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The World Bank Group in Bangladesh


Key Messages

  • This Country Program Evaluation assesses the development effectiveness of the World Bank Group’s engagement with Bangladesh over the past decade.
  • Bangladesh is widely acknowledged to be a development success story, having reached lower-middle-income status less than 50 years after its independence in 1971. Success was underpinned throughout much of the past five decades by strong macroeconomic fundamentals, good progress in reducing extreme poverty, increasing access to primary and secondary education, and decreasing under-five mortality rates. Growth over the past decade has been driven by the ready-made garment sector and by remittances from migrant workers.
  • However, as the country transitions to middle-income-country status, critical economywide reforms are needed for it to sustain progress. The impact of the coronavirus (COVID-19) pandemic on the economy, particularly on the ready-made garment sector, has accentuated the country’s vulnerabilities to fiscal and financial risks associated with a low tax-to–gross domestic product ratio, contingent liabilities from state-owned enterprises, and weaknesses in the banking sector, which existed well before the pandemic.


The World Bank Group made important contributions over the past decade to help Bangladesh address several of its development challenges. The most notable contributions included support for (i) increasing power generation capacity, (ii) improving access to clean energy, (iii) improving access of rural populations to all-season roads, (iv) improving financial inclusion, (v) increasing equity in access to primary and secondary education (especially for girls and the vulnerable populations), and (vi) reducing child and maternal mortality. The Bank Group also played a positive role in enhancing Bangladesh’s preparedness and resilience in the face of natural disasters caused by climate change.

However, achievements fell short in several areas. In education, while the Bank Group contributed to improvements in access, it did not invest sufficiently in data and measurement, particularly on learning outcomes, despite the fact that inadequate monitoring of education outcomes had been identified as a shortcoming in the 2009 Independent Evaluation Group Country Assistance Evaluation for Bangladesh. Progress on regional connectivity was negatively impacted by the Bank Group’s decision to step back from large infrastructure projects in the wake of the Padma Bridge cancellation. In other areas, domestic vested interests prevailed, resulting in little progress in improvements to the business environment, natural resource management, banking sector reform, and tariff reform.

Bank Group support adapted in response to changing circumstances. In light of the difficulties experienced with large infrastructure projects early in the evaluation period (fiscal years 2011–14), resources were shifted to sectors in which the Bank Group had more traction and a long-standing history of effective engagement, such as education and health. Bank Group adaptability was also notable in response to the Rohingya refugee crisis in 2018 and the coronavirus (COVID-19) pandemic that began in 2020.

Headline official data suggested that the fiscal position of the central government was sound, but rising vulnerabilities received insufficient attention. Bangladesh was consistently assessed to be at low risk of debt distress, and macroeconomic risks were regularly assessed as moderate. But 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. Greater attention to fiscal vulnerabilities, and a more cautious public assessment of fiscal risks, would have been warranted given rising domestic borrowing costs, interest payments that increased to 25 percent of current expenditures, and a still low ratio of tax to gross domestic product. In the past, Bangladesh’s performance has been persistently strong despite preexisting macrofinancial weaknesses. But as the country continues to develop into a more diversified economy with a more sophisticated financial sector, those weaknesses may pose greater risks than in the past. Issues such as central bank independence and the quality of banking sector supervision, the accurate reporting of nonperforming loans (including in state-owned banks), the accounting of implicit contingent liabilities in state-owned enterprises, and the quality of official gross domestic product data will continue to grow in importance as the economy matures toward upper-middle-income status.

Despite a trend of deterioration in the country’s institutional quality and economic management, the Bank Group significantly increased financing to Bangladesh over the review period, making Bangladesh one of the largest borrowers from the International Development Association (IDA). Although Bangladesh’s core IDA performance-based allocation declined by 14 percent in the face of a deterioration in the quality of its institutional and governance framework, lending commitments from the World Bank expanded significantly through the use of IDA windows (with varying degrees of concessionality). Most of the increase came in the form of financing from the IDA Scale-Up Facility, which accounted for 20 percent of total IDA lending during the second half of the Country Program Evaluation period.


  1. 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 sectorwide approaches in education and health, the World Bank, together with other development partners, helped achieve good results on access in these areas.
  2. 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.
  3. Measuring improvements in the quality of education requires deliberate and ongoing investment in data collection.
  4. Despite a decline in the country’s performance-based allocation, 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 performance-based allocation and Scale-Up Facility in terms of the significance that IDA assigns to measures of institutional quality and governance.
  5. 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 contingent liabilities in state-owned enterprises, underreporting of nonperforming loans, and questions about the accuracy of gross domestic product data) could be more explicitly taken into account in macroeconomic assessments.
  6. Financial Sector Assessment Program arrangements between the World Bank and the International Monetary Fund (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 to 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 Financial Sector Assessment Program and differences in the prioritization criteria between the World Bank and the IMF.