The World Bank (WB) will give Bangladesh US$300 million to strengthen local governments through establishing national budget transfers for all 4,550 Union Parishads, the lowest tier of local government, and mainstreaming the annual financial audits of all Union Parishads.
Kazi Azam, Secretary-In-Charge of the Economic Relations Division, and Qimiao Fan, WB's Country Director for Bangladesh, signed the financing agreement on behalf of their respective sides at the Economic Relations Division today.
Built on the success of two predecessor projects, the Local Governance Support Project-3 (LGSP3) will benefit over 115 million people across the country.
The project will also pilot a fiscal transfer system for 16 Pourashavas (municipalities) in all eight Divisions. The eligible municipalities will receive expanded block grants to give them access to greater resources to respond to local service delivery priorities.
"Bangladesh has made significant progress in moving forward the decentralization agenda as stated in the Seventh Five Year Plan," said Kazi Azam.
"The government's continued commitment is evident as we proceed to institutionalize a transparent and predictable fiscal transfer system for the Union Parishads which will benefit over 70 percent of the country's population living in the Union Parishads," he added.
"Over the past decade, the World Bank has been supporting the government's vision of a stronger and more accountable local governance system. Started in 2006, the LGSP was the first nationwide program to provide block grants to Union Parishads to spend at their own discretion," said Qimiao Fan.
"With consecutive projects, fiscal transfers to Union Parishads for discretionary spending has increased 11-fold to Taka 2.23 million per Union Parishad in FY2016 from Taka 0.2 million in FY2007. LGSP3 will continue the momentum, and the enhanced discretionary resources will enable local governments respond to local needs more effectively," he added.
Since 2006, the World Bank has been financing the Union Parishad block grants. From the fourth year of the LGSP3 project, the government will fully finance the Union Parishad block grants out of national budgetary allocations with all the principal features. LGSP3 will fully functionalize the web-based monitoring of Union Parishads functions developed under the predecessor project.
LGSP3 will also continue community-based initiatives and strengthen women's role in decision-making. A Women's Development Forum, comprising all elected women members, have been organized at the Upazila level to facilitate capacity building and women's empowerment in local development. At least 30 percent of the grants will continue to be earmarked for schemes prioritized by women.
The zero-interest credit from the International Development Association (IDA), the World Bank's concessional arm, has a maturity of 38 years, including a 6-year grace period; and carries a service charge of 0.75 percent.