grants globally in areas such as education, health, agriculture, energy and poverty alleviation.

Conclusion-

This assistance will also ease the pressure on Bangladesh's foreign exchange reserves to some extent, which has been under strain in recent years due to external debt and import dependence.