The Bank Group’s support to Bangladesh was informed by government priorities as articulated in Vision 2021 (Center for Policy Dialogue 2007) and the Seventh Five Year Plan (Government of Bangladesh 2015), and the priorities identified in the Bank Group’s 2015 SCD (World Bank 2015a). The Bank Group supported several IDA priorities and adjusted to major shocks during the review period. However, some of its activities went beyond what the authorities were prepared to support (for example, on water resource management and financial sector modernization), resulting in projects being aborted or canceled after approval.
The Bank Group contributed to increasing power generation capacity and access to clean energy, improving rural populations’ access to all-season roads, and improving financial inclusion. It contributed to a significant increase in access to primary and secondary education, especially for girls and vulnerable populations, and to a reduction in child and maternal mortality rates. The Bank Group also helped enhance country preparedness for and resilience to natural disasters due to climate change, and supported reforms in procurement through the introduction of e-procurement. Although it is too soon to assess the impact of support on displaced populations and host communities, the World Bank has played an important convening role and has responded to the government’s concerns with the nature of the support it provided.
However, there are some areas in which Bank Group support has not led to meaningful results. Bank Group interventions in regional transport and urban services continue to experience implementation challenges. Efforts to advance economywide structural reforms (for example, reforms related to the financial sector, trade, investment climate, and PPPs)—which are critical to the country’s middle-income aspirations—gained little traction with the authorities and achieved few results. Improvements in water resource management also proved elusive. Although significant progress was made to improve education access, data on improvements in learning outcomes were not systematically collected.
Headline official data suggested that the fiscal position of Bangladesh’s central government over the evaluation period was sound, but underlying vulnerabilities rose and were significantly higher in 2019 than in 2010. Although World Bank staff flagged the main fiscal vulnerabilities early in the evaluation period and became increasingly aware that fiscal and banking sector vulnerabilities were mounting, Bangladesh was consistently assessed to be at low risk of debt distress, and macroeconomic risks were regularly assessed as moderate and fundamentals as strong. Greater attention to fiscal vulnerabilities, and a more cautious public assessment of fiscal risks, would have been warranted given issues such as Bangladesh’s low tax-to-GDP ratio, rising interest costs as a share of current expenditures, eroded central bank independence, high and rising NPLs in state-owned banks, an underfunded public sector pension system, concerns with the quality of banking sector supervision (including understatement of NPLs in the banking system more broadly), growing explicit and implicit contingent liabilities in SOEs and the banking sector, and concerns with the quality of GDP data.
In a number of cases, and in the absence of a government commitment, the Bank Group maintained its engagement by producing relevant analytical work that could inform its dialogue with the government and allow it to respond more rapidly when conditions permitted (for example, regarding banking sector reform). The World Bank consistently delivered clear, objective analysis and cautioned about emerging vulnerabilities in the financial sector, but rising vulnerabilities on the fiscal side were sometimes downplayed by the World Bank in the second half of the evaluation period, contributing to a preexisting sense of complacency.
During the CPE period, the Bank Group proactively supported the government in addressing the Rohingya crisis and the COVID-19 pandemic. The Bank Group leveraged internal synergies through complementary and joint work in energy, although progress on private sector development was not forthcoming. Together with other development partners, the Bank Group sustained its long-standing engagement in health and education through the SWAP. The Bank Group also produced analytical work that meaningfully informed dialogue with authorities and underpinned lending.
Despite mixed performance across the portfolio and deteriorating indicators of institutional quality and economic management, the portfolio grew significantly in size and complexity over the review period. Although Bangladesh’s performance-based allocation from IDA declined as a result of deteriorating CPIA indicators, this decline was more than offset by allocations from the World Bank’s Scale-Up Facility, potentially sending mixed signals about the role of IDA’s performance-based incentives.
Experience over the evaluation period suggests the following lessons:
- Rebalancing the portfolio in the face of changing conditions and a difficult political economy helped the Bank Group remain relevant in Bangladesh. In the wake of the Padma Bridge cancellation, the World Bank successfully reallocated financing away from large infrastructure and toward human development, where the World Bank had long-standing and successful engagement. Through SWAps in education and health, the World Bank, together with other development partners, helped achieve good results related to access to education and health.
- Where reform is deemed critical to sustain development progress but government commitment is weak or absent, continued targeted analysis of key development constraints—highlighting the costs and risks associated with inaction—can help prepare the ground for future action when a window of opportunity presents itself. In turn, active engagement of Bank Group management with high-level decision makers on critical reforms can help foster ownership and sustainability of reform.
- Measuring improvements in the quality of education requires deliberate and ongoing investment in data collection.
- Despite a decline in the country’s PBA, the overall IDA financing increased, largely due to the Scale-Up Facility. The World Bank also resumed budget support operations in a context of persistently low domestic revenue mobilization and governance shortcomings. These developments raise a question about the alignment of the PBA and Scale-Up Facility in terms of the significance that IDA assigns to measures of institutional quality and governance.
- Given the presence of significant explicit and implicit contingent liabilities, concerns about the quality of financial sector and national accounts data, and supervisory shortcomings in the financial sector, the World Bank could provide clearer caveats in its public statements about the quality of the macroeconomic framework. Underlying concerns with data quality and coverage (for example, the lack of information on SOE-contingent liabilities, underreporting of NPLs, and questions about the accuracy of GDP data) could be more explicitly taken into account in macroeconomic assessments.
- FSAP arrangements between the World Bank and the IMF can constrain the ability of the World Bank to provide comprehensive and timely assessments of financial sector vulnerabilities in nonsystemically important economies. The Bangladesh experience points to challenges in the World Bank’s ability to obtain a timely assessment of financial stability in some client countries, given the current division of labor with the IMF on the FSAP and differences in the prioritization criteria between the World Bank and the IMF.
- See chapter 8, Government of Bangladesh (2012).The Bank Group–supported Nationally Determined Contribution Support Facility is helping countries like Bangladesh address barriers to lowering their carbon footprint in their power sectors, which currently account for a significant portion of their greenhouse gas emissions.