Document of The World Bank

FOR OFFICIAL USE ONLY

Report No. 41758-BD

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROGRAM DOCUMENT

FOR

PROPOSED SECOND ADDITIONAL FINANCING

IN THE AMOUNT OF SDR 62.9 MILLION

(US$ 100 MILLION EQUIVALENT)

TO

THE PEOPLE’S REPUBLIC OF BANGLADESH

FOR

THE FOURTH DEVELOPMENT SUPPORT CREDIT

December 20,2007

Poverty Reduction and Economic Management Bangladesh Country Management Unit South Asia Region

This document has a restricted distribution and may be used by recipients on ly in the performance o f their off icial duties. I ts contents may not otherwise be disclosed without W o r l d Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

ACC ADB A D P ATC BB BBBF BERC BJMC BOP BRAC BTMC C D M P

CERF CPP C P T U CTG DC DFID DMB DNA D S C DTI EC Eo1 ESCAP

FFW FY GDP GFDRR

GOB GR ICT IDA IDB IFRC IMF IPP

GOVERNMENT FISCAL YEAR July 1 - June 30

CURRENCY EQUIVALENTS Cur rency Unit = Bangladeshi Taka (Tk)

U S S l = Tk 68.60 (November 2007)

ACRONYMS AND ABBREVIATIONS

Anti-corruption Commission Asian Development Bank Annual Development Program Agreement o n Textiles and Clothing Bangladesh Bank Bangladesh Better Business Fo rum Bangladesh Energy Regulatory Commission Bangladesh Jute M i l l s Corporation Balance o f Payment Bangladesh Rural Advancement Committee Bangladesh Texti le M i l l s Corporation Comprehensive Disaster Management Program Central Emergency Relief Fund Cyclone Preparedness Program Central Procurement Technical Unit Caretaker Government District Commissioner Department for International Development Disaster Management Bureau Damage and Needs Assessment Development Support Credit Direct Trader Input Election Commission Expression o f Interest Economic and Social Commission for Asia and the Pacific Food for Work Fiscal Year Gross Domestic Product Global Fund for Disaster Reduction and Recovery Government o f Bangladesh Gratuitous Rel ie f Information and Communications Technology International Development Association Islamic Development Bank International Federation o f Red Cross International Monetary Fund Independent Power Producer

LCG LGED MOA M F I s M o F D M MDG MT MW NBR NCB NGO O&M

P A C PKSF PFM PRGF PRS REB RMG SDR SDF SF

SOE Tk

TR TSC UN UNDAC

UNEP UNRC

Local Consultative Group Local Government Engineering Department Min is t ry o f Agriculture Microfmance Institutions Min is t ry of Food and Disaster Management Mi l lennium Development Goal Metric T o n Mega Watt National Board o f Revenue Nationalized Commercial Bank N o n Governmental Organization Operations & Maintenance

Public Accounts Committee Pal l i Karma-Shahayak Foundation Public Financial Management Poverty Reduction Growth Facil ity Poverty Reduction Strategy Rural Electrif ication Board Ready Made Garment Special Drawing Right Social Development Foundation Supplemental Financing

State-Owned Enterprise Bangladesh Taka

Test Rel ie f Transitional Support Credit United Nations Uni ted Nations Disaster Assessment and Coordination Uni ted Nations Environment Programme Uni ted Nations Resident Coordinator

UP Un ion Parishad us Uni ted States VAT Value Added Tax VGF Vulnerable Group Feeding VRS Voluntary Retirement Scheme

Vice President: Country Director: X i a n Zhu, S A C B D

Sector Director: Ernest0 May, SASPF Sector Manager: I jaz Nabi, SASPF

Praful C. Patel, SARVP

Task Team Leaders: Zahid Hussain and Ambar Narayan, SASPR

FOR OFFICIAL USE ONLY

TABLE OF CONTENTS

PROGRAM SUMMARY .................................................................................................................................

I .

I1 .

I11 .

I V .

V .

VI .

VI1 .

THE PROPOSAL ................................................................................................................................. 1

THE NOVEMBER 2007 CYCLONE .................................................................................................. 2

RECENT DEVELOPMENTS .............................................................................................................. 3

CYCLONE IMPACT: SOCIAL & HUMAN DIMENSIONS ............................................................. 5

CYCLONE IMPACT: ECONOMIC DIMENSION ............................................................................. 7 A . INCOME AND WEALTH .............................................................................................................. 8 B . EXTERNAL SECTOR .................................................................................................................... 9 C . FISCAL IMPACT ............. .................................... .......................................................... 10 D . INFLATION AND MONETARY CONDITIONS ........................................................................ 11

RESPONSE TO THE CYCLONE ..................................................................................................... 11 RESPONSE OF DEVELOPMENT PARTNERS .............................................................................. 14

BANK’S CYCLONE ASSISTANCE STRATEGY ........................................................................... 15

VI11 . THE REFORM PROGRAM SUPPORTED THROUGH DSC IV: AN UPDATE ............................. 16 A . PROGRESS ON POVERTY AND SOCIAL DEVELOPMENT .................................................. 16 B . REFORM PROGRESS SINCE THE APPROVAL OF DSC IV ................................................... 17

I X .

X .

X I .

RATIONALE FOR PROPOSED SUPPLEMENTAL FINANCING ................................................ 21

IMPLEMENTATION ARRANGEMENTS ....................................................................................... 22 A . TERMS OF THE SUPPLEMENTAL FINANCING .................................................................... 22 B . FUNDS FLOW AND DISBURSEMENT ARRANGEMENT FOR THE SUPPLEMENTAL

FINANCING ................................................................................................................................. 22 C . ENVIRONMENTAL ISSUES ....................................................................................................... 23

BENEFITS AND RISKS .................................................................................................................... 23 A . BENEFITS .................................................................................................................................... 23 B . RISKS ............................................................................................................................................ 23

ANNEXES

ANNEX 1: GOVERNMENT PROGRAMS TO SUPPORT CONSUMPTION OF CYCLONE AFFECTED HOUSEHOLDS ................................................................................................... 25

ANNEX 2: BANGLADESH AT A GLANCE ............................................................................................ 29

MAP BAN33368

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .

TABLES

TABLE 1 : IMPACT OF 2007 CYCLONE BY DISTRICT ........................................................................... 2

TABLE 3: MAJOR CYCLONES IN BANGLADESH: A HISTORIC PERPECTIVE ............................... 6 TABLE 4: LOSSES SUFFERED BY CYCLONE AFFECTED HOUSEHOLDS & BUSINESSES ........... 9 TABLE 5: PRELIMINARY ESTIMATE OF ASSISTANCE REQUIRED FROM THE GOVT ............... 13 TABLE 6: CYCLONE ASSISTANCE COMMITTED BY DEVELOPMENT PARTNERS & OTHERS 15

TABLE 2: BANGLADESH: SELECTED ECONOMIC INDICATORS, FY03-07 ..................................... 4

STATISTICAL ANNEX

TABLE 1: CYCLONE DAMAGE REPORT .............................................................................................. 32 TABLE 2: BANGLADESH MACROECONOMIC INDICATORS ...... .... . . ...... . . . ..... ... . .. . .. . . . ... . ... . . . . . ... . . .. .. 33 TABLE 3: SUMMARY MACROECONOMIC INDICATORS ................................................................. 34 TABLE 4: TOTAL EXPENDITURE BY FUNCTIONhfINISTRY ............. ......................................... 35 TABLE 5: GOVERNMENT OF BANGLADESH FISCAL TRENDS ......... ......................................... 36

TABLE 7: BANGLADESH SOCIAL INDICATORS ................................................................................ 38 TABLE 8: BANGLADESH: KEY EXPOSURE INDICATORS ................................................................ 39 TABLE 9: BANGLADESH - PROGRESS TOWARD MDGS ..................................................... 40

TABLE 6: BANGLADESH - KEY ECONOMIC INDICATORS .............................................................. 37

Task Team

This document has been prepared by Zahid Hussain and Ambar Narayan, with contributions f rom Sakuntala Akmeemana, Zaidi Sattar, Raihan Elahi, Zafrul Islam, Qaiser Khan, Farria Naeem, Sanjana Zaman, Shah Nur Quayyum, and Suraiya Zannath, and assistance f rom Mehar Akhter Khan and Oxana Bricha.

Vinaya Swaroop (Lead Economist for Bangladesh) provided overall guidance to the Task Team. H e and Sandeep Mahajan helped in the preparation o f this document.

Lili Liu (Lead Economist, PRMED) was the peer reviewer for this operation.

PROGRAM SUMMARY

THE PEOPLE’S REPUBLIC OF BANGLADESH SECOND ADDITIONAL FINANCING

FOR THE FOURTH DEVELOPMENT SUPPORT CREDIT

Borrower: The People’s Republic o f Bangladesh

Implementing Agency: Ministry o f Finance

Beneficiaries: Ministry o f Finance

Amount: SDR 62.9 mil l ion (US$ 100 mill ion)

Terms: Standard IDA terms; 40-year maturity, including a 10-year grace period

Disbursements: SDR 62.9 mil l ion (US$ 100 mill ion) disbursed in a single tranche upon credit effectiveness.

Project ID: Pl lO l lO

i

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROPOSED SECOND ADDITIONAL FINANCING TO THE PEOPLE’S REPUBLIC OF BANGLADESH FOR THE

FOURTH DEVELOPMENT SUPPORT CREDIT

I. THE PROPOSAL

1. The Bangladeshi economy i s reeling under the impact o f three adverse external shocks occuning in quick succession during the last several months. These shocks could derail the good economic progress Bangladesh was malung in recent years. The f i rs t shock has been the unabated increase in international prices o f o i l and food o f which Bangladesh i s a net importer. The second shock came in the form o f severe floods during July-September 2007, which k i l led over a thousand people and wrecked havoc on the economy. The third and the most recent shock was the devastating cyclone that struck the country o n November 15,2007, causing significant loss o f l i f e and inf l ic t ing enormous social, human and economic costs.

2. Faced with this unusual and unanticipated situation, the Government o f Bangladesh (GOB) has appealed for urgent international support t o cope with the unremitting strain on the economy and the immediate rel ief needs o f nearly nine mi l l ion cyclone victims. Responding to that call, the second Supplemental Financing (SF2) to the Fourth Development Support Credit (DSC IV) i s being proposed for two reasons. First, to provide GOB with the fiscal space to undertake emergency spending without foregoing planned critical development expenditures. Second, to enable GOB to remain on track in implementing i t s policy and institutional reform agenda agreed under the framework o f DSC IV. SF2 will also help protect the flood rehabilitation expenditures supported by the f irst Supplemental Financing (SF1) to D S C IV (for an amount o f US$ 75 million), which was delivered to GOB in October 2007 in response to the devastating floods in July-September, 2007. Emergency spending would be critical to address short-term needs o f those affected by the cyclone-through programs such as cash or food assistance to households, grants and loans to help rebuild damaged homesteads and replace lost assets, assistance to farmers on agncultural inputs, and rehabilitation o f damaged infrastructure.

3. The proposed credit will help GOB continue along the path o f reforms needed to accelerate economic growth and poverty reduction. The Bank has supported the government’s pol icy and institutional reform program through a series o f multi-sectoral budget-support operations-Development Support Credits (DSCs).’ These credits have assisted Bangladesh’s reform efforts to (a) strengthen core governance functions, with emphasis on reforms in public procurement, budget formulation and execution, tax administration and public administration; and (b) improve the investment climate by maintaining macroeconomic stability, deepening domestic deregulation and trade liberalization, and strengthening the performances o f the banlung and energy sectors and state-owned enterprises (SOEs). T o help sustain the momentum of the reform program, the Bank i s working with the current Caretaker Government (CTG) on a wide range of pol icy and institutional reforms that can be supported by a Transitional Support Credit (TSC) as part o f i t s FY08 assistance program.’ Whi le the government

’ A total of US$900 million has been provided to GOB in the f o r m o f four budget-support operations. The first DSC was processed in 2003 and the last-a US$200 mi l l i on IDA credit-was approved by the Board in M a y 2007. The W o r l d Bank Group’s most recent Country Assistance Strategy, discussed by the Board in April 2006, aligns with the country’s Poverty Reduction Strategy. I t envisaged a series o f Poverty Reduction Support Credits to b e initiated in FY08 fol lowing general elections then scheduled for early 2007. Because o f the

2

1

remains committed to reforms, the repeated natural disasters can disrupt the momentum by creating pressures on the government budget and worsening the macroeconomic situation-a r i s k that the proposed supplemental financing will help mitigate.

11. THE NOVEMBER 2007 CYCLONE

4. Just as Bangladesh was beginning to emerge f rom the aftermath o f the floods, a Category-Four tropical cyclone (named Si&) struck i t s southern coastline o n November 15, 2007. With a 74-lalometer radius and wind speeds reaching 223 km/hour, i t k i l led nearly 4,000 people (with an additional 900 s t i l l reported missing) and affected the lives o f about 8.7 mi l l ion people in 30 out o f the 64 districts in the country. Had it not been for the country’s Cyclone Preparedness Program (CPP)-that allowed four days o f advance warnings at regular intervals, with messages delivered from house to house by 40,000 CPP volunteers-the death to l l would have been much higher. The economic losses were extensive, including destruction or damage to standing Aman rice crops, fisheries (particularly shrimp farms), forestry, livestock, housing, rural roads, embankments, and power distribution and transmission network. The beauty and biodiversity o f the Sunderbans, a Wor ld Natural Heritage site, has also been significantly damaged.

5. Bangladesh i s among the countries most vulnerable to natural disasters, which include recurrent floods, droughts, and cyclones. I t s southern part i s nestled in the Bay o f Bengal with a 710 km long coastal belt and an area o f about 37,000 sq. km. The coastal zone includes coastal p la in islands, tidal flats and offshore waters, and i s crisscrossed by a vast river network, a dynamic estuarine system, and a drainage basin. The coastal area i s roughly 32 percent o f the country’s geographical area and home to nearly 35 mi l l ion people (24 percent o f the total population). Poverty i s significantly higher in the coastal zone than in the rest o f the country. Barisal and Khulna divisions, which account for most o f the coastal area, have poverty rates o f 52 and 46 percent respectively, compared with 40 percent for the country as a whole.

T a b l e 1: I m D a c t o f 2007 Cvc lone bv distr ict Number o f People

Deaths affected Reported (million)

Population (million) Districts

4.93 2,944 3.7 Worst Affected Districts (4) Patuakhali, Pirojpur (Barisal)

Bagerhat (Khulna division); Borguna,

Barisal, Bhola, Jhalokathi (Barisal division); Khulna, Satkhira (Khulna); Shariatpur, Faridpur, Gopalganj, Madaripur (Dhaka)

Chandpur, Chittagong, Comilla, Cox’s Bazar, Dhaka, Feni, Jessore, Kishorganj,

Munshiganj, Narayanganj, Narail, Narshingdi, Noakhali, and Rajbari

14.05 333 3.92 Badly Affected Districts ( 9)

Affected Laxmipur, Manikgan, Moulvibazar, 43.96 70 1.31 Districts (17)

Source: DMB, Situation Report, December 15,2007

changed political situation and the new election schedule, it has been decided that the Bank would support the country’s ongoing reforms during the transition period through a one-off budget support in the form o f a Transitional Support Credit.

2

6. Many o f the worst or badly affected districts were characterized by high consumption poverty and lagging social indicators in comparison with the rest o f the country even before the cyclone. All four worst-affected districts (where more than 75 percent o f the population has been af fectedkBorguna, Bagerhat, Patuakhali and Pirojpur-are in the poorest divisions o f Barisal and Khulna (see Table 1 above); in fact, all districts in Barisal division are in the “worst” or “badly” affected category. The socio- economic characteristics o f the four worst-affected districts indicate high levels o f deprivation pr ior t o the cyclone. Per capita consumption o f households in these four districts i s almost 15 percent below the national average; 25 percent of households have electricity connections compared to the national average o f 44 percent; 11 percent l ive in houses with straw r o o f compared to 8 percent nationally (Household Income and Expenditure Survey/HlES, 2005); and 53 percent have access to tap or tubewell dnnking water compared to 83 percent nationally (Census 2001).

7. A crisis situation has developed in the cyclone-affected areas, which necessitates massive rel ief work and post-cyclone rehabilitation. Ponds and other sources o f dnnkmg water have become polluted, exposing area residents to the threat o f disease. The Government, in partnership with development partners and NGOs, i s putting in place a robust rescue, relief, and rehabilitation effort. As the immediate needs are met, the focus o f the government and development partners would shift towards a longer term strategy that facilitates economic recovery in the affected areas and improves systems to build resilience in the country to mitigate the impact o f such shocks in the future. GOB has a comprehensive disaster management strategy which could be further refined on the basis o f lessons learnt.3 Complementing the ongoing efforts o f the government, a Damage and Needs Assessment (DNA) i s being prepared by the Wor ld Bank in partnership with other development partners, which will provide more information o n improving existing disaster prevention and management systems.

8. The proposed SF2 credit will help GOB meet the immediate short-term needs by reducing the fiscal pressure on the FY08 budget arising f rom unforeseen cyclone-related spending, including the need to provide large amounts o f cash and food aid (including rice) to address the consumption needs o f the affected population. GOB has already redirected some o f i t s budgetary resources for cyclone rescue and relief. Concessionary financing from development partners in support o f the additional resource requirement would be critical in this hour o f need. The recent polit ical and economic developments in the country, summarized in the next section, provide the context for the proposed operation.

111. RECENT DEVELOPMENTS

9. Political developments. A protracted period o f political unrest late last year caused the parliamentary elections to be postponed in January. The current CTG took office o n January 11, 2007 after a state o f emergency was declared. The CTG-a nonpartisan government established under Bangladesh’s Constitution to assist and oversee the conduct o f free, fair, and credible elections-has pursued this central mandate with vigor, engaging in a broad agenda o f institutional reforms. The CTG i s being assisted by the country’s defense forces in maintaining law and order and preparing for elections. At the centre o f its institutional reform agenda i s a robust anticorruption effort, which has strong public support. On July 15, 2007, the Election Commission (EC) released an electoral roadmap, with the next parliamentary election scheduled for the end o f 2008. The timetable for the parliamentary elections remains on schedule. The preparation o f a digt ized voter l i s t i s proceeding well. Since September, the E C has been engaging in a dialogue with the 15 main polit ical parties about reforms to the electoral laws, a process now almost complete.

A strategy o n disaster management was put together by GOB in 2003, which l a id out a Comprehensive Disaster Management Program. The response to the 2007 f lood emergency and to the November cyclone (particularly the significant reduction in loss o f human lives as compared to previous disasters) reflects these improvements.

10. Whi le progress on the electoral roadmap i s o n track, there remains some uncertainty about the future polit ical landscape. Intra-party polit ical reforms have stagnated. The two leaders of the main polit ical parties, the BNP and Awami League, remain highly influential over their respective parties despite being in custody on corruption-related charges. The C T G also has many powerful detractors, including those who have lost due to the anti-corruption drive. High and rising food prices remain a central public concern.

1 1. Economic Developments. Despite several development constraining factors-low natural resource and s h l l base, high population density, severe vulnerability to floods and cyclones-Bangladesh has continued its steady economic and social progress. The poverty rate declined by an average o f nearly 2 percentage points annually, f rom 49 percent o f the population in 2000 to 40 percent in 2005, mainly o n the back o f strong and stable economic growth. Annual Gross Domestic Product (GDP) growth has accelerated by 1 percentage point every decade, averagmg over 6 percent a year during FY2003-07. Progress toward several other MDGs, as elaborated in paragraph 46 below, has also been impressive.

12. The economy grew by 6.6 percent in FY06, the highest rate in over two decades, and, despite prolonged polit ical turmoil, by 6.2 percent in FY07. This was the fourth consecutive year o f at least 6 percent growth (see Table 2 below). Growth has been broad-based, shared across al l major economic sectors and benefiting f rom robust demand in both domestic and export markets. The manufacturing sector grew at an impressive 11.4 percent in FY07, its strongest performance in over a decade. Garment exports, which account for about 75 percent o f manufacturing exports, grew by 11.6 percent (in nominal dollar terms) in FY07 despite enhanced competition f rom other low-cost producers after the dismantling o f the Agreement on Textiles and Clothing (ATC) on January 1, 2005. Construction, fueled by strong manufacturing growth as wel l as large remittance inflows, grew by an estimated 7.1 percent, maintaining i t s 7-8 percent growth record since FY94. Remittances through formal channels were recorded at nearly US$ 6 billion, which i s about 9 percent o f GDP and ha l f o f gross merchandize exports, compared with US$ 1.9 b i l l ion in FYO1.

Table 2: Bangladesh: Selected Economic Indicators, FY03-07 (in percent o f GDP, unless otherwise indicated)

2002103 2003104 2004105 2005106 2006107 Real GDP growth ( percent change) 5.3 6.3 6.0 6.6 6.2

Per capita GDP Atlas method (US$) 395.1 418.0 446.4 469.1 487.7

Consumer prices 4.4 5.8 6.5 7.2 7.2 (percent change, 12 month average)

Overall Budget balance (before grants) -3.4 -3.1 -3.3 -3.2 -3.2 Overall Budget balance (after grants) -2.4 -2.6 -3.0 -2.8 -3.1

Revenues (incl. grants) Tax revenues

11.3 10.7 10.8 11.1 11.0 8.3 8.2 8.5 8.5 8.3

Expenditures 13.7 13.3 13.8 13.9 14.1 Current account (excluding off icial 0.1 0.2 -1 .o 0.8 0.7 transfers) Gross reserves in US$ mil l ions 2,471.0 2,714.0 2,930.0 3,471.0 5,001.0 (in months o f imports) (2.9) (2.8) (2.5) (2.7) (3.2)

Source: Government o f Bangladesh, IMF.

4

13. The fiscal, monetary, and external indicators remained mostly within the thresholds o f the macroeconomic framework agreed with the IMF under the Poverty Reduction Grant Facil ity (PRGF) program that ended in June 2007. However, there are n o w emerging stresses. An area o f increasing concern i s inflation. Year-on-year consumer price index inflation reached a nine-year high o f 10 percent in August-October, 2007. A large part of the inflation i s due to rising food prices, aggravated by the floods and the cyclone. Non-food inflation has also been rising, though it has been somewhat contained since July. By providing cash foreign exchange resources, this operation will augment the government's abil ity t o ameliorate food shortages (by importing food) and thus contain food price increases.

Macroeconomic stability has been broadly maintained.

14. After persistently falling short o f targets for several years, revenue mobilization seems to have turned a comer this year with NBR tax revenues growing at 22.5 percent, with income tax collection up 44.7 percent and customs revenue up 19 percent for July-November 2007-all considerably above targets. Non-NBR tax revenue and non-tax revenue have also done well, growing by about 20 percent and 38 percent respectively in July-August 2007 relative to the corresponding period o f the previous year. As elaborated later in the document, the budget i s under considerable stress because o f a sequence of external shocks. In response to the various additional spending pressures, the government i s planning austerity measures, by delaying implementation o f low-priority Annual Development Program (ADP) projects.

15. A summer of floods. Devastating floods struck Bangladesh in the months o f July/August and again in September 2007. The floods directly affected over 13 mi l l ion people in 46 districts, caused over 1,000 deaths, and damaged over 2 mi l l ion acres o f agncultural land, infrastructure, social and educational facilities, and private assets, including housing, crops, livestock, and fisheries. The estimated economic impact o f the floods was about U S $ 1.1 b i l l i ~ n . ~

16. The CTG's flood response efforts placed severe pressure on i t s FY08 budget. The Tk 8 b i l l ion (0.2 percent o f GDP) originally budgeted for natural disaster response proved much smaller than the fiscal impact o f the floods. This put at risk the development spending priorities and overall macroeconomic stability. T o help cope with the situation, the Bank provided a US$ 75 mi l l ion Supplemental Financing to D S C IV. Subsequently, a US$ 122.2 mi l l ion Flood Restoration and Recovery Assistance Program have been prepared (with a Board date on January 10, 2008). Barely one month after the disbursement o f SFI, nature struck again in the form o f Sidr. The full impact o f the cyclone will be h o w n after the ongoing needs assessment for restoration and rehabilitation i s completed. Meanwhile, additional budget spending in FY08 to meet the more immediate basic needs o f cyclone victims has been estimated by the Ministry o f Finance to be around US$377 mi l l ion (see paragraph 35 below for details).

IV. CYCLONE IMPACT: SOCIAL & HUMAN DIMENSIONS

17. Preliminary estimates o f the damages f rom Sidr indicate that loss o f l i fe has been markedly less than that f rom the last two major cyclones (see Table 3). Human suffering-including damage to livestock, housing and crops-is nevertheless immense and o f a scale similar t o that f rom earlier cyclones (Table 3). Mi l l ions o f people lay trapped in isolated offshore islands and coastal belts, without access to food, shelter and drinkmg water, and amidst decomposing bodies and ruined infrastructure. Immediately after the cyclone, government officials, NGOs, social workers, and political parties had l imi ted success in

Estimates include output loss from agriculture, livestock and fisheries sectors. Output losses for transport, industry and wholesale and retail trade were not estimated due to lack o f data. These losses were estimated at about 20% o f total loss during 2004 floods. By that measure, total losses during 2007 floods could be about US$ I .4 billion. Source: World Bank, 2007 Flood Restoration and Recovery Assistance Program, December, 2007.

5

reaching the affected areas, especially the remote offshore islands due to disruptions in the communication network.

Table 3: M a j o r Cyclones in Bangladesh: A Historic Perspective

1970 1985 1991 2007 Date M a x speed (km/hour) Average surge height (meter) Number o f people affected (millions) Deaths Number o f homes damaged (millions) Roads damaged (kms) Number o f livestock k i l led Crops damaged (mil l ion hectares) Rice production losses (mi l l ion tons) Losses to fisheries (mil l ion US$)

12Nov. 25May 24 1 154 10 4 4.7 1.8

500,000 11,069 0.4 0.1

74 125,000 135,033

0.1

29April 225 6.4 10

138,000 0.7

2,350 682,000

0.4 0.2

193.0

15 Nov. 223 7

8.9 3,347

1.5 8,075

1,778,507 1.4 1.3 10.7

Total losses (in billion US$ at current prices) 0.1 1.4 2.2* Source: Historical numbers are f rom Statistical Yearbook o f Bangladesh, BBS; Ericksen, N J et al. Socio Economic Implications o f Climate Change. Bangladesh Unnayan Parishad, Br ie f ing Document No . 4. ;Khalil, Gazi Md. (1993) The Catastrophic Cyclone o f April 199 1 : I t s Impact o n the Economy o f Bangladesh, Natural Hazards, Vol 8, pp 263-281; U N E P State o f the Environment Reporting, 2001; Uni ted Nations ESCAP; Wikipedia; 2007 numbers are mostly f r o m Ministry o f Food and Disaster Management, Bangladesh Super Cyclone ‘Sidr’ 2007, Dec. 12,2007. *Ministry o f Finance, Dec. 12,2007

18. All the statistics o n damage and losses reported here are preliminary, based on estimates available so far f rom the government, which can change over time as more information emerges from the ground. More accurate estimates o f the social and human costs f rom the cyclone, as wel l as the medium-term impact on macroeconomic indicators, livelihoods and poverty will become available once the aforementioned DNA i s completed.’ The paragraphs below summarize the available information o n social and human costs from Sidr; the next section does the same for the economic costs.

Livelihoods. Fisheries, agnculture, livestock, poultry, collection o f forest products, small businesses and trades, micro-enterprises, and wage labor are the major l ivelihood activities in the coastal areas. Income generation has been severely affected in al l these sectors, but especially for fishing communities, farmers, traders, and small enterprises. Several hundred thousand individuals have been displaced and just as many have lost their jobs or businesses. Rickshaw pullers, market traders and day laborers engaged in seasonal employment and other intermittent activities for subsistence have also visibly suffered.

Health. Many healthcare centers have been seriously damaged. Hunger and disease have become the order o f the day in the affected areas. Unsafe water and unsanitary conditions created by the cyclone have vastly increased the risk o f disease (diarrhea, s lun diseases, eye infection in particular) outbreaks. Malnutrition i s affecting infants, young children, and pregnant and lactating women. An estimated 52,810 people have been injured and are in need o f medical supplies and treatment. Fortunately, most hospitals and clinics were able to preserve vaccines through the use o f generators,

’ This should build on the existing medium to long-term strategy on disaster management approved by GOB in 2003. For more information, please see http://www.cdmp.org.bcU

6

cold boxes, and other means. The pre-positioning of essential drugs and medicines including water purif ication tablets greatly aided preparedness and response.

Water and sanitation. A serious lack o f safe water supply and latrines has emerged. One estimate for some o f the worst-affected areas puts the percentage of slab latrines damaged or destroyed as high as 70 percent.6 Access to communal facilities i s l imi ted and most cyclone shelters do not have adequate sanitation facilities. Saline water, carcasses, and debris have contaminated drinking water sources in many communities. Power outages have affected water supplies in areas with piped water. The affected population i s vulnerable to outbreaks o f diarrhea and other hygiene related diseases. Fortunately, it seems that many o f the contaminated wells can become operational with a few days o f pumping and decontamination.

Housing. Widespread damage to houses has been the most visible asset loss associated with Sidr. Preliminary estimates are that nearly 1.5 mi l l ion houses have been at least partially damaged, with 38 percent o f those fully destroyed. In many upazilas (sub-districts), more than ha l f o f the thatched-roof homes, inhabited by the extreme poor, have been completely destroyed. Many o f the affected households have also lost essential household items. Although community reconstruction and reparation have started in some places, such activities are inadequate to meet the needs o f the poor. Shelter materials such as corrugated i ron sheets, wood, and other construction materials are badly needed to help the poor rebuild their houses.

Education. The cyclone has fully or partially damaged nearly 15,000 educational institutions. The damage and loss include physical infrastructure, classroom supplies, and learning materials. Schools that remain open are reportedly witnessing l o w attendance rates.

Infrastructure. A number o f roads, bridges, culverts and embankments were damaged. These include 1,741 km o f fully damaged and 5,767 km partially damaged roads, 1,687 fully or partially damaged bridge and culverts, and 1,866 km o f fully and partially damaged embankments.’

Power. The power supply system was severely hit. The national power grid tripped depriving the entire nation o f electricity for almost 24 hours. Combining the urban and rural electricity distribution networks, a total o f about 2,740 km o f circuit wires were disconnected, about 37,500 electric poles were either broken or tilted, 32 towers including r iver crossings were disrupted, about 87 distribution Sub-stations were shut down and 38,539 meters were broken. The damage to the power sector i s estimated at about U S $ 17 mill ion. More than 85 percent o f these damages are in the rural areas. The utilities have now restored electricity supply in most areas. Areas where river crossing towers got disrupted will take some more time for renovation.

V. CYCLONE IMPACT: ECONOMIC DIMENSION

19. Prior to the 2007 floods and cyclone, the Bangladeshi economy was poised to grow in the range o f 6.5 to 7 percent in FY08, propelled by a recovery in agriculture after a weak performance last year. Buoyant garment exports and remittance flows as wel l as the possibility o f higher aid and private f lows were expected to sustain investment, including in power infrastructure. The year also began with a comfortable foreign exchange reserve position o f more than U S $ 5 bi l l ion (equivalent to 3.2 months o f imports) and this level was sustained even after back-to-back floods in the July-September period. Amidst this generally positive economic environment, one concern was inflation, which had been aggravated by rising international prices o f essential food items such as rice, wheat and edible oil. This

Cyclone Sidr, United Nations Rapid In i t ia l Assessment Report with a focus o n nine worst affected districts, undated. Disaster Management Bureau Situation Report, December 4,2007. 7

7

section summarizes the movement o f key economic variables and how these may be affected by the cyclone.

A. Income and wealth

20. Output losses in agriculture and small trade will directly affect the economy’s growth. Indirect effects on economic growth are expected to arise f rom the damage caused to infrastructure and stocks o f r a w and intermediate materials, and inundation o f agricultural land with saline water. In the immediate aftermath o f the cyclone, its adverse impact i s l ikely to occur in the following sectors:

Agricultural production. More than 2.4 mi l l ion acres o f cropland i s reportedly damaged, destroying almost one-quarter o f the ready-to-harvest crops. Aman rice bore the brunt o f the damage, with a loss o f about 1.3 mi l l ion tons o f production, which i s roughly 10 percent o f the FY08 production target. Media reports suggest extensive damage to Rabi crop as well. Most o f the affected areas have a single annual harvest during the period o f November to January, which made the timing o f the cyclone particularly harmful. The severe short-term damage to standing crops (particularly rice) by the cyclone has necessitated emergency imports o f rice. For the medium term, i t will be important to identify the potential impact o f the cyclone on future rice production in affected and unaffected areas alike, given the potential impact o f rice production on livelihoods, incomes and import needs.

Livestock. The government estimates that nearly 1.8 mi l l ion livestock (cattle, buffalos, goats and poultry) have been killed; the large majority o f which were cattle. For the poor th i s represents loss o f a critical household asset and associated wealth and income.*

Fisheries. The cyclone washed away most o f the shnmp enclosures, hatcheries, and processing plants. December-January i s the main fresh-water shrimp harvesting period. M u c h o f that production has been lost as saline water entered fresh water zones during the cyclone. Total loss to fisheries i s tentatively estimated at Tk 738 mi l l ion (close to US$ 11 million), or 4.3 percent o f value added in the fisheries sector in FY07.

Infrastructure. There has been damage to transport and communication networks. Rural roads and embankments protecting such roads have suffered some damage. The coastal and inland waterways transport infrastructure, including femes and associated landing and loading areas, have also suffered. Electricity and telecom infrastructures have been widely disrupted. The damages to the electricity network put the ice factories and the f i sh processing industries out o f operation and added to the losses suffered by farmers and fisheries.

21. Preliminary estimates indicate output losses amounting to nearly U S $ 4 4 5 mill ion, or 0.7 percent o f GDP on account o f Sidr (see Table 4). WealtWasset losses suffered by households and businesses are estimated at around Tk 44.5 b i l l ion (0.9 percent o f GDP) or about U S $ 645 mi l l ion. Crops dominate output losses, while housing and private timber trees dominate the asset losses.

22. Likely poverty impact. Natural disasters l ike cyclones cause immediate impoverishment by wiping out assets and employment opportunities, and increase longer-term economic vulnerability. The immense loss o f private assets-housing stock, durable household goods and livestock-would have an immediate and significant impact on the income, consumption and living conditions o f the poor. Some signs o f the short-term impact are already emerging in the Sidr-affected areas. The damages to food stock and crop production poses a r i sk o f food shortages and are l ikely to exacerbate food price inflation,

Loss o f livestock takes away the most tangible collateral o f the poor, adversely affecting their access to credit. Media reports show instances o f Si&-affected families having to resort to high-interest loans (interest rates as h igh as 15 to 20 percent per month) and ultra poor households to commit their labor at greatly reduced wage rates.

8

already at record high levels prior to the cyc10ne.~ The abil ity to import foodgrain will be critical to reduce this risk; and rel ief programs that address the immediate needs o f the affected population-such as cash grants and food aid-have a crucial ro le in protecting the affected population against deprivation.

Table 4: Losses Suffered by Cyclone Affected Households & Businesses* Loss (in million Taka) (in million US%) (i) Output

Crops 29,933 434

Total output loss 30,671 445

Livestock 5,334 77 Private timber trees 16,261 236 Homestead trees 2,604 38 Housing 20,3 13 294

Total asset loss 44,512 645 * Losses in other private sectors are estimated to be l o w and, hence, not reported here. Source: Estimates by Wor ld Bank staff based o n DMB data o n damages as o f Dec 12,2007.

Fisheries 738 10.7

(ii) Asset

23. In addition, there i s considerable r i s k o f long-term poverty impact of such a shock due to a number o f different reasons. Severe shocks often compel the vulnerable to cope with immediate needs by selling remaining productive assets, accumulating high-interest loans, and removing children from school, a l l o f which adversely affect their long-term economic potential. Evidence f rom the 199 1 cyclone shows borrowing f rom informal sources protected the consumption o f many poor but also lef t them highly indebted. Social protection programs l ike cash grant and food aid can play an important role, by reducing the need for costly coping strategies among the affected that can lead to long-term poverty traps. The risk of long-term poverty impact i s also exacerbated by the very nature o f cyclone damage, which has not only severely affected the standing crop but may also depress yields f rom h t u r e crop(s) in the affected areas. Given these risks, assistance for inputs and asset replacement to farmers will be critical in reducing the risk o f increased chronic poverty in the cyclone-affected areas. Furthermore, long-term mitigation strategies that improve the economic resilience o f vulnerable populations (through mechanisms l ike insurance, for example) can be beneficial, given that repeated shocks l ike floods and cyclones can households in a vicious cycle o f asset loss, indebtedness, loss o f productivity and poverty.

B. External sector

24. The cyclone will increase the country's import bill and hurt shrimp exports. In addition to emergency food imports, post cyclone rel ief and rehabilitation would involve importing construction materials (corrugated i ron sheets, cement, and steel) to repair damaged houses, road links, embankments, schools, and health and sanitation facilities. Replenishing the 1 mi l l ion tons o f Aman production loss alone could cost about US$ 350 mi l l ion o f additional rice imports.'o Exports o f frozen food, the second largest export category, are also l ikely to suffer, with some adverse impact on the balance o f payments (BOP).

25. The BOP position prior to the cyclone was reasonably comfortable despite some emerging stresses. Trade deficit widened to US$ 1.1 b i l l ion in July-September 2007, compared with US$ 361 mi l l ion deficit in July-September, 2006, as merchandize exports declined by 6 percent and import payments increased by 17.5 percent. Garment exports declined by 7.8 percent in the first quarter o f F Y 0 8

Retail price o f coarse rice in Dhaka has increased by 6 percent as o f December 3 relative to i t s pre-cyclone level. Assuming US$350 per ton international price for rice. lo

9

reflecting fewer import orders received during the period o f polit ical instability in November-December 2006, and exacerbated by labor unrest in the RMG sector and unusually warm winter in Europe that hurt knitwear exports. The widening o f trade deficit was offset by continued strong growth in remittances- 22 percent higher in the f irst five months o f FY08 relative to the corresponding period o f the previous year. As a result, the foreign exchange reserves remained above US$5 b i l l ion (equivalent t o 3.2 months of imports) through mid-December and the exchange rate stayed relatively stable. The pressure arising from the emergency import o f food, agricultural inputs, and construction materials are l ikely to be cushioned by the expected additional external assistance on account o f the cyclone and f lood and cyclone- induced increase in remittances." All in all, the impact of cyclone on BOP i s unlikely to be substantial, particularly if the required external assistance on concessional terms materializes.

C. Fiscal impact

26. The fiscal impact o f the cyclone i s l ikely to be sizable. The rel ief effort, expansion in food- assisted safety nets, l ivelihood restoration assistance, repairs to public property, and the impact o f the cyclone on economic growth are al l l ikely to put pressure o n both the revenue and expenditure sides o f the budget.

27. The expenditure needs are multi-dimensional. The original FY08 target for food distribution through the public food distribution system was 2.2 mi l l ion tons, which will be revised upward to accommodate additional f lood and cyclone relief needs. The Ministry o f Agriculture (MOA) i s preparing an extensive agricultural rehabilitation program for the Sidr-affected districts, under which seeds and fertilizers would be distributed free o f cost among the Sidr-affected farmers for the upcoming Boro season. The MOA has also undertaken an initiative to facilitate large-scale cultivation o f pulses in the cyclone-hit coastal districts o f Barguna, Bhola, and Patuakhaly, where Boro crop i s not usually grown. In addition, farmers would need assistance with the health o f their surviving cattle, many o f whom are suffering f rom malnutrition, in the form o f essential veterinary medicines and vaccines. Assistance for procurement o f housing materials, food and other essentials such as drugs and medicines and support for reviving livelihoods will further add to budgetary expenditures.

28. Given these needs, revenue (current) expenditure i s l ikely to overshoot the original FY08 budget target. The provision for unforeseen expenditures in the FY08 Revenue Budget and the Food Account has already been significantly exhausted by the floods. There may s t i l l be some room for redirecting expenditures f rom the ADP toward the repair o f damaged infrastructure. As it is, ADP implementation has suffered a severe b low due to the floods, with the implementation rate o f only 7.5 percent in the first quarter, compared with 10.7 percent in the f i rs t quarter o f FY07.

29. The FY08 central government budget deficit i s l ikely to overshoot the original target o f 4.5 percent o f GDP, by a projected 0.9 percentage point, out o f which cyclone-related additional expenditures account for around 0.5 percentage points.'* Lack o f pass-through o f international prices o f o i l and fertilizer has created pressure for providing budget support t o energy and chemical SOEs. Damage f rom floods has already affected the implementation o f the FY08 budget. Spending on flood rel ief and

US$375 m i l l i on i s the estimate o f the Bangladesh Bank. Source: Finance Secretary's presentation o n Sidr at the Local Consultative Group (LCG) meeting o n December 12,2007. The projected F Y 0 8 budget deficit without adding the additional expenditure arising f r o m the three shocks and assuming 80 percent uti l ization o f programmed A D P expenditure i s 3.5 percent o f GDP. T o t h s , the absence o f pass-through o f increased international prices (o i l and fertilizer) adds 1 percentage point (the amount to be provided through the central government budget in FY08), f lood expenditure another 0.4 percentage points and cyclone expenditure 0.5 percentage points, increasing the deficit projection for F Y 0 8 t o about 5.4 percent o f GDP.

11

10

rehabilitation amounted to Tk 20.6 b i l l ion by mid-November and was financed by reallocation o f h n d s originally earmarked for operations and maintenance and social safety nets, cuts in non-priority development projects and external budget support. The challenge o f containing the FYO8 budget deficit within the post-flood target will be formidable, notwithstanding the 22.5 percent growth in tax revenue collection by the National Board o f Revenue (NBR) achieved during July-November, 2007, relative to July-November, 2006. There i s an urgent need to tackle the fiscal situation by continuing to strengthen the nation-wide tax registration h v e , tax administration and enforcement, cutting non-priority development projects further and mobil izing additional foreign aid.

D. Inflation and monetary conditions

30. Inflation, already o n the rise in recent years, has been exacerbated by the floods and the cyclone. Inflation reached a nine-year high o f 10 percent (year-on-year) in August-October, 2007, driven mainly by food inflation, which remained over 11 percent (year-on-year). Non-food inflation was lower at around 7.5 percent (year-on-year). Rice, edible oil, and wheat were the major sources o f food inflation in both rural and urban areas. Over the longer term, inflation has risen due to international commodity price increases and domestic monetary accommodation o f these price increases. Also, these price movements were compounded by short-term domestic supply shocks such as relatively poor crop harvests last year and the drives against corruption, adulteration and hoarding. The damage to crops and transport infrastructure caused by floods and cyclone would also exacerbate inflationary pressures.

3 1. Containing inflation would require a cautious monetary pol icy stance and greater fiscal prudence. Most urgent policy attention i s needed for the large financial losses o f the SOEs, the financing o f which fuels inflation. Adjustment o f administered prices o f fuel, gas, electricity and fertilizer i s long overdue and SOEs are counting losses in billions o f takas every month as a result. SOE losses in FY08 on account o f under-pricing o f diesel, urea, power, and gas are projected at nearly Tk 112 b i l l ion (US$1.6 billion).

32. The banking system has Tk 140 b i l l ion in surplus liquidity (equivalent to 3 percent o f GDP),13 reflecting monetary hangover f rom past surges in money supply and dampened demand for money by the private sector in recent months. After declining f rom 22.3 percent in December 2006 to 15.7 percent in August this year, monetary (M2) growth rose to 15.9 percent in September, reflecting sharp increases in net foreign assets and credit to the public sector, both central government and the SOEs. Growth o f credit t o the private sector declined from 19.4 percent in December 2006 to 15.1 percent in June 2007 before rising to 15.9 percent in August-September, 2007, as nominal lending rates fell marginally f rom 12.75 percent in June to 12.57 percent in September. Monetary growth declined to 14.2 percent in October due to decline in growth o f both net foreign assets as well as net domestic assets. However, growth in credit t o private sector increased to 16.3 percent.

VI. RESPONSE TO THE CYCLONE

33. The Government’s response to the cyclone has been swift and robust-both in mitigating i ts effects and coping with i t s aftermath. Avai l ing o f the disaster preparedness programs in place, the CTG opened 2,168 cyclone shelters, which accommodated at least 1.5 mi l l ion people evacuated f rom the vulnerable areas of the coastal districts. In the aftermath o f the cyclone, the Government has deployed members o f the defense forces, boats and helicopters for rescue and rel ief activities, allocated funds f rom the Chief Adviser’s Relief and Welfare Fund for Gratuitous Relief and house building, and provided rice, medicines, water purification tablets, blankets, tents and corrugated i ron sheets to the cyclone victims. The CTG’s cyclone response strategy has three components:

l3 As o f October 25,2007

11

Immediate, short-run (f i rst month) activities include search and rescue, restoration of emergency services, provision o f emergency rel ief and treatment facilities, and damage assessments.

Medium-term (three to four months). House building assistance; continued food support; reopening damaged educational institutions; preventing outburst o f epidemics; sinking tube wells; cleaning salinated ponds; repairing roads, culverts and bridges; restoring electricity networks; providing mobile electricity generators to supply electricity to local hospitals, drinkmg water pumps, ice factories and fish processing zones.

Long-term (beyond four months). Rehabilitation o f the Sundarbans; reconstruction o f coastal embankments, polders and sluice gates; coastal afforestation; improving early warning systems; and expansion o f CPP operations.

34. A preliminary program o f assistance has been prepared by the government, which includes rel ief activities, food imports, assistance to farmers for agricultural inputs, reconstruction and repair o f damaged structures, and infrastructure rehabilitation. T h e program also includes measures to provide safety net support to households and revive livelihoods, through cash grants and/or food assistance to maintain consumption levels as wel l as soft loans and grants to help replace lost assets.I4 For cyclone relief, the Government i s primarily relying on two pre-existing programs: Gratuitous Rel ief (GR) and Vulnerable Group Feeding (VGF), both o f which are implemented through local governments (Union Parishads or UPS). The Government i s also providing funds to Nationalized Commercial Banks (NCBs) and Microfinance Institutions (MFIs) to enable them to provide refinancing options for their clients in the cyclone affected areas. Some significant initiatives o f the preliminary assistance program are listed below. Table 5 (see below) provides details on expenditure impact o f the program and the sources o f financing envisaged.

A new VGFprogram, from December I, in 790 unions of the 12 Sidr-affected districts (see Annex-1). VGF i s a means-tested program designed to provide additional food resources in a period o f distress to a selected number o f women who are identified by UPS. T o address the needs o f cyclone-affected households, 5,000 additional VGF cards are being allotted to every Up in the four most affected districts and 2,500 per UP in eight other districts, with each card entitling the recipient to 15 hlograms o f rice per month for four months.15 T h i s program will need an additional rice allocation o f 152,000 MT and i s expected to cost Tk 3.12 billion, t o be borne entirely f rom the FY08 budget.

Death and medical benefits for cyclone-related deathdinjuries, and cash grants for rebuilding homesteads through the GR program (see Annex-1). Death benefits amount to Tk 20,000; medical benefits up to Tk 5,000 per person; and housing benefits Tk 10,000 and 6,000 for a fully and a partially destroyed home, respectively. The beneficiaries are selected by a team comprising of elected UP officials and certified by the District Commissioners. Total cost i s estimated to be Tk 5.14 billion.

Low-interest loans to fishermen ranging from Tk 50,000 to Tk 200,000. This i s estimated to cost Tk 1.16 billion.

Low-interest loans to poultry and livestock farmers ranging from Tk 10,000 to Tk 50,000. The estimated cost i s Tk 0.86 bil l ion.

l4 Past experiences with disaster responses have shown that rapidly distributed cash and/or in-kind assistance is especially effective in helping households cope with the devastating effects o f such shocks o n livelihoods and consumption. Recent examples o f successes with quick-disbursing cash and/or in-kind grants include the 2004 Asian tsunami, the Pakistan earthquake and the 1998 floods in Bangladesh. With each card given to one family, this should provide support t o about 20,000 to 25,000 individuals in each UP in the worst affected districts, which i s virtually i ts entire population; while about h a l f o f the UP'S population will b e supported in the moderately affected districts.

15

12

0 Supplying seeds, fertilizer and insecticides along with agricultural rehabilitation related short term programs for Rabi crop and I . - B o r o cultivation to recover the damage of Rabi and Aman crop in the affected areas. The estimated cost i s Tk 1.5 b i l l ion to be borne entirely f rom the FY08 budget.

Importing 0.789 million MT of rice costing Tk 20.12 b i l l ion to be financed from foreign assistance.

Table 5: Preliminary Estimate of Assistance Required from the Government

Assistance for

Families VGF Cards Baby Food Housing

Livestock and Poultry Fishermen Fanns (FishRoultryDairy) Small EntrepreneurBusiness Agriculture Rehabilitation Rice Import Drinking Water Educational Institutions Roads Bridge, Culvert, Femes Coastal Embankment Electricity Forest Employment Generation N e w Construction*

(Taka in billion) Total From Foreign Aid Medium- Longer

Demand Budget in FYOS Term Term

3.12 3.12 0.10 0.10 4.00 0.50 1.50 2.00 1.13 0.40 0.73 1.16 0.50 0.66 0.61 0.25 0.36 3.50 1.30 2.20 1.50 1 S O

12.50 12.50 0.13 0.05 0.08

30.10 0.85 12.00 17.25 6.37 0.99 1.92 3.46 0.94 0.10 0.84 7.23 7.23 1 .oo 0.07 0.93 1.38 0.25 1.13 5 .OO 5.00

65.48 14.96 50.52 Total 145.25 9.88 25.98 41.62 67.77

I n million US$ 1 2105.07 143.19 376.52 603.19 982.17 *Include new bridges, embankment cum roads, coastal aflorestation, mitigating, environmental damage, school cum shelter, and multi-purpose center cum animal shelter. Source: Finance Division, Ministry o f Finance, December 2,2007

35. The full program o f the government for cyclone relief, recovery, and medium to long term restoration and rehabilitation i s estimated to cost US$ 2.1 bil l ion. The part o f this program to be implemented in FY08 i s estimated to cost US$520 mill ion. Of this US$ 143 mi l l ion will be provided from the FY08 budget and another US$ 377 mi l l ion will be met this year f rom additional foreign assistance (if available). The remaining wil l be provided in the medium to longer term f rom additional foreign assistance. So far (as o f November 28, 2007), the government has incurred Tk 2.65 b i l l ion (US$ 38.4 mill ion) o f cyclone related expenditure, o f which 92 percent was for restoration and rehabilitation and the remaining for food relief. About 56 percent o f these expenditures have been financed f rom the FY08 safety net budget, 24 percent f rom the O&M budget, 10.3 percent f rom Block Allocation and the remaining 10.3 percent f rom the Chief Adviser’s Relief and Welfare Fund.

36. Bangladesh Bank (BB) has decided to extend i t s foreign currency liquidity support o n a pr ior i ty basis to commercial banks to settle import bills for essentials, including foodgrains and petroleum products. BB has also advised commercial banks to provide cheaper short-term loans to cyclone-affected fishermen and timber traders. Furthemore, BB has asked eight government-owned banks to intensify disbursement o f fresh farm loans to cyclone-affected farmers, and i s closely monitoring the agriculture credit disbursement process in both flood-hit and cyclone-affected areas. Under the new measures, the

13

cyclone-affected farmers will be eligible for fresh credit after rescheduling their previous classified loans. BB has set the credit target at about Tk 13 b i l l ion (US$188 mill ion) f rom government-owned banks and financial institutions and has asked them to disburse 70-80 percent o f this target by December-January.

37. The government’s response in the immediate aftermath o f this disaster reflects significant improvements in the institutional capacity to deal with emergency compared with previous natural disasters o f this type, aided by GOB’S adoption o f a Comprehensive Disaster Management Program (CDMP) in 2003. Improvements have occurred in terms o f policies to reduce leakages in food distribution and allowing private sector t o import, an effective and well-targeted Vulnerable Group Feeding program, construction o f cyclone shelters, and establishment o f early warning systems. Recent experiences also indicate that Bangladesh has been increasingly successful in providing assistance through cash grants in emergency situations. Cash and food transfers are administered by the Ministry o f Food and Disaster Management (MFDM) and distributed through local governments, employing community based targeting methods. Bangladesh’s disaster response system using casWfood grants has been evaluated in several international studies and found to be reasonably effective. An assessment o f the cash grant and food aid programs post-1998 floods indicate that the GR program was reasonably we l l targeted towards flood-affected households, while VGF was more successful in targeting poor households (see Annex-1). The response capability o f c i v i l administrations in providing rel ief has also improved, and government campaigns to educate households on food and water safety precautions during floods and cyclones have proved effective.

Response of development partners

38. In coordination with the Bangladesh Air Force, the UN i s distributing 208 tons o f high-energy biscuits to an estimated 850,000 people. 240,000 packets o f water-purifying powder are being distributed among 48,000 families. Shelter materials wi l l be distributed to 18,000 households whose houses were destroyed. Medical officers have been made available to assist government response. The UN has begun procurement and distribution for setting up tube wells, 100,000 Jerry cans, US$ 1.5 mi l l ion worth o f medicines, 92 tons o f baby food, 100,000 blankets, 60,000 family kits, 60,000 pieces o f children clothing, and 50,000 plastic sheets. U S $ 50,000 has been made available for water, supplies, and transportation.

There has been a swift response f rom the donor community.’6

39. On November 21, the UN Emergency Rel ief Coordinator released the second round o f Central Emergency Rel ief Fund (CERF) allocation for activities in heath, telecommunications, emergency shelter and non-food items. T h i s i s in addition to the init ial CERF allocation for projects in agnculture, chi ld protection, food, nutrition and water and sanitation disbursed on 19 November. Earlier, o n November 16, the International Federation o f Red Cross and Red Crescent Societies (IFRC) launched a preliminary emergency appeal to support the Bangladesh Red Crescent Society to assist 235,000 beneficiaries for a period o f nine months. Total commitments by development partners (excluding the W o r l d Bank and the Asian Development Bank), as o f December 12, have amounted to US$223 mi l l ion (Table 6). The Asian Development Bank (ADB) has pledged US$180 mi l l ion (including US$60 mi l l ion f rom bilateral donors).

40. Coordination o f re l ief effort was a major challenge for the Government, particularly in the early days when several national and international NGOs, supported by the donors, spontaneously initiated rel ief operations. The M o F D M in collaboration with the United Nations Resident Coordinator (UNRC) moved quickly to establish a U N D o n o r Coordination Mechanism, holding i ts first meeting just two days after the cyclone. A small secretariat was established to provide support t o the Secretary, MoFDM, and to assist him in meeting the growing l i s t o f demands.

~

l6 A number o f countries have provided a variety o f support to aid the cyclone victims. For space consideration, specific responses o f bilateral development partners are not l is ted here.

14

VII. WORLD BANK’S CYCLONE ASSISTANCE Table 6: Cyclone Assistance Committed by STRATEGY Development Partners and Others

Development Partner a/ Amount 41. Responding to the need o f the country, the Committed (in

US$ million) World Bank has offered up to US$ 325 mi l l ion to help K ingdom o f Saudi Arabia 102.76

18.02 Bangladesh recover and to strengthen the country’s Japan**

10.00 disaster mitigation systems. The Bank’s strategy to aid Kuwait cyclone recovery and mitigation has the following key EC 9.36 components: Netherlands 1.44

Un CERI 15.4 . Budget-support. A quick-disbursing US$lOO UK 14.47 mi l l ion financial support-the proposed operation- U S A 19.51 to the Government’s budget by end-January, 2008. Canada 3.40 This will assist in reducing the fiscal pressure o n the 4.00

cyclone-related spending. The Government i s 2.75

1.52 currently using the FY08 Block Allocations, O&M 1.72 and the Safety N e t budget to meet the immediate

. Livelihood support and infrastructure rehabilitation 1.37 China 1.05 i n the short term. T h i s will include an additional India 1 .oo

1 .oo US$lOO mi l l ion allocated to the Social Investment Libya 1 .oo Program project for l ivelihood restoration among the Turkey

affected poor, including microcredit, emergency Others* 3.21 assistance funds, community infrastructure Total 223 aCtiVitieS, S k d l S development and income generating activities.” In addition, U S 2 5 mi l l ion i s being allocated towards immediate infrastructure Pakistan, Czech Republic, and Estonia rehabilitation (such as that o f power and water supply infrastructure) through existing projects.

term restoration and rehabilitation program will be underpinned by a strategy to aid recovery and preparedness that focuses o n improving rel ief responses, reducing exposure to natural hazards and enhancing coping ability over the medium and long-term. The Bank has started developing such a medium to long-term strategy to anchor i ts program. Among the areas where Bank assistance may be needed are rebuilding livelihoods in the medium-tern; improving coastal defenses including rehabilitation o f embankments and upgrading and expanding cyclone shelters; r iver banks strengthening to reduce flood risks; and improving mechanisms for risk management including disaster-risk financing. A preliminary estimate o f the size o f the Bank’s long-term program i s around US$125 mill ion. The design of the long-term strategy and the Bank’s comprehensive program will be guided by the findings o f the DNA noted earlier.

h n m a r k FY08 budget arising f rom non-programmed 3.35

Belg ium 2.00 Italy Gemny

relief and rehabilitation needs. Sweden 3.5

*Includes Korea, Switzerland, sr i Lanka, Thailand, France, New Zealand, OPEC,

** Includes Japanese Debt Cancellation Fund Source: Minis t ry o f Food & Disaster Management, Bangladesh Super Cyclone ‘Sidr ’ . Long-term restoration and rehabilitation: A long- 2007, December 12, 2007.

42. The Bank’s three-pronged strategy was discussed with GOB and has i t s full support. It was also discussed with key development partners and f i t s into the overall plan for external assistance for cyclone recovery.

l7 A portion o f th is i s l ike ly to be financed through grant contributions f rom partners at the Global Faci l i ty for Disaster Reduction and Recovery (GFDRR).

15

nII. THE REFORM PROGRAM SUPPORTED THROUGH DSC Iv: AN UPDATE

43. As noted at the beginning o f this document, the D S C series has supported GOB’S reform efforts along two pillars: (a) strengthening core governance functions, with emphasis o n reforms in public procurement, budget formulation and budget execution, tax administration, and public administration; and (b) improving the investment climate, by maintaining macroeconomic stability, deepening domestic deregulation and trade liberalization, and strengthening performance o f the banlung and energy sectors and o f state-owned enterprises.”

44. The government i s committed to deepening these reforms and has shown progress so far despite the major distractions caused by natural events l ike floods and cyclone, which threaten to take away both financing as wel l as administrative focus, thus disrupting reforms. A description o f the reform efforts- past, ongoing and needed in the future-that underpin the country’s development vision i s provided in the DSC IV d o ~ u m e n t . ’ ~ The following paragraphs provide a br ie f update date o n the reforms since the approval o f DSC IV by the Board in M a y 2007.

A. Progress on poverty and social development

45. Bangladesh has made remarkable progress in reducing poverty over the last 15 years. In early 1990s, close to 60 percent o f the population was living in poverty; the poverty rate declined to 49 percent in 2000 and 40 percent by 2005. If the current trends in growth and inequality were to continue, Bangladesh will meet its MDG o f halving i t s poverty rate f rom 57 percent in 1990 to 29 percent by 2015. The steep decline in the poverty rate f rom 2000 to 2005 was significant enough to reduce the number o f people in poverty (with a growing population) by nearly 6 mil l ion between 2000 and 2005. The reduction in poverty i s attributable mainly to a 3.7 percent annual average growth in real GDP per capita during 2000-05 with almost no increase in consumption inequality (as measured by the Gini index) since 1996.

46. Improvements in quality o f l i fe between 2000 and 2005 were not l imited to consumption, but were also seen for indicators such as housing conditions, access to electricity, sanitation, and telephone connections. Bangladesh i s o n track to meet i t s MDG on gender parity, having already achieved the goal in primary and secondary schooling. Significant gains have also been achieved in reducing child mortality. The under-five mortality rate has fallen f rom 136 deaths per 1,000 l ive births in 1990 to 66 today. Attaining the MDGs relating to child malnutrition and those in education relating to universal net primary enrollment and primary completion remains challenging but within reach. Bangladesh has also nearly achieved the safe water MDG, with 97 percent o f i t s population having access to pathogen-free water, before arsenic contamination posed a new round o f challenges.20

47. Analysis o f poverty reduction suggests that a lot o f the economic gains during 2000-05 among households took place as a result o f higher incomes generated from available assets and occupations, which in turn indicate the beneficial impact o f economic growth. Poverty reduction i s l inked to wage and

l8 The DSC IV reform program is closely aligned with the reform pillars outlined in GOB’S Poverty Reduction Strategy (PRS) presented to the boards o f the International Development Agency (IDA) and the International Monetary Fund (IMF) in early 2006. The DSCs have complemented a parallel Special Drawing Right (SDR) 347 mil l ion Poverty Reduction Grant Facility (PRGF) program o f the IMF, which ended in June 2007. Currently, the IMF has an economic surveillance facility in Bangladesh. World Bank, 2007, Program Document for the Fourth Development Support Credit to the People’s Republic of Bangladesh, Report No. 39595-BD, Washington, DC. For more information on MDG progress, see Government o f the People’s Republic o f Bangladesh and United Nations, 2005, “Millennium Development Goals: Bangladesh Progress Report,” Dhaka; and World Bank, 2007, “To the MDGs and Beyond: Accountability and Institutional Innovation in Bangladesh,” Washington, D.C.

2o

16

productivity increase in the industry sector, along with substantial employment growth in the service sector. Increased inf low o f remittances i s also l ikely to have played an important role.

48. Substantial challenges, however, s t i l l l i e ahead. Around 56 mi l l ion Bangladeshis remained in poverty in 2005. Regions in the west and southwest (Rajshahi, Barisal, and Khulna divisions) have fallen significantly behind those in the east (Dhaka, Chittagong, and Sylhet divisions). Dhaka and Chittagong contributed nearly 80 percent o f national poverty reduction between 2000 and 2005, with just over h a l f the population, while Khulna and Barisal, with about one-fifth o f the population, made no contribution. The November cyclone has pushed the lagging regions further behind. Lack o f economic growth in these regions i s related to poor connectivity t o the main growth centers o f the country (most importantly, Dhaka), inadequate infrastructure, and lower in f low o f remittances. Closing this regional economic divide would be an important area o f focus for public policy, as the CTG has stated publicly on repeated occasions.

B. Reform progress since the approval of DSC I V

49. The progress made as part o f the DSC IV-supported initiatives in strengthening the banhng sector, liberalizing the trade regime, strengthening tax administration, and reforms to improve the functioning o f core governance institutions has been encouraging. The reform momentum in recent months has remained strong. Since the approval o f SF1, the Government has undertaken a number o f governance-related measures, including (i) completion o f the legal steps to separate the judiciary f rom the executive; (ii) amendment o f the Anti-Corruption Commission (ACC) act to enhance i t s independence and clarify i t s jurisdiction; (iii) constitution o f a Regulatory Reforms Commission to strengthen the regulatory environment; (iv) constitution o f a Bangladesh Better Business Forum; and, (v) finalization o f the rules to implement the Procurement Act. Progress has also been good in improving governance in the power sector, especially in tendering o f large baseload power plants, a process previously r i fe with corruption. The following paragraphs provide updates on reform progress by specific areas:

(i) Macroeconomic stability

50. With the implementation o f economic reforms envisaged in the Poverty Reduction Strategy (PRS), growth was expected to be sustained at around 6.5 to 7 percent over the medium term, with the industrial sector continuing to be the main driver. The combined impact o f the July-September floods and the cyclone i s l ikely to reduce current year growth to the 5.5-6.0 percent range. The impact o f these natural disasters, as in the past, i s expected to subside in subsequent years.

51. The FYO8 budget has come under severe pressure f rom the three shocks: international o i l and non-oil commodity price increases, the July-September floods, and n o w the cyclone. Administered petroleum prices were last adjusted on April 1,2007. Since then o i l prices have increased by US$33 per barrel in international markets. Urea prices have not been adjusted in last eleven years during which urea import price has increased by Tk 25,000 per ton. Inadequate pass-through o f international fuel and urea prices to domestic consumers has resulted in state energy and chemical companies accumulating large losses, adding to the already high stocks o f their outstanding uncovered liabilities. In the absence o f domestic price adjustments, the FYO8 budget faces an extra US$ 80 mi l l ion pressure arising f rom subsidy to energy and fertilizer not provided for in the original budget, which anticipated more benign global commodity prices and assumed necessary adjustments to administered prices. The floods added roughly US$ 500 mi l l ion o f unforeseen expenditure and now the cyclone will likely add another US$ 520 million this fiscal year. T h e total f lood and cyclone induced expenditure shock constitutes 8.9 percent o f the original FY08 budget o f about U S $ 11.5 bil l ion.

17

52. Assuming no adjustment in administered prices, revenue performance in line with budget target, and central government expenditures at normal trend, and factoring in the additional energy and urea subsidy plus the additional cyclone and flood-related expenditures, the Central Government deficit i s estimated to rise to about 5.4 percent o f GDP in FY08, compared to 3.5 percent projected without the additional budgetary expenditure arising f rom the three external shocks. Assuming US$ 225 mi l l ion flood- and cyclone-induced increase in net foreign financing, domestic financing would rise to 2.8 percent o f GDP in the absence o f any expenditure and price adjustments, compared to 1.5 percent in the absence o f the shocks.

These shocks have resulted in a precarious fiscal situation.

53. Having nearly exhausted the potential for reallocating expenditure within the FY08 budget, the government i s faced with three policy choices, each o f which would prove to be unpleasant to certain sections o f the population:

1. Raise domestic energy and fertilizer prices sufficiently (i.e., t o reflect import cost) to create fiscal space for desired levels o f developmental and natural disaster-related expenditure. T h ~ s , o f course, i s a very sensitive issue politically.

2. A l l o w the flood and cyclone related expenditures without administered price and other adjustments and face heightened inflationary pressures on top o f the already tense inflation situation, being mindful that inflation particularly hurts the poor. Or, crowd out productive private investment owing to increased government borrowing.

3. Narrow the gap between administered prices and import cost o f fuel and fertilizer and further cut ADP expenditure, and finance the remainder through increased borrowing. This would lead to some combination o f higher inflation, lower public spending in desired areas, and smaller transfers to those benefiting fkom energy and fertilizer subsidies.

54. The resolution to the policy predicament will require implementation o f a more decisive administered pricing strategy, creation of fiscal space through revenue enhancement, and more efficient public expenditure management. Whatever i s the choice made by the government, based on i t s competing priorities, the adverse terms o f trade shocks, one way or the other, will, however, extract a substantial cost fkom the economy as a whole. The only question i s who i s made to bear that cost.

55. The short-run solution to this pol icy dilemma, however, i s not easy. Clearly, option 2 i s the least desirable o f the three from GOB’S point o f view. Option 1, though desirable, does not seem feasible in the near term because o f political sensitivities.21 By default, that leaves only option 3. Resistance on account o f higher prices can be mitigated with targeted subsidies. The adjustment pain can also be at least partially mitigated in the short run through increased concessional foreign assistance.

(ii) Banking: Corporatizatiodprivatization o f National Commercial Banks (NCBs)

56. T h e corporatization process has been completed for three o f the four NCBs. Sonali, Janata and Agrani banks have each been formally converted into public l imi ted companies, and their assets, liabilities and capital transferreddivested in entirety to the newly formed banlung companies. Exclusion o f the three NCBs from Bangladesh Bank Nationalization Order 1972 was announced through a gazette notification. The new banking companies are now being operated by independent management and boards o f directors in accordance with the Companies A c t o f 1994. The Finance Divis ion has h r the r

21 I t i s instructive to note that large SOE losses emanating f r o m keeping administered prices l o w shifts publ ic resources in favor o f the better-off at the expense o f the poor. Higher subsidy to cover SOE losses-that the better-off enjoy the most-comes at the expense o f pro-poor expenditures, including on human development and rural infrastructure. I t i s indeed ironic that the arguments against price adjustments are made in the name o f the poor by the beneficiaries o f l o w administered prices-urban and rural middle and upper classes.

18

directed the new banks to draw up their respective action plans by December 2007 to overcome their capital and provisioning shortfalls with the BB.

57. Despite the government's good-faith effort to divest its 93 percent stake o f Rupali Bank Limited, a formal response i s yet to be received from the preferred bidder, who has been delaying the signing o f the Sales and Purchase Agreement. The government i s n o w considering closure o f this long-pending deal and reinitiating the process o f privatization o f the bank.

(iii) State-owned enterprises: Restructuring

58. Government efforts to contain the losses o f SOEs are ongoing in some sectors. A s part o f this effort, four loss-making jute mi l ls were shut down in July 2008. The Government has also reduced the size o f the labor force in SOEs under four public sector corporations-namely, Bangladesh Biman, Bangladesh Jute Mills Corporation (BJMC), Bangladesh Textile Mills Corporation (BTMC), and Bangladesh Freedom Fighter Welfare Trust. Funded by the Government's Voluntary Retirement Scheme (VRS), 16,237 workers have been retired so far in FY08.

59. Bangladesh Biman i s now planning further cost reduction by retiring more staff through VRS, whi le worlung out public-private partnership models for i t s operation and ownership, as wel l as other restructuring measures to make i t s operations more profitable. In addition, Government i s considering closing down eight more loss-mahng jute mills under BJMC in the coming months. A long with payment o f VRS the Government also has an ongoing counseling and retraining program as part o f a Social Protection Package for the retired SOE workers. T h i s social protection package i s being executed by BRAC, a leading NGO.

(iv) Power sector

60. The Government has started implementation o f the least-cost generation development plan. T o support implementation o f the generation expansion program, the Government i s in the middle o f finalizing a generation financing strategy, which i s designed to integrate least-cost selection o f projects within an overall public and private financing framework.

61. The Government has appointed Transaction Advisors for three large base-load power plants. For the Bibyana 450 MW Independent Power Producer (IPP) Government has pre-qualified five sponsors and the transaction process i s o n track. The Expression o f Interest (EOI) for Sirajgonj 450 MW IPP i s due o n December 11, 2007 and the request for EO1 for Meghnaghat 450 MW IPP will be issued soon after pre-qualifying the Sirajgonj 450 MW IPP. Contracts have also been awarded to six sponsors to set up 10 small power plants. These sponsors have been selected, through a transparent and competitive process under the Government's Small Power Generation Policy. The contracted commercial operation dates for these power plants are o n or before January 10,2009. From these power plants a total o f 220 MW o f power will be generated.

The other two IPPs are following a staggered schedule.

62. The Government has adopted the Financial Restructuring Plan, in principle, and has appointed auditors to start restructuring the balance sheets o f al l power utilities. Provision o f Tk 6 b i l l ion has been made in the FY08 budget to cover power sector losses as power tariffs are below cost.

63. A new Chairman has been appointed in BERC. The appointment o f the last (5*) member o f the Commission has also been appointed. For BERC to be fully operational i t needs to appoint i t s staff - for which they required approval on (i) Organogram, (ii) Service Regulation and (ii) Table o f Equipment. The organogram has already been approved. The Energy Div is ion i s n o w incorporating the Ministry of

19

Law’s comments on the Service Regulation and expects Ministry o f Law’s final vetting soon. The Table of Equipment has been approved by the Ministries o f Finance and Establishment.

(v) Trade and tax administration

64. Average nominal import tariff protection was cut f rom 24.3 percent to 21.9 percent in the FY08 budget. Furthermore, the tar i f f structure was simplified by collapsing the Infrastructural Development Surcharge with the customs duty and eliminating zero-tariff status for many products. A significant trade liberalization agenda remains, however, as, by most measures, Bangladesh i s s t i l l among the most protected economies in the world. The C T G has expressed i t s commitment to deepen trade liberalization and reduce the anti-export bias in the coming months and the FY09 budget.

65. The C T G has repeatedly expressed concerns regarding the poor tax collection in the country-at 8 percent o f GDP in FY07, tax mobilization in Bangladesh i s among the lowest in the world. The CTG has initiated separation o f the tax pol icy function f rom tax administration, and has agreed to review the VAT and income tax legislations as part o f simplifying i t s tax system. It has introduced universal self- assessment in income tax, direct trader input (DTI) in import cargo clearance, and i s workmg to merge the VAT and IT Large Taxpayer Uni ts under the NBR.

(vi) Public financial management and procurement

66. Notable actions in these areas include:

o More strategic and performance oriented budget management process across the ministries under MTBF; Integrated Financial Management Information system through IBAs; and Project Audit Manual for improved audit reports for donor assisted projects.

The Government i s putting in place an ad-hoc Public Accounts Committee (PAC) in the absence o f an elected Parliament. The move has received positive nod from a l l concerned.

o

o Based on the newly passed Procurement Act, the Government has finalized the rules and, after endorsement o f the Finance Adviser, i t i s n o w at the final stage o f approval by the Ministry o f Law, before it i s gazetted and given effect.

o Transparency o f the procurement system i s improving further with the beginning o f posting procurement performance data in the website o f Central Procurement Technical Unit (CPTU) by the Rural Electrification Board (REB) and LGED. For these two organizations, the annual report for FY06 has already been posted in CPTU’s website for contracts valued at Tk 10 mi l l ion and above and the report for FY07 i s expected to be published in December, 2007.

(vii) Governance and anticorruption

67. Governance and anti-corruption reforms have occupied center stage during the CTG’s tenure thus far. Reform efforts have sought to strengthen the key institutions o f accountability, by clarifying their mandate and providing them the requisite resources (financial and manpower) to carry out their tasks. K e y measures have included:

0 Concrete steps to comply with a six-year-old High Court ruling to separate the judiciary f rom the executive branch o f Government. Amendments to the Criminal Procedure Code that came into

20

operation on November 1, 2007, and two new sets o f Rules22 are important milestones. The related administrative requirements, including the creation o f and appointments to new magisterial posts, and the provision o f court infrastructure, are proceeding.

Init iation o f internal reforms in the Public Service Commission, under the guidance o f a new chairman and members. The Government i s discussing the prospect of a right to information ordinance to improve transparency in i ts functioning. The importance o f such an act has been publicly endorsed by senior officials including the chief adviser.

An inter-agency approach to tackling corruption, which appears to be yielding results. The Anti- corruption Commission’s jurisdiction has been clarified through amendments to the A C C Act, and necessary rules for i t s operation have come into effect. Bangladesh acceded to the United Nations Convention Against Corruption in February and i s reviewing i ts legal and regulatory framework to ensure compliance with the Convention. Meanwhile, corruption cases against a number o f former politicians and businessmen are proceeding.

A seven-member Local Government Committee formed by the CTG in June has recommended a far- reaching decentralization agenda. Recommendations included establishment o f a Local Government Commission to regulate and steer the decentralization process, and draft unified ordinance for Zila, Upazila and Union Parishads, municipalities, and city corporations.

Constitution o f a 17-member Regulatory Reforms Commission to amend the administrative rules and regulations to facilitate doing business. In i t s f i rs t meeting, the commission prioritized amendments to the rules relating to duty, bonded warehouses, environmental certification, customs and foreign loans approval process. The commission will submit recommendations to the Government every month, which will be posted on an official website to ensure transparency and public awareness. I t submitted the f i rs t set o f recommendations on December 4,2007.

Constitution o f the Bangladesh Better Business Forum (BBBF), a public-private platform, to foster dialogue between the Government and the private sector. The Forum will be headed by the Chief Adviser, and will bring together government policymakers, chief o f a m y staff, business leaders, c iv i l society members and economists.

Ix. RATIONALE FOR PROPOSED SUPPLEMENTAL FINANCING

68. GOB’S response to the devastation caused by Sidr i s placing severe pressure o n the (already overburdened) FY08 budget. In the absence o f the proposed financing, Government would need to cut further into i t s existing O&M budget, reduce planned capital spending allocations (ADP), or significantly scale down support t o recurrent expenditure activities. Alternatively, the Government will have to fa l l back on much more expensive domestic borrowing or use monetary financing, which will fuel already high inflation. Reacting swiftly, GOB has already redirected some o f i t s l imited budgetary resources for cyclone rescue and relief. Grants or concessionary financing from development partners in support o f the additional resource requirement would be critical t o meeting the country’s recovery and development needs.

69. The Wor ld Bank i s wel l placed to assist the country in i ts hour o f need, and the proposed SF2 budget support operation would be an efficient and timely instrument in response to GOB’S most pressing spending needs arising f rom the cyclone. SF2 would provide cash assistance to the budget relatively quickly to help finance part o f the FYO8 resource gap incurred as a result o f the cyclone, which makes it

These are the Bangladesh Judicial Service (Service Constitution, Composition, Recruitment and Suspension, Dismissal & Removal) Rules and the Bangladesh Judicial Service (Posting, Promotion, Leave, Control, Discipline and other Service Conditions) Rules.

22

21

preferable over other forms o f emergency assistance. The resources provided under SF2 will help protect GOB’S reform program that were supported under DSC IV and have since remained broadly o n track despite the three external shocks. The SF2 operation i s part o f the collective response f rom development partners such as the ADB, DFID, UN, Japan, USAID and others.

70. A s noted earlier, a formal damage and needs assessment i s ongoing and would in form the extent and nature o f the medium- and longer-term recovery and rehabilitation support needed by the country. The associated costs are l ikely to be high, however. From available information, i t i s already clear that the human, social, and economic impacts would be sizeable (see Table 3, Section II). The impact o n growth and employment i s l ikely to occur as a result of setbacks in agricultural production, losses in fisheries and livestock assets, and damage to infrastructure, transport, and communication (see Section 11).

71. The proposed operation i s consistent with Bank pol icy as reflected in OP 8.60.23

X. IMPLEMENTATION ARRANGEMENTS

A. Terms of the Supplemental Financing

72. The only condition to the effectiveness o f the Financing Agreement i s the receipt o f a satisfactory legal opinion from the borrower. There will, however, be an overall requirement that the government continue to maintain a satisfactory macroeconomic pol icy framework as was required under the D S C series. Continued close engagement with the IMF will help the country in this effort. The closing date for the Supplemental Financing i s June 30,2008.

B. Funds flow and disbursement arrangement for the Supplemental Financing

73. Supplemental Financing proceeds will be disbursed in a single tranche and will be deposited into a specific deposit account o f the Ministry o f Finance and Planning established at Bangladesh Bank for this purpose; the deposit account i s part o f the country’s of f ic ia l foreign exchange reserves. An amount equivalent to the Credit proceeds will then be credited to an account of the Government to finance budgeted expenditures. Transactions and balances o f the Government account will be fully incorporated into the Government’s accounting records and financial statements. Disbursement will not be l inked to any specific purchases and n o procurement requirements will be needed. If any portion o f the Credit proceeds i s used for ineligible purposes as defined by the Financing Agreement, IDA will require the Borrower either to return that amount to the deposit account or refund the amount directly to IDA.

74. Fiduciary arrangements for this operation are the same as those used for managing the Government’s own foreign exchange reserves at the Central Bank and budgetary resources through the treasury system. Whi le recent assessments o f these fiduciary arrangements continue to highlight a weak environment, efforts have been made in recent years to improve the systems, with significant results.

A comprehensive reform effort to improve PFM institutions is ongoing. T h i s includes reforms to improve budget planning, accounting and auditing o f government transactions, financial reporting and procurement. Accounting transactions are being computerized, improving the accuracy and timeliness o f public financial information. Reconciliation o f budget accounts and corresponding bank accounts i s improving and computerization i s being extended to capture these transactions.

e

According to this policy, supplemental financing may be provided for a development policy operation for which an anticipated gap in financing jeopardizes a reform program that i s otherwise proceeding on schedule and in compliance with the agreed-on policy agenda.

23

22

0 The IMF safeguard assessment confirms that Bangladesh Bank’s safeguards framework has been strengthened in a number o f areas, including publication o f i ts financial accounts (as per International Financial Reporting Standards), reconciliation o f monetary data reported to the IMF with the audited accounts, and improvements in foreign exchange management. Since FY03, BB has had i t s financial statements audited by internationally affiliated audit firms in full compliance with international auditing standards. The entries o f the deposit account will, upon request f rom IDA, be audited by independent auditors acceptable to IDA under terms of reference in accordance with international standards o n auditing.

C. Environmental issues

75. significant negative effects on the environment, natural resources, or forests.

Policies supported by the proposed Supplemental Financing are not expected to have any

XI. BENEFITS AND R I S K S

A. Benefits

76. GOB’S response to Sidr in terms o f relief, l ivelihood support and reconstruction requires timely financial support. The proposed SF2 would be an important and among the more reliable instruments in response to the more immediate spending needs o f the Government. Pledges f rom bilateral donors to date have amounted to roughly US$ 220 mi l l ion. Pledges typically have a longer gestation lag than desired and so flexible financing o f the type being proposed i s necessary to speed up the rehabilitation process. Being quick disbursing, the proposed SF2 would help the government provide timely assistance to affected populations and allow flexible allocation o f resources in response to urgent and evolving needs. It also f i t s into the Bank’s proposed cyclone assistance strategy-by providing the emergency support needed by the government in the immediate aftermath o f the disaster, while a more comprehensive medium to long term recovery program i s developed, to be implemented o n the ground only after the immediate rel ief operations are complete.

77. T h e proposed SF2 will also contribute to minimizing the r i sks to implementation o f the overall reform program supported through the D S C series, and maintaining the reform momentum in key development areas that could be supported by a potential TSC being discussed for late FY08.

B. Risks

78. There are r i sks involved with these types o f assistance, which are also borne out by experiences in other countries. An important r i sk has to do with limited administrative capacity to implement relief, restoration and reconstruction operations. This r i s k in Bangladesh, however, i s partly mitigated by recent evidence that confirms the country’s growing capacity for effectively managing and coping with natural disasters. The significantly lower number o f human l ives lost during Sidr compared with past cyclones o f similar intensity i s a testament to this progress.

79. GOB approved a medium to long-term strategy on disaster management in 2003, which la id out a Comprehensive Disaster Management Program (CDMP). The response to the 2007 f lood emergency and to the November cyclone so far reflects these improvements, in particular takmg into consideration the difficulties o f reaching remote communities when communications are interrupted and means are limited. The macroeconomic and social impact o f natural disasters has been greatly reduced and the vulnerability o f the poor has been diminished, through a combination of policy measures, and improvements in safety net programs, disaster awareness, early warning systems, shelters and the capacity o f c i v i l administration.

23

In addition, the country’s renowned NGOs play an increasingly important role in disaster prevention, recovery, and relief, enabling the government to respond promptly to disasters.

80. Bangladesh i s inherently vulnerable to natural disasters. I t i s frequently visited by cyclones, storm surges and floods which in their wake claim many lives, affect mill ions o f people and extensively damage public and private property. Global warming and the resulting climate change have increased the likelihood that the fi-equency o f such disasters may increase. Whi le the proposed SF2 does not address these risks, the multi-pronged strategy o f which it i s a part will a im at assisting the long-term mitigation o f natural disaster damage. In addition, the Wor ld Bank, ADB, W A C , other specialized UN agencies, and several donor countries are also helping strengthen the government’s capacity to respond to and mitigate future natural disaster damage. One area o f focus would be improving the current warning signal alerting system to ensure that communities can better understand the level o f actual r i s k they face and what they must do to protect themselves and their livelihoods.

8 1. Fungibility o f funds implies that budgetary resources may be diverted or misused, which poses a particular fiduciary r i s k to budget-support operations l ike the proposed SF2. GOB, however, has a good record o f allocating public spending to key development sectors and emergency rel ief and rehabilitation activities, as seen in the context o f earlier natural disasters. The fact that GOB has already redirected some o f i t s l imited budgetary resources for cyclone rel ief (as noted earlier) also indicates i t s commitment towards relief expenditures. Auditing arrangements and financial management within government ministries are being strengthened (refer to paragraph 74 above), which further mitigates the risk o f resources being misused.

82. An additional risk i s associated with the political situation in the country, which continues to remain fluid. In late August, a trivial incident at Dhaka University triggered widespread protests at a number o f universities throughout Bangladesh, some o f which spilled out into the streets. These protests were seen as the most serious threat yet to polit ical stability since the current CTG took office, with calls f rom some for an end to the emergency rule. While the C T G controlled the l a w and order situation quickly by imposing a curfew in several cities, there continues to be a r i s k o f such outbursts. Mismanagement o f the post-cyclone relief, restoration and rehabilitation could trigger such outbursts as well, which seems to have already occurred in a couple o f locations, including a demonstration in Barguna demanding food and clothes on December 3. Such incidents can become a flashpoint for wider protests, and any prolonged period o f protests may take the focus o f the Government away f rom much- needed economic reforms. Whi le these r isks exist, the proposed operation will contribute towards mitigating these by providing the country with more resources to address the economic and social impact o f the cyclone. Moreover, the r isks listed need to be also assessed against the potential reputation risk for the Bank if it was seen as not responding at this critical hour o f need in a country that suffers f rom repeated disasters because o f i t s geo-physical location along with, perhaps, the effects of global climate change.

24

Annex 1

GOVERNMENT PROGRAMS TO SUPPORT CONSUMPTION OF CYCLONE AFFECTED HOUSEHOLDS

The Government o f Bangladesh (GOB) has moved rapidly to respond to the cyclone emergency through a package o f measures designed to provide a consumption cushion and assist in recovery o f assets using a comprehensive program o f cash and food transfers, which have been used to respond to previous disasters with significant success. Bangladesh’s disaster response system using casWfood grants has been evaluated in several international studies and found to be reasonably effective.24 There are four government safety net programs that can potentially be used to provide emergency rel ief t o disaster victims, including cash grants, and these are included in the Government’s budget. T w o o f these are being used as o f n o w to assist cyclone victims. Cash and food transfers are administered by the Ministry of Food and Disaster Management (MoFDM) and distributed through local governments, employing a community based targeting method.

Whi le medium term recovery o f livelihoods and assets will require a more comprehensive program, the programs listed below represent the safety net initiatives to protect the consumption o f the cyclone- affected in the short term, through cash or food aid. In addition to these programs, as noted in the program document, the other important short-term rel ief measures employed by GOB are low-interest loans to fishermen, poultry and livestock farmers, assistance o n inputs for farmers, and import o f rice.

Gratuitous Relief (GR) provides immediate cash/ food grants to households following disasters - administered by the local governments (Union ParishadsAJPs) and central government officials based in the Upazila. GR appears to have been well-targeted in the aftermath o f past disasters, including after the 1998 flood. Reported leakages to non deserving beneficiaries and fraud were also kept to a minimum. The Government plans to use GR program for provision o f death, medical and housing benefits to Sidr- affected households o n an emergency basis. Death benefits amount to Taka 20,000; medical benefits up to Taka 5,000 per person; and housing benefits Taka 10,000 for a fully destroyed house and Taka 6,000 for a partially destroyed house. The beneficiaries are selected by a team comprising elected UP officials and certified by the District Commissioner (DC).

Vulnerable Group Feeding (VGF) i s a means-tested program designed to provide additional food resources to a selected number o f women in a period o f distress. Usually, the women selected by the UP chairman receive a card that entitles them to receive a given amount o f grain a month for a period o f two months. In the past, while VGF appears to have been we l l targeted within the UP, the geographic distribution o f VGF cards was not always consistent with that o f the disaster. To address this problem, the government has announced that each UP in the four worst affected districts will receive 5,000 VGF cards while those in the other affected districts will receive 2,500. T h i s should provide support t o about 20,000 to 25,000 individuals in each UP in the worst affected districts, which i s virtually i t s entire population; while about ha l f o f the UP’S population will be supported in the moderately affected districts. Each VGF card will entitle the recipient to 15 lulograms o f rice per month for four months. The Government has opted for food rather than cash transfers partly out o f a concern that because o f communication bottlenecks in the area that restrict the supply o f commodities, cash grants may fuel local inflation. To move the VGF foodgrain, the government would get assistance from the military, which has very good logistic capacity.

For example Dorosh, Paul, Carlo del Ninno and Quazi Shahabuddin Eds., 2004. The 1998 Floods and Beyond- Towards Comprehensive Food Security in Bangladesh. The University Press Limited, Dhaka and IFPFU, Washington DC.

24

Monitoring Safety Net Support for Cyclone Affected Households

T o understand how the safety net system in Bangladesh functions in the aftermath of a disaster, a study will be conducted with Wor ld Bank support, collecting information f rom program implementers l ike local government representatives, beneficiaries and other stakeholders, fo l lowing a simple template or questionnaire. The findings f rom the study wil l inform GOB in developing future plans to enhance or modify post-disaster casWfood assistance programs, which would be an integral part o f its strategy for disaster-preparedness.

Assessment of effectiveness of various government programs following the 1998JIoodsf’

A number o f instruments have been used by the Government o f Bangladesh to provide immediate food rel ief to the people in the aftermath o f the 1998 flood. The main instruments implemented were the Gratuitous Rel ief (GR), the Vulnerable Group Feeding Program (VGF), the Test Rel ief (TR) and the Food for Work (FFW).

As a part o f the GR program, grain, a l itt le bit o f cash and other supplies (clothes and biscuits) were given to the districts. Eventually, the grain was given to the UP chairmen who distributed it in small rations o f 3 to 10 hlograms to the people believed to need it the most. Through the VGF program, in the period o f August and September 1998, approximately one mi l l ion women received 8 lulograms o f rice for two months. In October, the number o f women was increased to 4 mi l l ion and the ration was increased to 8 kg o f rice and 8 kg o f wheat. In November, the number o f participants was increased to 4.2 mi l l ion and in December the number o f rations was increased to 15 kg o f wheat and 5 kg o f rice. The program ran until April 1999. Other programs such as the TR and the FFW are public works programs, which were not fully operational in the immediate aftermath o f the flood and started after January 1999.

Average size o f transfers and number of people covered: Average amount o f the transfer for VFG in 1998 was f i rs t 8 kg o f wheat a month to 2 mil l ion poor women for 4 months. Later the number o f beneficiaries was increased f i rs t to 4 mi l l ion and finally t o 8 mill ion. The allocation was also increased to 16 kg o f grain for a period o f 8 months. At the time the monetary value o f the transfer was between 100 and 150 Tk per month.

The amount o f the transfer o f the GR in 1998 was about 100 Tk for the households in most severe flood exposure areas. The number o f beneficiaries i s not clear since the transfers were handed out to the districts and then to the Upazila which gave them to the UP chairman that distributed. The data shows that the amounts distributed also depended on the level o f severity o f the exposure to the flood.

Targeting experience in 1998: The VGF program was not effectively targeted in accordance with f lood exposure. 18.7% o f the households not directly exposed to the flood received cards, only a l itt le below the percentage o f households very severely exposed to the flood (24.5%). This was seemingly done by design since some districts that had not been affected by the flood also received an allocation o f cards, albeit in a smaller number.

GR was better targeted towards flood-affected households than VGF. Only 9.6% of households not directly affected by the flood received assistance through the short term GR program, compared with 36.7% o f the very severely affected households. VGF was better targeted to the poor than was GR, 50.9% o f VGF recipients were relatively non-poor households that belong to the top 60% o f the per capita

This annex i s derived from Dorosh, Paul, Carlo del Ninno and Quazi Shahabuddin Eds., 2004. The 1998 Floods and Beyond-Towards Comprehensive Food Security in Bangladesh. The University Press Limited, Dhaka and IFPRI, Washington DC.

26

expenditure distribution or that own 0.5 acres or more o f land. Neither program achieved broad coverage, however: 69.3% o f the flood-exposed households did not receive GR; 76.6% did not receive VGF.

In contrast to VGF, transfers from NGOs appear to be well targeted to households affected by the flood. 24.5% of the very severely flood-exposed households received transfers from NGO’s, compared with only 2.7% of the non-flood exposed households.

Table A-1.1 : Transfers received by expenditure quintiles Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 All

Per capita expenditures (Takdmonth) 319.4 471.5 600.7 778.0 1603.9 755.2 Total household expenditures 1812.3 2672.2 3384.0 4160.3 8315.8 4071.5 (Takdmonth) Household food expenditures 1331.3 1898.9 2410.1 2793.9 5301.3 2748.6 (Takdmonth) Flood exposed households (%) 69.7 70.2 76.2 67.6 71.7 71.1 % of households owning <OS acres 85.5 76.8 67.6 60.9 49.3 68.0

Share o f households receiving transfers (%) Total government transfers 67.1 43.7 49.0 41.1 34.9 47.2

Gratuitous Relief (GR) 31.6 23.8 27.8 21.2 17.8 24.4 Vulnerable Group Feeding (VGF) 38.8 22.5 19.2 17.2 11.2 21.8 Other government transfers 13.2 7.9 14.6 8.6 13.2 11.5

NGO transfers 11.2 11.9 10.6 9.3 11.2 10.8 Private transfers 7.9 9.9 7.9 8.6 11.2 9.1 Total transfers 69.1 53.6 57.6 49.7 46.7 55.4

Average transfer received I household (Takdmonth)a Total government transfers 59.9 31.2 44.1 32.3 25.8 38.7

Gratuitous Relief (GR) 11.9 9.6 11.5 8.3 8.5 9.9 Vulnerable Group Feeding (VGF) 32.4 16.0 15.0 14.2 6.9 16.9 Other government transfers 14.0 5.7 15.1 8.7 10.4 10.8

NGO transfers 8.1 9.6 8.5 6.7 13.2 9.2 Private transfers 23.8 73.5 111.6 232.9 165.9 121.5 Total transfers 93.0 114.8 165.9 271.9 205.1 170.1

Number 152 151 151 151 152 757 Source: FMRSP-IFPFU Bangladesh Flood Impact Survey, 1998.

27

Table A-1.2: Transfers received by index of household exposure to flood N o t exuosed Moderate Severe Very severe All

Per capita expenditures (Takdmonth) 699.2 Total household expenditures 3645.9 (Takdmonth) Household food expenditures 2388.1 (Takdmonth) % of households owning <0.5 Acres 67.1

Percentage o f households receiving transfers Total government transfers

Gratuitous Rel ie f (GR) Vulnerable Group Feeding (VGF) Other government transfers

NGO transfers Private transfers Total transfers

33.3 9.6

18.7 7.8 2.7 8.7

41.1

Average transfer received I household (Takdmonth)a Total government transfers 26.3

Gratuitous Rel ie f (GR) 3.0 Vulnerable Group Feeding (VGF) 13.9

NGO transfers 2.1 Private transfers 111.1 Total transfers 139.7

Other government transfers 9.4

Number 219

1019.1 4485.9

2960.6

64.7

44.1 21.6 24.5

9.8 5.9 9.8

48.0

36.5 6.2

19.8 8.8 3.1

218.2 257.8

102

689.6 41 14.8

2708.0

65.3

50.5 30.6 21.9 11.4 12.1 11.4 60.9

40.7 13.2 16.2 10.2 11.2

134.3 186.5

297

790.0 755.2 4345.8 4071.5

3247.7 2748.6

77.7 68.0

64.0 47.2 36.7 24.4 24.5 21.8 18.7 11.5 24.5 10.8 4.3 9.1

71.2 55.4

55.4 38.7 16.7 9.9 20.9 16.9 15.6 10.8 20.5 9.2 39.4 121.5

118.5 170.1

139 757 Source: FMRSP-IFPFU Bangladesh Flood Impact Survey, 1998.

a Average transfer received over the four month period, July 15 - November 15, 1998.

28

Annex 2

Bangladesh at a glance POVERTY and SOCIAL

Bangladesh 2007 Population. mid-vear (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 2001-07

Population (%I Labor force I%) Most recent estimate (latest year available, 2001-07)

Poverty (% of population below natbnalpoverty line) Urban population (% of total population) Life expectancy at birth (years) Infant mortalitv (per 1,oOO live births) Child malnutrition (% of children under 5) Access to an improved water source f% ofpopu/ation) Literacy f% of population age f5+) Gross primary enrollment (% of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

GDP (US$ billions) Gross capital formatlotdGDP Exports of goods and services/GDP Gross domestic savings/GDP Gross national savings/GDP

Current account balance/GDP interest paymentslGDP Total debffGDP Total debt service/exports Present value of debffGDP Present value of debffexports

(average annual growth) GDP GDP per capita Exports of goods and services

1987

23.8 16.0 5.2 9.1

16.1

-4.1 0.8

33.9 22.9

198787 1997-07

4.4 5.6 2.1 3.6

12.8 11.2

146.9 510 74.5

1.9 2.1

26 64 54 48 74 41

109 107 111

1997

42.3 20.7 12.0 15.9 21.6

-2.0 0.4

36.2 10.3

2006

6.6 4.8

25.8

South Asia

1,470 684

1,005

1.7 2. I

29 63 66 45 84 60

110 116 105

2006

61.9 24.7 19.0 20.2 27.7

1.3 0.4

30.6 4.8

2007

6.5 4.6

27.0

LOW- income

2,353 580

1,364

1 9 2 3

31 59 80 39 75 62

104 110 99

2007

67 7 24 0 22 0 20 5 29 1

1 4

30 3 3 5

2007-11

6 3 4 5

I 1 6

Development diamond'

Life expectancy

T Gross

primary capita enrollment

I

Access to improved water source

-Bangladesh __ Lowincome group

Economic ratios.

Trade

T Do m e s t i c savings formation

Capital

Indebtedness

-Bangladesh ___ Low-income group

STRUCTURE of the ECONOMY

(% of GDP) Agriculture Industry

Services

Household final consumption expenditure General gov't final consumption expenditure Imports of goods and services

Manufacturing

(average annual growth) Agriculture Industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services

Manufacturing

1987 1997

32.4 25.8 20.8 25.1 13.3 15.6 46.8 49.1

86.6 80.9 4.3 4.4

12.1 18.0

1987-97 1997-07

2.5 3.4 6.8 7.4 7.0 6.9 3.9 5.7

3.2 3.9 4.1 8.6 7.1 8.4 8.3 8.0

2006

19.6 27.9 17.2 52.5

76.1 5.5

25.2

2006

4.9 9.7

10.8 6.4

4.6 6.0 8.3

f8.2

2007

18.9 28.5 17.9 52.6

77.3 5.6

28.9

2007

3.2 9.5

11.2 6.7

5.6 6.4 7.2

23.6

Growth of capital and GDP (%)

l5 T

l l l l x i -GCF +GDP

[Growth of exports and imports (%) 1 30

20

10

0

-10 r - Exports -O-lmports I Note: 2007 data are preliminary estimates. Group data are for 2005

* The diamonds show four key indicators in the countw (in bold) compared with its incomeqroup average. If data are missing, the diamond wili be incornDlete.

29

Annex 2

Export and import levels (US$ mill.)

Bangladesh

PRICES and GOVERNMENT FINANCE

Domestic prices (% change) Consumer prices Implicit GDP deflator

Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall surplus/deficit

TRADE

(US$ millions) Total exports (fob)

Raw jute Leather and leather products Manufactures

Total imports (cif) Food Fuel and energy

Xapltal goads-

Export pnce index (2000=1W) Import pnce index (2000=100) Terms of trade (2000=100)

BALANCE of PAYMENTS

(US$ mibons) Exports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Reserves including gold (US$ miliions) Conversion rate (D€C, /oca//US$)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

IBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Officiat creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)

World Bank program Commitments Disbursements Pnncipal repayments Net flows Interest payments Net transfers

1987

10 9

8 6 2 9

-3 9

1987

1,074 104 135 669

2,620 413 230

+56

50 51 97

1987

1,301 2,876

-1,576

-122 731

-966

1,169 -203

30 6

1986

8,062 61

2,450

448 5

28

553 843 55 2 0

337 8

330 25

305

1997

2 5 3 1

9 2 2 3

-4 3

1997

4,334 116 222

3,637 6,447

184 51 5

+ 9 3 +

86 84

102

1997

4,991 7,656

-2,665

-107 1,907

-865

696 169

1,671 42 7

1996

15,341 46

5,713

672 8

92

596 548 -30 14

-117

239 279 54

225 45

180

2006

7 2 5.2

10 7 2 2

-3 3

2006

10,412 148 257

9,535 13,301

1,372 2,004

9 9 5 8

122 141 87

2006

11,752 15,664 -3,912

-702 5,438

824

-486 -338

2,296 67 2

2005

18,928 0

8,688

805 0

223

671 338 -14 802 20

600 547 153 394 70

325

2007

7 2 5 6

10 6 1 5

-3 1

2007

12,053 147 266

11,118 15,511

1,918 2,233

-1 929

132 153 86

2007

13,537 18,256 -4,719

-803 6,554

952

360 -1,312

3,638 69 1

2006

20,521 0

9,297

685 0

242

490 553 -24 697 33

462 398 172 226 70

155

I Inflation e/.) t

O7 I 01 02 03 a4 05 06

I a Exports t# Imports

Current account balance to GDP (56)

I 2 7

-3 A

1 Composition of 2006 debt (US$ mill.)

I C 476

l A - IBRD

I C - I M F G - Shwt-term

E - Bilateral B - IDA D - Other multilateral F - Pnvate

30

Statistical Annex

32

Table 2: Bangladesh Macroeconomic Indicators Description FY02 FY03 FY04 FY05 N O 6 FY07 (P) Growth Rates (YO) GDP Growth GDP Growth Per Capita Per Capita GDP Atlas Method (US$ ) Per Capita GDP Growth Atlas Method (USS )

Saving & Investment (YO o f GDP) Gross Domestic Saving Gross National Saving Private Investment Public Investment

Central Govt. Budget (YO of GDP) Total Revenue Total Expenditure Overall Budget Defici t

Balance of Payments (% of GDP) Trade Exports (f.0.b.) Imports (f.0.b.) Services & Income (net) Current Transfers Current Account Balance ( including transfers)

External Indicators External Debt (US$ b.) Ext. Debt as % of GDP BB Gross Reserves (US$ b.) (end o f period) BB Gross Reserves (in months of imports)

External Debt Service Ratio (% of total foreign exchange earnings)*

Money and Credit M 2 Growth (“h, year-on-year) Net Domestic Asset Growth (%, year-on-year) Ratio o f Private Sector Credit to GDP (“A)

Exchange Rate Nominal Period Average (TI</uS$) Nominal End of Period (Tk/uS$) Real Effective Exchange Rate Index

Rate o f Inflation (%) (year on year)** Total Public Debt (% of GDP)

Memorandum Items GDP at Current. Prices (Tk bill.) GDP at Current. Prices Atlas Method (US$ bill) Population (mill.) Population growth Rate

Source: Various publications of the World Bank, IMF, ADB, and Bangladesh Bureau o f Statistics Total foreign exchange earnings include commodity earnings, workers’ remittances and invisible receipts. ** CPI was rebased from FY98 using FY96 weights Bangladesh Economic Review (2005) P = Provisional Atlas Method was not used for calculating average per capita GDP and GDP at current market prices in the 198Os, in FY04 and FY05

33

4.4 2.9 372 0.2

18.2 23.4 16.8 6.4

10.1 14.8 4.7

26.7 11.6 15.1 -1.6 5.5 0.5

16.3 34.4 1.6 2.1

6.3

13.1 11.6 24.7

57.4 57.9 101.5

2.8 52.9

2,737.3 51.1 132.1

1.5

5.3 3.8 389 4.6

18.6 24.9 17.2 6.2

10.3 13.7 3.4

28.7 12.2 16.4 -2.0 6.5 0.3

17.4 31.9 2.5 2.9

5.8

15.6 12.2 25.8

57.9 58.5 97.0

4.4 51.1

3,005.8 53

134.1 I .5

6.3 4.8 418 7.5

19.5 25.4 17.8 6.2

10.1 13.2 3.1

30.5 13.2 17.3 -2.2 6.6 0.3

18.5 29.5 2.7 2.8

4.9

13.7 13.5 28.4

58.9 60.4 93.4

5.8 51.0

3,329.7 56.9 136.1 1.5

6.0 4.5 44 8 7.0

20.0 25.8 18.3 6.2

10.5 13.8 3.3

33.1 13.9 19.2 -2.4 7.0 -0.8

18.8 29.3 3.0 2.6

4.5

16.9 17.2 29.9

61.5 63.7 91.7

6.5 50.1

3,707.1 61.7 138.2

1.5

6.6 5.1 469 4.8

20.2 27.7 18.7 6.0

10.7 13.9 3.2

36.1 15.8 20.2 -2.6 8.3 1.3

19.4 28.6 3.1 2.4

4.1

19.5 19.7 31.5

66.5 69.7 86.9

7.2 49.3

4,157.3 65.8 140.2 1.5

6.2 4.7 488 4.0

20.5 29.1 18.7 5.6

10.3 13.5 3.2

39.7 17.4 22.4 -3.1 9.4 1.4

19.8 29.0 5.1 3.4

3.7

17.0 12.6 32.3

69.1 68.8 84.6

7.2 47.4

4,675.0 69.4 142.4

1.5

Table 3: Summary Macroeconomic Indicators

Actual Provisional Projections

N O 2 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FYlO Output and Prices

Real GDP Growth CPI

External Outlook Exports (f.0.b) (billion US$)

Imports (c.i.0 (billion US$)

Current account balance (% of

Gross official reserves (billion

In months o f GNFS imports

Annual % change

Annual % change

GDP)

US$)

Public Finance Total Revenue Total Expenditures Overall budget deficit

Domestic financing Public debt

(excluding grants)

Money and Credit Net Domestic assets Private sector

Broad money (M2)

Annual percentage changes

4.4 5.3 6.3 6.0 6.7 6.2 5.5 6.5 7.0 2.8 4.4 5.8 6.5 7.2 7.2 9.0 5.8 4.6

5.9 6.5 7.5 8.6 10.4 12.1 13.7 15.6 17.8 -7.6 9.5 15.9 14.0 21.5 15.8 13.7 13.9 14.1 7.7 8.7 9.8 11.9 13.3 15.5 18.0 20.9 24.2 -8.7 13.1 13.0 20.6 12.1 16.6 16.0 16.1 15.8 0.3 0.3 0.3 -0.9 1.3 1.4 1.2

1.6 2.5 2.7 2.9 3.5 5.0 5.9 7.1 8.4

2.1 2.9 2.8 2.5 2.7 3.2 3.0 3.2 3.4 Percent of GDP

10.1 10.3 10.1 10.5 10.7 10.3 10.8 11.3 11.8 14.8 13.7 13.2 13.8 13.9 13.5 16.0 14.8 15.5 4.7 3.4 3.1 3.3 3.2 3.2 5.3

3.5 3.7 2.5 1.2 1.8 1.7 2.1 2.0 3.4 1.7 1.6 52.9 51.1 51.0 50.1 49.3 47.4 47.3 45.8 44.6

0.5 -0.3

End ofyear; percentage change 11.6 12.2 13.5 17.2 19.7 12.6 11.5 10.3 13.7 13.9 12.6 17.5 17.0 18.3 15.1 14.9 14.4 12.9 13.1 15.6 13.7 16.9 19.5 17.0 14.6 13.0 14.9

Source: IMF & GOB

34

Table 4: Total Expenditure by FunctionMinistry

(percentage o f GDP) MinistryDivision FY02 N O 3 FY04 FY05 FY06 FY07(R) FY08(B)

General Administration General Public Services(GPS) Defense Public Order and Safety(P0S)

Social Services Education Heal th Social Security and Welfare(SSW) Recreation, Culture and Religious

Affairs(RCRA)

Economic Services

Livestock(AFL)

Construction(MMC)

Division(RDC)

Affairs(CHTs)

Employment (CLE)

Agriculture, Fisheries and

Mining, Manufacturing and

Rural Development & Cooperative

Ministry of Chittagong Hill Tracts

Ministry of Commerce, Labor &

Infrastructure Services Ministry of Science & Technology(ST) Fuel and Energy(FE) Transport and Communication(TC) Housing and Community

Services(HCS)

Interest

3.3 1.4 1.2 0.7

3.9 2.2 1 .o 0.6

0.2

1.2

1 .o

0.1

0.1

0.1

0.1

4.2 0.0 0.9 1.9

1.4 0.0 1.7

3.3 1.5 1.1 0.7

3.9 2.2 0.9 0.6

0.2

1.1

0.9

0.1

0.1

0.1

0.1

4.1 0.1 1 .o 1.8

1.3 0.0 1.9

3.4 1.5 1.1 0.7

3.8 2 .o 1 .o 0.6

0.2

2.5

0.9

0.1

1.4

0.1

0.0

3.1 0.0 1.2 1.7

0.2 0.0 1.8

3.5 1.6 1.1 0.8

3.6 1.9 0.9 0.7

0.2

2.9

1.2

0.1

1.4

0.1

0.0

3.2 0.0 1.2 1.8

0.2 0.0 1.8

3.3 1.3 1.1 0.8

4.1 2.2 1 .o 0.7

0.2

2.8

1.1

0.1

1.5

0.1

0.1

2.6 0.0 0.9 1.5

0.2 0.0 1.8

3.4 1.3 1.2 0.9

4.1 2.3 1.1 0.6

0.2

2.8

1.1

0.0

1.5

0.1

0.1

2.1 0.0 0.6 1.3

0.1 0.0 2.0

3.7 1.8 1 .o 0.9

4.2 2.3 1 .o 0.7

0.2

2.8

1.3

0.1

1.3

0.1

0.1

2.3 0.0 0.9 1.3

0.1 0.0 2.0

Total 14.4 14.3 14.5 15.0 14.5 14.4 15.1 Source: Ministry of Finance

R=revised, B= budgeted

35

Table 5: Government of Bangladesh Fiscal Trends Provisional

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Total Revenue Tax Non-Tax

276.8 309.8 339.0 389.2 443.7 483.4 210.3 248.3 274.3 314.1 354.2 389.6 66.5 61.5 64.7 75.1 89.5 93.8

Total Expenditure -404.0 -411.5 -441.7 -513.2 -5783 -632.0 Current expenditure -218.2 -244.5 -258.7 -312.5 -350.5 -429.8 Other expenditures' -2.1 -9.6 -11.3 -2.5 1.2 -4.9 Annual Development Program -152.3 -163.0 -167.9 -185.8 -194.7 -1 80.2 Non-ADP & N e t Lending -17.2 -6.6 -16.0 -24.2 -41.3 -17.1

Residual -14.2 12.2 12.2 11.8 7.0 0.0

Overall budget deficit * 127.2 101.7 102.7 124.0 134.6 148.6

Net foreign financing 58.6 64.2 42.8 60.2 48.1 583

Net domestic financing Banking system Other domestic

68.1 37.5 59.8 63.8 86.4 91.4 21.7 -10.7 13.4 35.0 58.8 41.4 46.4 48.2 46.4 28.8 27.6 50.0

Privatization Receipts 0.6 0.0 0.0 0.0 0.0 0.0

Total Central Government Debt 1445.2 1535.6 1706.0 1857.2 2049.4 2216.0

GDP at current market prices 2732.0 3005.0 3345.0 3707.0 4157.0 4675.0 (As percent of GDP)

Total Revenue 10.1 10.3 10.1 10.5 10.7 10.3 Tax 7.7 8.3 8.2 8.5 8.5 8.3 Non-Tax 2.4 2.0 1.9 2.0 2.2 2.0

Total Expenditure 14.8 13.7 13.2 13.8 13.9 13.5 Current expenditure 8.0 8.1 7.7 8.4 8.4 9.2

Other expenditures' 0.1 0.3 0.3 0.1 0.0 0.1 Annual Development Program 5.6 5.4 5.0 5.0 4.7 3.9 Non-ADP & Net Lending 0.6 0.2 0.5 0.7 1 .o 0.4

Residual -0.5 0.4 0.4 0.3 0.2 0.0

Overall budget deficit 4.7 3.4 3.1 3.3 3.2 3.2

Net foreign financing 2.1 2.1 1.3 1.6 1.2 1.2

Net domestic financing Banking system Other domestic

2.5 1.2 1.8 1.7 2.1 2.0 0.8 -0.4 0.4 0.9 1.4 0.9 1.7 1.6 1.4 0.8 0.7 1.1

Privatization Receipts 0.0 0.0 0.0 0.0 0.0 0.0

Total Central Government Debt 52.9 51.1 51.0 50.1 49.3 47.4 Source: IMF and Staff estimates * The overall budget deficit for 2004105 includes externally financed flood-related expenditure 1 / include food account surplus(-)/deficit(+) and extraordinary expenditures

2/ Non-ADP & Net Lending in FY06 includes bonds (10 billion taka) issued to a nationalized commercial bank to assume BPC's liabilities. 3/ Non-ADP &Net Lending includes bonds (84 billion taka) issued to three nationalized commercial banks to assume BPC's liabilities.

36

Table 6: Bangladesh - Key Economic Indicators Indicator FY02 FY03 FY04 FY05 FY06 FY07(P) National Accounts (as % of GDP) Gross Domestic Product"

Agriculture Industry Services

Total Consumption Gross Domestic F ixed Investment

Government Investment Private Investment

Export (GNFS)b Imports (GNFS)

Gross Domestic Savings

Gross National Savings

Memorandum Items Gross Domestic Product (US$ m i l l i on at current prices) GDP per capita (US$, Atlas Method)

Real Annual Growth Rates (%) GDP at constant market prices GNI at constant market prices

Balance of Payments (US$ millions) Exports (GNFS)

Merchandise $0. b.

Imports (GNFS) Merchandise c.i$

Resource Balance Ne t Current Transfers Current Account Balance Foreign Direct Investment

Ne t Aid F l o w Aid Disbursement Debt Amortization

Other Capital e

Change in Reserves

Memorandum Items: Resource Balance (% o f GDP)

100.0 21.9 25.4 49.0

81.8 23.2 6.4 16.8

14.3 19.0

18.2

23.4

47,565.0

386.9

4.4 5.5

6,793.0 5,929.0

9,06 1 .O 7,697.0

-2,268.0 2,826.0 157.0 391.0 541.0 963.0 -422.0 -5 14.0

-408.0

-4.8

37

100.0 21.0 25.3 50.1

81.4 23.4 6.2 17.2

14.3 19.9

18.6

24.9

51,719.0

395.1

5.3 6.2

7,379.0 6,492.0

10,285.0 8,707.0

-2,906.0 3,440.0 176.0 376.0 466.0 918.0 -452.0 -482.0

-815.0

-5.6

100.0 20.2 25.5 50.2

80.5 24.0 6.2 17.8

14.9 20.6

19.5

25.4

56,554.0

418.3

6.3 6.0

8,445.0 7,521.0

11,638.0 9,840.0

-3,193.0 3,743.0 176.0 276.0 147.0 544.0 -397.0 -433.0

-171.0

-5.6

100.0 19.3 26.1 50.5

80.0 24.5 6.2 18.3

16.2 23.1

20.0

25.8

60,299.0

446.4

6.0 5.8

9,750.0 8,573.0

13,917.0 11,870.0

-4,167.0 4,290.0 -557.0 800.0 491.0 940.0 -449.0 -830.0

-161.0

-6.9

100.0 18.9 26.9 50.6

79.8 24.7 6.0 18.7

18.9 25.3

20.3

27.7

62,016.0

469.1

6.6 8.1

11,752.0 10,4 12.0

15,664.0 13,301.0

-3,9 12.0 5,438.0 824.0 743.0 535.0

1,023.0 -488.0 -1649

-338.0

-6.3

100.0 18.2 27.6 50.8

79.5 24.3 5.6 18.7

19.8 26.7

20.5

29.2

68,337.0

487.7

6.2 7.9

13,537.0 12,053.0

18,256.0 153 11 .O

-4,719.0 6,554.0 952.0 760.0 512.0

1,037.0 -525.0 -501

-1,493.0

-6.9

Real Annual Growth Rates Merchandise Exports (f.0.b.) -7.6 9.5 15.9 14.0 21.5 15.8 Merchandise Imports ( c i f . ) -8.7 13.1 13.0 20.6 12.1 16.6

Indicator FY02 FY03 FY04 FY05 FY06 FY07(P) Public Finance (as % of GDP at mkt prices) Total Revenues Current Expenditure Overall Budget Def ic i t Capital Expenditure Ne t Foreign Financing

Monetary Indicators M2/GDP Growth o f M2 (year on year % change) Private Sector Credit Growth (year on year % change) Tota l Domestic Credit Growth (year on year % change)

Prices Indices (FY96 = 100) Merchandise Export Price Index Merchandise Import Price Index Merchandise Terms o f Trade Index

Nominal Exchange Rate (USSLCU)

Consumer Price Index (% change)

10.1 8.0 4.1 6.2 2.1

36.1 13.1

13.9

13.2

123.2 146.4 84.1

57.4

2.8

10.3 8.1 3.4 5.6 2.1

37.9 15.6

12.6

8.0

126.2 157.8 80.0

57.9

4.4 4.5

10.2 7.8 3.1 5.5 1.1

38.9 13.7

12.0

11.9

135.2 164.2 82.4

58.9

5.8

10.5 8.4 3.3 5.7 1.6

40.8 16.9

17.0

17.4

139.6 170.0 82.1

61.5

6.5 5.1

10.7 8.4 3.2 5.7 1.2

43.4 19.5

18.3

21.1

142.4 176.7 80.6

66.5

7.2

10.3 9.2 3.2 3.9 1.2

45.0 17.0

15.1

14.9

145.9 183.8 79.4

69.1

7.2 GDP Deflator (% change) 3.2 4.2 5.2 5.6 Source: Bangladesh Bureau o f Statistics, Bangladesh Bank and IMF a/ GDP at current market price b/ "GNFS" denotes "goods and non-factor services" c/loans only. For FY05 includes flood-related donor assistance o f US$123 million, plus World Bank loans (DSC I1 and education) totaling another US$300 million that were originally planned for FY04.

dl excluding transfers

e/ Other short-term loans + other assets + trade credit in the BOP f/ Nominal period average exchange rate "LCU' denotes "local currency units". An increase in US$/LCU denotes appreciation P = Provisional

38

Table 7: Bangladesh Social Indicators

Latest Single Year Same RegiodIncome Group 1999- 2002- 2003- 2004- South LOW-

1991-92 1995-96 2000 03" 04 05 Asia Income Population Total population end o f the year (millions) 113.3 122.1 129.8 133.4 135.2 137.0 1425.0 2312.0

Growth rate (%annual average for period) 2.1 1.8 1.4 1.4 1.3 1.3 1.8 1.9 Urban population (% ofpopulation) 18.0 19.0 25.0 27.0 ... 28.0 30.0 Total fertility rate (births per woman) 4.2 3.4 3.1 2.9 3.0 3.1 3.7 Poverty (Lower poverty line) (% ofpopulation) National Headcount Index 42.7 34.4 33.7 ... 25.1 ... ...

Urban Headcount Index 23.3 13.7 19.1 ... 14.6 ... ... Rural Headcount Index 46.0 38.5 37.4 ... 28.6 ... ...

Income GNI per capita (US$)at constant prices 283.0 343.5 381.0 400.0 420.0 440.0 510.0 440.0 Consumer Price Index (1 995/96=100) 100.0 124.3 136.0 143.9 153.2 136.0 142.0

IncomelConsumption Distribution Gini Co-efficient 0.4 0.4 0.5 ... 0.5 ... ...

Food Price Index (1 995/96=100) 100.0 128.5 137.0 146.5 158.1 ... ...

Lowest Quintile (% o f income or consumption) 6.5 5.7 6.2 ... 5.3 ... ... Highest Quintile (% o f income or consumption) 44.8 50.1 52.0 ... 52.7 ... ...

Health (% of GDP) 0.6 0.7 1.0 1.0 1.0 1.9 0.9 1.2 Education (% of GDP) 1.7 2.1 2.2 2.2 2.1 0.9 3.1 3.3 Social Security and Welfare (% of GDP) ... ... 1.0 0.6 0.6 0.7 ... ...

Public Expenditures

Gross Primary School Enrolment Rate (% of age group) Total 76.0 95.0 96.6 97.3 97.0 97.0 95.0

Male ... 97.0 97.0 97.0 97.0 108.0 103.0 Female 70.0 93.0 97.0 98.0 98.0 89.0 87.0

Access to an Improved Water Source (% ofpopulation) Total ... ... 97.0 97.0 97.0 84.0 76.0

Urban ... ... ... ... 92.0 88.0 ...

Immunization Rate (% under 12

Measles 68.0 69.0 71.0 76.0 75.7 77.0 63.0 64.0 DPT ... 77.0 83.0 87.0 75.0 70.0 ...

Child Malnutrition (% of under 5 years) 73.0 66.0 49.1 48.0 47.5 47.0 ... Life Expectancy at Birth (years) Total 56.3 58.9 61.5 62.1 65.1 63.0 59.0

Male 55.0 57.0 61.0 ... 64.4 62.0 58.0 Female 56.0 59.0 62.0 ... 65.7 63.0 60.0

Infant (per thousand live births) 88.0 77.0 ... 66.7 65.0 56.0 74.0 77.0 Under 5 (per thousand live births) ... 112.0 ... 84.6 88.0 77.0 99.0 116.0

Male (per 1000population) ... ... 278.0 262.0 ... ... Female (per 1000population) ... ... 272.0 252.0 ... ... Maternal (per 100,000 live births) 4.7 4.4 ... 3.2 3.2 300.0 ... ...

Mortality

Adult (1 5-69)

... ... Births attended by skilled health staff (%) 7.0 ... 14.0 11.6 13.0 13.0 Source: Unlocking the Potential-Poverty Reduction Strategy Paper (GOB) ,Bangladesh Bureau o f Statistics and World Bank a/ Some data correspond to 2000-01 and 2001-02 b/ The immunization rates in 2003/04 are for children 12-23 months old.

39

Table 8: Bangladesh: Key Exposure Indicators

(in US$ m i l l i on unless otherwise stated) Actual Estimate Projection

2002 2003 2004 2005 2006 2007 Total debt outstanding and disbursed (TDO)

Ne t disbursements

Total debt service (TDS)a

Debt and debt service indicators (%)

TDORGS~ TDO/GDP TDS/XGS ConcessionaVTDO

IBRD exposure indicators (%)

IBRD DSPub l i c D S Preferred creditor DSPub l i c

IBRD DS/XGS IBRD TDOd (USSmiIl) Share o f IBRD portfol io IDA TDOd (USSmilI)

DS‘

IFC Loans Equity and quasi-equitye

MIGA MIGA euarantees

17,061.0

217.0

727.0

182.6 35.9 7.8 92.8

0.9

55.2

0.1 13.0 0.0

7,063.0

88.0 13.0

18,778.0

337.0

672.0

178.8 36.2 6.4 93.2

1.1

63.9

0.1 7.0 0.0

8,062.0

94.0 13.0

64.0 61.0

19,321.0

543.0

958.0

162.6 34.0 8.1 ...

0.8

39.5

0.1 0.0 0.0

8,208.0

116.0 12.0

46.0

20,364.0

1,010.0

1,018.0

160.9 33.5 8.0 ...

0.0

41.7

0.0 0.0 0.0

8,805.0

98.0 12.0

...

21,379.0

1,015.0

1,039.0

161.1 34.0 7.8 ...

0.0

45.0

0.0 0.0 0.0

9,480.0

...

...

...

22,354.0

975.0

1,107.0

158.9 33.3 7.9 ...

0.0

48.6

0.0 0.0 0.0

10,099.0

...

...

...

a/ Includes public and publicly-guaranteed debt, private non-guaranteed, use o f IMF credits and net short-term capital b l “XGS” denotes exports o f goods and services, including workers’ remittances c l Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements d/ Includes present value o f guarantees el Includes equity and quasi-equity types o f both loan and equity instruments

40

Table 9: Bangladesh - Progress Towards MDGs

2015

PRSP MDG targetb target

1980 1990 2000’ 2002 2004-05d

Poverty Headcount Ratec Fertility Rate (children per woman) Infant Mortality (per 1,000 live births) Crude Birth Rate (per 1,000 population) Crude Death Rate (per 1,000 population) Li fe Expectancy (years) Gross Primary Enrollment (%) Gross Secondary Enrollment (“A) Adult Illiteracy (“A)

... 5.0

101.4 33.4 10.2 56.9 61.0 18.0 71.0

58.8 49.8 ... 40.8 25.0 29.4 4.3 3.0 3 .O 3.0 94.0 66.3 53.0 56.0 18.0 31.0 32.8 19.9 20.1 20.8 11.3 4.8 5.1 5.7 56.0 60.6 62.0 63.5 73.0 73.0 72.0 96.6 86.7 97.0 100.0 100.0 19.0 42.0 52.8 44.0 95.0 65.0 55.0 50.4 41.1 10.0

Source: Unlocking the Potential-Poverty Reduction Strategy Paper (GOB) ,Bangladesh Bureau o f Statistics a/ Some data are for 1999 b/ Based on the progress rate o f 1990-02 c/ The poverty headcount rate refers to the upper poverty l ine d/ 2004 Crude Birth rate and Crude death rate figures

41

MAP SECTION

R A J S H A H IR A J S H A H I

D H A K AD H A K A

S Y L H E TS Y L H E T

K H U L N AK H U L N A

B A R I S A LB A R I S A L

C H I T TC H I T T A G O N GA G O N G

PPANCHAGARANCHAGAR

THAKURGAONTHAKURGAONNILPHAMARINILPHAMARI

LALMONIRHA

LALMONIRHATT

DINAJPURDINAJPUR

RANGPURRANGPURKURIGRAMKURIGRAM

GAIBANDHAGAIBANDHA

JOYPURHAJOYPURHATT

NAOGAONNAOGAON

NOWNOWABGANJABGANJ

RAJSHAHIRAJSHAHI

NANATORETORE

BOGRABOGRA

JAMALPURJAMALPUR

SERPURSERPUR

NETROKONANETROKONA

MYMENSINGHMYMENSINGH

TTANGAILANGAILSERAJGANJSERAJGANJ

PPABNAABNA

KUSHTIAKUSHTIA

MEHERPURMEHERPUR

CHUADANGACHUADANGA

JHENAIDAHJHENAIDAH MAGURAMAGURA

RAJBARIRAJBARI

FFARIDPURARIDPUR

MANIKGANJMANIKGANJ

DHAKADHAKA

GAZIPURGAZIPUR

KISHORGANJKISHORGANJHABIGANJHABIGANJ

SUNAMGANJSUNAMGANJ

SYLHETSYLHET

MOULMOULVI BAZARVI BAZAR

BRAHMANBRAHMANBARIABARIA

NARSINGDINARSINGDI

NARANARAYNGANJYNGANJ

MUNSHIGANJMUNSHIGANJ

SARIASARIATPURTPUR CHANDPURCHANDPUR

COMILLACOMILLA

MADARIPURMADARIPURGOPGOPALGANJALGANJ

NARAILNARAILJESSOREJESSORE

SASATKHIRATKHIRA

KHULNAKHULNA

BAGERHABAGERHATT

PEROJPURPEROJPUR

BARISALBARISAL

JHALUKAJHALUKATHITHI

PPAATUAKHALITUAKHALIBHOLABHOLA

BARGUNABARGUNA

LUXMIPURLUXMIPUR

NOAKHALINOAKHALI FENIFENI

KHA

GRA

CH

HA

RI

KHA

GRA

CH

HA

RI

RANGAMARANGAMATITI

CHITTCHITTAGONGAGONG

BANDARBANBANDARBAN

COXCOX’’SSBAZARBAZAR

RangpurRangpur

GaibandhaGaibandha

DinajpurDinajpur

BograBogra

SerajganjSerajganjNatoreNatore

JoypurhatJoypurhat

NaogaonNaogaon

NowabganjNowabganj

JamalpurJamalpurSerpurSerpur

NetrokonaNetrokona

SunamganjSunamganj

PabnaPabna

KushtiaKushtia

RajbariRajbariMeherpurMeherpur

ChuadangaChuadanga

JhenaidahJhenaidahMaguraMagura

NarailNarail

SatkhiraSatkhira

BagerhatBagerhat

PerojpurPerojpur

JhalukathiJhalukathi

GopalganjGopalganj

MadaripurMadaripurSariatpurSariatpur

FaridpurFaridpur

JessoreJessore

NoakhaliNoakhali

KhagrachhariKhagrachhari

PatuakhaliPatuakhali

BholaBhola

BargunaBarguna

ComillaComilla

Moulvi BazarMoulvi Bazar

MymensinghMymensingh

TTangailangail

ManikanjManikanj

RangamatiRangamati

BandarbanBandarban

Cox's BazarCox's Bazar

ThakurgaonThakurgaon

NilphamariNilphamari LalmonirhatLalmonirhat

KurigramKurigram

PanchagarPanchagar

FeniFeni

GazipurGazipurNarsingdiNarsingdi

NaraynganjNaraynganj

MunshiganjMunshiganj

ChandpurChandpur

LuxmipurLuxmipur

BrahmanbariaBrahmanbaria

HabiganjHabiganj

KishorganjKishorganj

RajshahiRajshahi

KhulnaKhulna

SylhetSylhet

BarisalBarisal

ChittagongChittagong

DHAKADHAKA

JJaammuunnaa

GGaannggeess

GGaannggeess

MMeegg

hhnnaa

KarKarnalinaliReserReservoirvoir

GG aa nn gg ee ss DD ee ll tt aa

SS uu nn dd aa rr bb aa nn ss

R A J S H A H I

D H A K A

S Y L H E T

K H U L N A

B A R I S A L

C H I T T A G O N G

PANCHAGAR

THAKURGAONNILPHAMARI

LALMONIRHAT

DINAJPUR

RANGPURKURIGRAM

GAIBANDHA

JOYPURHAT

NAOGAON

NOWABGANJ

RAJSHAHI

NATORE

BOGRA

JAMALPUR

SERPUR

NETROKONA

MYMENSINGH

TANGAILSERAJGANJ

PABNA

KUSHTIA

MEHERPUR

CHUADANGA

JHENAIDAH MAGURA

RAJBARI

FARIDPUR

MANIKGANJ

DHAKA

GAZIPUR

KISHORGANJHABIGANJ

SUNAMGANJ

SYLHET

MOULVI BAZAR

BRAHMANBARIA

NARSINGDI

NARAYNGANJ

MUNSHIGANJ

SARIATPUR CHANDPUR

COMILLA

MADARIPURGOPALGANJ

NARAILJESSORE

SATKHIRA

KHULNA

BAGERHAT

PEROJPUR

BARISAL

JHALUKATHI

PATUAKHALIBHOLA

BARGUNA

LUXMIPUR

NOAKHALI FENI

KHA

GRA

CH

HA

RI

RANGAMATI

CHITTAGONG

BANDARBAN

COX’SBAZAR

Rangpur

Gaibandha

Dinajpur

Bogra

SerajganjNatore

Joypurhat

Naogaon

Nowabganj

JamalpurSerpur

Netrokona

Sunamganj

Pabna

Kushtia

RajbariMeherpur

Chuadanga

JhenaidahMagura

Narail

Satkhira

Bagerhat

Perojpur

Jhalukathi

Gopalganj

MadaripurSariatpur

Faridpur

Jessore

Noakhali

Khagrachhari

Patuakhali

Bhola

Barguna

Comilla

Moulvi Bazar

Mymensingh

Tangail

Manikanj

Rangamati

Bandarban

Cox's Bazar

Thakurgaon

Nilphamari Lalmonirhat

Kurigram

Panchagar

Feni

GazipurNarsingdi

Naraynganj

Munshiganj

Chandpur

Luxmipur

Brahmanbaria

Habiganj

Kishorganj

Rajshahi

Khulna

Sylhet

Barisal

Chittagong

DHAKA

I N D I A

I N D I A

I N D I A

MYANMAR

BHUTAN

Jamuna

Ganges

Ganges

Meg

hna

KarnaliReservoir

B a y o f B e n g a l

M o u t h s o f t h e G a n g e s

To Dispur

To Dispur

To Dispur

To Silchar

To Goalpara

To Patna

To Katihar

To Katihar

To Gangtok

To Sittwe

To Calcutta

To Calcutta

G a n g e s D e l t a

S u n d a r b a n sMt. Mowdok

(957 m)

26°N

25°N

24°N

23°N

22°N

21°N

25°N

24°N

23°N

22°N

21°N

88°E 89°E 90°E 91°E

89°E 90°E 91°E 92°E

92°E

BANGLADESH

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 10 20 30 40

0 10 20 30 40 50 Miles

50 Kilometers

IBRD 33368

SEPTEMBER 2004

BANGLADESHDISTRICT CAPITALS

DIVISION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

DIVISION BOUNDARIES

INTERNATIONAL BOUNDARIES