Bangladesh and the Asian Development Bank (ADB) on Monday signed an agreement for $250 million in policy-based loan to support Bangladesh’s economic recovery following the coronavirus disease (COVID-19) pandemic.

The assistance is under the first subprogram of the programmatic $500 million Sustainable Economic Recovery Program, according to a press release.

Economic Relations Division (ERD) Secretary Fatima Yasmin and ADB country director Manmohan Parkash signed the loan agreement on behalf of Bangladesh and ADB, respectively at a hotel.

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The Sustainable Economic Recovery Program will facilitate a rapid and sustainable recovery from the COVID-19 pandemic, generate employment, and expand economic activities for micro-entrepreneurs and small businesses.

This will be pursued through policy reforms that will create fiscal space to enhance public expenditure and support the recovery and growth of cottage, micro, small, and medium-sized enterprises (CMSMEs).

The program will support the government’s planned public investment in education, health, social protection, and infrastructure and help to stimulate economic activities.

The program aims to expand the tax base, improve compliance, and strengthen enforcement, rationalize tax exemptions, and modernize tax administration.

Also read: ADB to loan $400 million to Bangladesh under agreement signed Monday

The program will widen access to finance for women entrepreneurs, particularly those running CMSMEs, by introducing or modifying refinancing programs and credit guarantee schemes with an earmarked portion for women entrepreneurs.

The program will also encourage more women-led start-ups by earmarking 10% of new start-up financing for them.

The COVID-19 pandemic has severely impacted micro-entrepreneurs and small businesses in the country. Limited access to affordable finance is one of the most critical constraints faced by CMSMEs.

Only 28 percent of the larger CMSMEs, or small and medium-sized enterprises, have access to formal bank credit. Enhancing access to credit for CMSMEs will lower borrowing costs, protect this important segment of the economy, support inclusive growth, and absorb the demographic dividend.

ADB’s support coincides with the finalization of Bangladesh’s Eighth Five-Year Plan and the launch of the new ADB country partnership strategy for Bangladesh, 2021–2025.

ADB provided a $500 million countercyclical support facility (pandemic response option) in 2020, towards immediate budgetary support to the economy in the wake of the COVID-19 pandemic to part-finance incremental health, social and economic expenditures by the government.

ADB Country Director Manmohan Parkash Bangladesh has managed the ongoing COVID-19 pandemic well through the stimulus and incentive packages and expanded social protection programs under a pragmatic policy to support lives and livelihoods.

Appreciating the Government’s policies for economic recovery, he said, “Rapid implementation of critical reforms for improving public investment and expenditure efficiency, domestic resource mobilization, diversifying the economy, boosting competitiveness, and promoting small enterprises for local-level job creation are critical reforms that need to be implemented expeditiously.”

“I am pleased that these reforms that we are committing today will help improve the fiscal headroom to support the aspiration of Bangladesh to become an upper middle-income country by 2031,” Parkash added.