World Bank to double annual loans to Bangladesh

DHAKA, June 24 (Reuters) - The World Bank said it will increase loans to Bangladesh to $1.3 billion a year over the next three years beginning from next July to ease pressure on the national budget due to high oil and food prices.

"The sharp rise in food prices has had a serious impact on food consumption and nutrition levels of poor people in Bangladesh, and also oil price hikes have pressured the budget," said Praful C Patel, vice president for the South Asia region of the World Bank.

At present the level of annual assistance is around $750 million. Patel said the extra assistance "... will help Bangladesh to face increased prices of products like food, oil and fertiliser and will also cushion (the) budget deficit," Patel told a news conference at the end of a two-day visit.

On June 9, Mirza Azizul Islam, finance adviser (minister) to Bangladesh's army-backed interim government, announced the country's 2008-09 fiscal budget, with a total outlay of a nearly one trillion taka ($14.6 billion) targeting 6.5 percent growth.

The budget deficit will stand at 5 percent of GDP or 305.8 billion taka ($4.46 billion) of which 2.2 percent will be financed from foreign resources while the other 2.8 percent will be met from domestic borrowing.

Patel said the World Bank has already raised a fund of $1.2 billion, and Bangladesh would qualify to get a substantial amount.

"The World Bank has already approved $320 million of soft loans for Bangladesh as a budgetary support needed due to high price rises of oil and food in international markets," said Patel.

He said Bangladesh continued to sustain more than 6 percent economic growth and would be able to achieve double digit growth over the next 10 years.

"But before that the country must focus on the development of human resources, the biggest wealth of Bangladesh, adequately develop infrastructure -- especially power and energy -- and also ensure investment-friendly political stability," Patel said.