World Bank: US$200 million for Bangladesh flood recovery project
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WORLD BANK MOVES SWIFTLY TO PROVIDE US$200 MILLION FOR BANGLADESH FAST-TRACK EMERGENCY FLOOD RECOVERY PROJECT
DHAKA, November 25, 1998 - The World Bank today announced the approval of a US$200 million credit to Bangladesh for a fast-track emergency flood recovery project as part a broader effort to help the country respond to the devastating floods of July-September 1998. The project will provide quick-disbursing assistance to maintain macroeconomic stability while helping to finance import costs associated with restoring damaged infrastructure, production levels, and food grain stocks.
"The Bank has worked rapidly to respond to Bangladesh's request for assistance in its hour of need in the aftermath of this year's floods. The way this project was put together is, I believe, a good example of how the new Bank is working to be more client-responsive. This required tight collaboration between the Bank Headquarters, the Bank's Dhaka Office, and the Government," says Shekhar Shah, World Bank project team leader and Country Anchor for Bangladesh.
The project will provide assistance for: the agricultural sector to ensure that farmers have adequate supplies of seeds, fertilizers, and other agricultural inputs for planting the next rice crop; additional food grain imports in order to maintain and augment food grain stocks that would otherwise be depleted with the partial loss of two rice crops; the manufacturing sector, in order to enable manufacturers to import machinery, spare parts, and other raw materials; and additional imports of fuel, cement, and other construction materials that are needed for relief operations and repair of physical infrastructure. Up to 20 percent of the credit proceeds could be used retroactively for eligible imports for which payments were made after July 12, 1998, the date of the onset of severe flooding.
"The Bank is following a three-part strategy to help Bangladesh respond to this natural disaster," says Fred Temple, World Bank Country Director for Bangladesh. "First, the Bank is providing quick disbursing assistance to help maintain macroeconomic stability in the short-term through the emergency flood recovery project. Second, Bank staff are working with the government and other development partners to reprogram existing IDA-financed projects and those under preparation to finance the repair of damaged infrastructure and facilities. Based on preliminary damage estimates, we currently anticipate that 8 of the 22 ongoing IDA-financed projects will be restructured to finance US$116 million of rehabilitation-related expenditures. The third part of the Bank's response focuses on long-term strengthening of the country's capacity for disaster preparedness and management."
About the 1998 Floods in Bangladesh
Unlike previous floods, the floods of July-September 1998 lasted an unprecedented eleven weeks, ranking now as perhaps the worst floods in living memory. While it is still too early to have a definitive explanation for this prolonged flooding, the 1998 floods appear to have been caused by the simultaneous rise of three rivers that usually crest at different times, as well as by a rise in sea levels in the Bay of Bengal, which impeded the rivers' drainage into the sea.
The floods inundated two-thirds of the country, affected some 30 million people, and caused over 1,100 deaths. They also severely damaged an estimated 15,000 kilometers of roads, 14,000 schools, hundreds of bridges and culverts, and close to 500,000 homes.
The floods will have a substantially adverse impact on economic growth in 1998/99. The floods damaged rice crops, inundated small and large industries, disrupted the major manufacturing export of ready-made garments, and severed important infrastructure links such as the road between Dhaka and Bangladesh's main port of Chittagong.
Restoring production capacity to its pre-flood levels will take time. A preliminary assessment suggests that GDP growth in 1998/99 could decline to below 4 percent from the 5.6 percent achieved in 1997/98. The agricultural sector is likely to suffer the largest loss. In addition, it is anticipated that the floods will have a negative impact on Bangladesh's balance of payments and budget deficit. In response to anticipated macroeconomic impacts, the government has taken a series of measures designed to reduce pressure on the balance of payments and the budget. With these measures and the emergency support from IDA and the International Monetary Fund, as well as additional food aid and financial support from other donors, the post-flood current macroeconomic situation is expected to remain stable.
The US$200 million credit is provided by the International Development Association (IDA), the World Bank's concessionary lending affiliate, on standard IDA terms, with a 40-year maturity, including a 10-year grace period. The full credit amount is expected to be disbursed by December 31, 1999.