The World Bank Bangladesh First Recovery and Resilience DPC (P174892) Program Information Document (PID) Concept Stage | Date Prepared/Updated: 22-Dec-2021| Report No: PIDC33206 Page 1 of 5 The World Bank Bangladesh First Recovery and Resilience DPC (P174892) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Project Name Parent Project ID (if any) Bangladesh P174892 Bangladesh First Recovery and Resilience DPC (P174892) Region Estimated Board Date Practice Area (Lead) Financing Instrument SOUTH ASIA Mar 31, 2022 Macroeconomics, Trade Development Policy and Investment Financing Borrower(s) Implementing Agency People's Republic of Finance Division, Ministry of Finance Bangladesh Proposed Development Objective(s) This programmatic DPC series supports the Government of Bangladesh with the implementation of policies to sustain the COVID-19 recovery and enhance resilience to future shocks. Financing (in US$, Millions) FIN_SUMM_PUB_TBL SUMMARY Total Financing 250.00 DETAILS -NewFin3 Total World Bank Group Financing 250.00 World Bank Lending 250.00 Decision The review did authorize the preparation to continue B. Introduction and Context Country Context Bangladesh made rapid social and economic progress in recent decades, reaching lower middle-income status in 2015. GDP growth averaged close to 6 percent since 2000, as strong labor market gains contributed to a sharp decline in poverty. The national poverty rate fell from 48.9 to 24.5 percent between 2000 and 2016. The COVID-19 pandemic caused major disruptions to economic activity, putting poverty reduction gains at risk. Real GDP growth decelerated to 3.5 percent in FY20. Early signs of a recovery emerged in the first half of FY21, after movement restrictions were progressively lifted and external conditions stabilized. Household surveys point to a gradual recovery in employment and Page 2 of 5 The World Bank Bangladesh First Recovery and Resilience DPC (P174892) earnings. As Bangladesh enters a new phase of development, fiscal and financial sector policy reforms can help accelerate the recovery and sustain growth. Increasing government revenues remains a priority to finance planned investments in infrastructure and human capital. Tax and tariff reforms are needed as Bangladesh prepares for LDC graduation in 2026 to allow more time to recover from the COVID-19 pandemic. At the same time, macroeconomic and financial sector stability are foundations for this growth. Bangladesh is extremely vulnerable to the effects of climate change, and measures to buffer shocks and mitigate greenhouse gas emissions are urgently needed. The poor are particularly vulnerable to disaster shocks. Increasing the coverage and efficiency of social protection programs will be critical to enhance resilience against shocks. Relationship to CPF This DPC series is consistent with the current Country Partnership Framework (CPF) and is aligned with all three focus areas of the CPF. It directly supports trade facilitation, financial intermediation, improved social protection coverage for the poor, and increased resilience to shocks (including climate-related shocks). While a new CPF is under development, the DPC is also well aligned with the findings of the 2021 Systematic Country Diagnostic Update, contributing to the post- least-developed-country (LDC) graduation transition through trade and tax policies. C. Proposed Development Objective(s) This programmatic DPC series supports the Government of Bangladesh with the implementation of policies to sustain the COVID-19 recovery and enhance resilience to future shocks. Key Results The reform program supported by this DPC series is expected to support the transition from revenues based on trade taxes to domestic taxes in support of Bangladesh’s post-LDC graduation agenda. The efficiency of public procurement will increase with the completion of the rollout of the e-GP system, while borrowing costs will decline with lower rates on National Saving Certificates and government provident funds. Financial sector stability will be enhanced through recovery plans and corporate governance requirements, helping address growing risks in this sector. Capital market development will be supported through the secured transactions legislation. The DPC reform program will also support enhancements in the coverage, speed, and efficiency of social protection programs. Adoption of additional renewable energy and improved efficiency of energy transmission will help lower greenhouse gas and other pollutant emissions in the energy sector, generating climate and health benefits. Increased private sector participation in the energy sector is also expected to reduce public financing requirements while increasing operational efficiency. D. Concept Description The DPC supports policies to sustain growth in the context of the country recovering from COVID and preparing for the LDC graduation. The DPC program comprises of two pillars of: (i) fiscal and financial sector policies for a sustained recovery; and (ii) strengthening resilience to future shocks. Under the first pillar, the DPC series will support the government with its transition from tariff-based revenues to consumption and income taxes in line with the 8th Five-Year Plan and Perspective Plan 2041. The DPC will support increased efficiency in public procurement in emergency situations, such as pandemics and natural disasters, to enable time-critical delivery of services. Financial sector reforms—through measures to reduce the cost of government borrowing while supporting capital market development, to strengthen financial sector stability by developing bank recovery plans, and to improve governance of state-owned banks—reflect government commitments in the 8th Five-Year Page 3 of 5 The World Bank Bangladesh First Recovery and Resilience DPC (P174892) Plan to improve the depth and resiliency of financial intermediation, including through improved adherence to the Basel III framework for banking supervision. Under the second pillar, the DPC series will support the government in expanding the shock responsiveness of its social protection programs, building on the recent expansion of social protection programs to reach all poor and vulnerable members of society. It will also support the government to increase the speed and efficiency of cash-based social protection programs. The energy component of the DPC will contribute to Bangladesh’s climate objectives, following the submission of enhanced National Determined Contributions in 2021. E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts The expansion of social protection programs is expected to make a positive contribution to poverty reduction. The expansion of cash transfer programs to respond to shocks will provide an additional buffer of protection to vulnerable groups. At the same time, the increase use of government-to-person (G2P) payments is expected to increase the speed and efficiency of cash transfers, while setting uniform service standards and fees to protect vulnerable groups. Adoption of the household database will facilitate the expansion and the integrity of social protection programs. Strengthened financial reporting on social protection programs will enable enhanced oversight of expenditures, allowing policymakers to regularly assess and adjust program implementation to meet emerging challenges. Policies to increase non-resident VAT and expand income tax withholding are expected to increase fiscal space for social expenditure, with a limited effective on low-income households. Environmental, Forests, and Other Natural Resource Aspects The policies supported under the Recovery and Resilience DPC are not expected to have any significant negative effects on the country’s environment and natural resources. Increasing the share of renewable energy generation will contribute to reduced air pollution and GHG emissions. Improving the transmission grid will further support this objective as a stronger grid can better integrate variable renewable energy and as private participation in the sector is expected to improve efficiency. . CONTACT POINT World Bank Bernard James Haven Senior Economist Borrower/Client/Recipient People's Republic of Bangladesh Implementing Agencies Page 4 of 5 The World Bank Bangladesh First Recovery and Resilience DPC (P174892) Finance Division, Ministry of Finance Md. Khairuzzaman Mozumder Dr. kzamanm@finance.gov.bd FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Bernard James Haven Approved By APPROVALTBL Country Director: Patchamuthu Illangovan 23-Dec-2021 Page 5 of 5