World Bank provides US$130 million to help Bangladesh respond to food crisis

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Crisis pushes four million Bangladeshis back into poverty

WASHINGTON, October 29, 2008- Poor families affected by high food prices stand to benefit from a US$130 million World Bank credit to Bangladesh. The financing is designed to ease the pressure on the country's current budget which is staggering from expansion of food-related spending including social protection programs.

The Food Crisis Development Support Credit Project, approved today by the World Bank, is part of the Bank's fast-track Global Food Response Program (GFRP).

"The spike in food prices, compounded by rising prices of other commodities, has pushed over four million Bangladeshis back into poverty," said Xian Zhu, World Bank Country Director for Bangladesh."This credit will help reduce the pressure on the budget and ensure continuation of the Government's social protection programs, designed to the help the poorest people deal with rising food costs."

According to a World Bank projection the food price shock has increased Bangladesh's poverty rate by around 3 percentage points. It also found that nearly 8 percent of the surveyed households pulled their children out of schools to get jobs to assist their families cope with the crisis. In addition, many poor households have cut their food intake.

The Government has allocated US$800 million in its FY09 budget to deal with this crisis. These measures include making food grain, particularly rice, available to poor people at subsidized prices, scaling up existing safety net programs, setting up a new employment guarantee scheme to help people in poor areas, and increasing the country's strategic food reserves.

The Bank is also providing ongoing assistance to strengthen Bangladesh's social safety net programs, including a new 100 day employment guarantee scheme that started on September 15 this year. Meanwhile, the country has taken several actions over the last 15 years that have strengthened the safety net system. For example, the country is gradually moving to cash-based safety nets to avoid both inefficiencies and possible diversion of funds along the complex procurement, storage, and distribution chain. NGOs and development partners are helping maintain oversight of many of the safety net programs.

"It is critically important to help Bangladesh cope with this crisis,"said Vinaya Swaroop, World Bank Lead Economist and project task team leader. "In the absence of concessionary financing resources, the Government would need to curtail development spending or other pro-poor programs in order to sustain its increased social spending. This credit will help the government to respond to immediate crisis-related needs while protecting other programs to promote growth and poverty reduction."

Bangladesh's progress in strengthening its own institutional arrangements for public expenditure, financial management and procurement is reflected in its improved rating under the World Bank's Country Policy and Institutional Assessment (CPIA).

The credit from the International Development Association (IDA), the World Bank's concessionary arm, has 40 years to maturity with a 10-year grace period; it carries a service charge of 0.75 percent.


In Dhaka: Mehrin A. Mahbub (880-2) 8159001-28 Ext. 4251,

In Washington: Erik Nora (202) 458 4735,