The government is in a fix to continue negotiation on the Development Support Credit (DSC)-IV worth US$150 million due to stiff conditions proposed by the World Bank (WB) in this connection.
Fulfilling all the conditions of the donor agency in the areas of financial system, energy sector and sectoral governance will be very difficult for the government ahead of next general election, said a high Finance Ministry official.
"But resorting to a negative attitude on the proposed credit may strain relationship between Bangladesh and the development partners," the official said.
The official added that such a stance may not only cloud the prospect of the DSC-IV, but it will also hamper the flow of future aid and grants.
The credit might be disbursed in the early 2006-07 fiscal after the negotiation proceeds and the WB conditions are met.
A WB mission held discussions with the officials of different ministries and divisions on DSC-IV in late December. But the government is yet to conclusively decide on its position on the issue, sources said.
The conditions include reducing 2.0 per cent of tax cut from the existing import duty, particularly from supplementary duty from the next fiscal year, improving public financial management and procurement systems.
Reform of the National Board of Revenue and other financial institutions under the agreed macroeconomic framework of the poverty reduction growth facility programme are the other major conditions.
Besides, the WB asked the government to develop and agree to specific terms of reference for the managing directors of the nationalided commercial banks (NCBs) and specify a fixed tenure for them under the proposed credit.
Improving access, efficiency and governance of the energy sector are also among the WB conditions.