$8b of World Bank finance stuck in long project procedures, design flaws

Highlights:

• World Bank has over $8 billion in undisbursed project aid
• Procedural delays consume nearly a year before first disbursement
• Weak feasibility studies cause flawed designs and implementation delays
• Frequent project director transfers disrupt continuity and progress
• Poor coordination and rushed negotiations create costly project problems
• Analysts urge accountability for persistent project implementation failures

Of the roughly $12 billion in project aid pledged by the World Bank, more than $8 billion remained undisbursed as of June, for reasons including procedural delays at various stages – from project conceptualisation and appraisal to board approval and the first disbursement – that consume nearly a year.

By the time the first instalment is released, almost a year, sometimes even more, of the grace period is already gone. World Bank financing typically comes with three to five years' grace period. On average, it takes 4.4 months from board approval to signing the financing agreement, another 2.1 months to make the agreement effective, and a further 5.3 months to receive the first disbursement – an 11.8-month journey, according to an Economic Relations Division (ERD) analysis of the reasons behind Bangladesh's chronic project delays and implementation failures that lead to cost and time overruns.

The problems identified in the assessment are hardly new. Flaws in feasibility studies often lead to incomplete or faulty project designs, which in turn create discrepancies between development project proposals and project appraisal documents. Other repeatedly cited problems include frequent changes of project directors, difficulties in land acquisition, and delays in the tendering process.

Analysts say the ERD has rightly identified many of these operational bottlenecks, but the assessment falls short of addressing a crucial question: who is responsible? The reasons behind frequent changes of project directors, prolonged implementation, and other failures need to be clearly identified, and those responsible must be held accountable if Bangladesh is to restore efficiency and discipline in project implementation.

"Without confronting the governance pathologies that shape project behaviour, such exhortations risk remaining aspirational rather than actionable," Zahid Hussain, former lead economist at World Bank's Dhaka office, told The Business Standard.

Implementation challenges

The assessment titled "Foster collaboration and innovation in addressing Project Readiness and Implementation Challenges for D-Ready" was presented at a high-level workshop on implementation challenges, increasing disbursement and disbursement readiness of World Bank-financed projects held at the ERD in Dhaka on 16 July.

According to the assessment, 15 of the 37 ongoing World Bank-financed projects are facing serious implementation challenges.

Four projects involving $1.4 billion in World Bank financing have also been approved by the World Bank board but are awaiting approval from the Executive Committee of the National Economic Council.

Weak preparation, document discrepancies slow projects

The assessment says projects approved based on faulty or inappropriate designs often encounter major problems once they reach the implementation stage. When the approved design does not match conditions on the ground, repeated changes become necessary, resulting in additional delays and rework.

The assessment identified weaknesses in feasibility studies as a fundamental problem, with incomplete designs often being developed based on inadequate project preparation.

It also pointed to discrepancies in information contained in Development Project Proposals, World Bank Project Appraisal Documents and financing agreements. Such inconsistencies create delays in the approval and implementation process.

Frequent transfers and procurement problems

The report said frequent transfers of project directors and delays in appointing project directors and staff to project implementation units are disrupting continuity after project approval.

Prolonged land acquisition processes and procurement complications, including delays in tendering, are also causing significant delays in project implementation.

The D-Ready project, undertaken as part of the government's efforts to modernise digital readiness and online services, is facing various challenges during its preparation and implementation stages, according to the assessment.

Design deficiencies, inconsistencies in documentation and administrative delays have created risks to the project's implementation schedule.

ERD officials said the main problems often emerge when projects that received approval with incorrect or inappropriate designs reach the implementation stage. As the designs do not match actual field conditions, repeated modifications become necessary, resulting in wasted time and reconstruction work.

The assessment said qualitative improvements and deeper coordination are needed to ensure that the Bangladesh-World Bank development partnership delivers its intended benefits. 

Lack of coordination and rushed negotiations

The assessment also said that information gaps are evident even during review meetings of the Project Evaluation Committee. The committee's inadequate understanding of the Project Appraisal Document and related documents has resulted in complex observations regarding the determination of staffing structures and estimated project costs. 

There is also a clear lack of understanding between implementing agencies and World Bank technical teams during the preparation of initial Development Project Proposals (DPPs). The ERD is then arranging loan negotiations in haste on the basis of these incomplete documents, further compounding the problems.

ERD officials said there have been instances where loan negotiations and the signing of proceedings have been conducted based on oral information, without due regard to formal written documents. For the Digital Systems for Transparency, Accountability and Resilience (D-STAR) project, the ERD prepared for the loan negotiations based on oral information. Later, when the proceedings of the Project Evaluation Committee were published, several unrealistic conditions were found in them.

Similarly, during the loan negotiations for the Metro Rail Line-2 (Gabtoli-Narayanganj) project, the proceedings were signed based on oral information. As a consequence, the project later became completely stalled after reaching the Project Committee.

Officials said that, in almost every project, there is very little time between receiving the final loan negotiation package or documents from the World Bank and the scheduled date for the main negotiations. This makes it difficult for the ERD and the relevant agencies to conduct proper reviews. There have also been instances where the main loan negotiations at the ERD were initiated with incomplete and immature documentation. The Bangladesh Clean Air Project is one such example.

The assessment said there is also a growing tendency to rush into using electronic signatures through DocuSign before all administrative and policy procedures and approvals have been completed.

The report said such instances of advance signing were identified in the annexes to the loan negotiations for the Bangladesh Regional Waterway Transport Project, the Accelerating Transport and Trade Connectivity in Eastern South Asia Programme, and the Financial Sector Support Project-II.

Issues to be noted and resolved

Delays in implementing World Bank-financed development projects, inconsistencies in information and a lack of administrative coordination are leaving billions of US dollars idle. The review by the ERD and the World Bank has identified serious issues ranging from inconsistencies in policy decisions to disbursement of funds without proper authorisation that need to be resolved.

Conceptual mismatch in definition of active portfolio

The report notes a fundamental methodological difference between the World Bank and the ERD in calculating the "active portfolio." The World Bank considers every project approved by its Board to be active, whereas the ERD includes only projects for which financing agreements have been signed. This discrepancy can lead to a misleading picture of the undisbursed amount.

For example, the Bangladesh Clean Air Project and the Energy Sector Security Enhancement Project have been approved by the World Bank Board but are yet to have their financing agreements signed. As a result, 100% of the committed funds for these projects are shown as undisbursed. The report emphasises the need to resolve this discrepancy.

The Bangladesh Clean Air Project, involving $290 million in World Bank financing, was approved by the World Bank Board on 18 June 2025.

Under the Energy Sector Security Enhancement Project (ESSEP), the World Bank is expected to provide a $350 million loan.

Delays in pipeline projects

The report notes that authorities are repeatedly struggling to align project preparation timelines with the World Bank Board's approval schedule. As the necessary processes are not being completed on time, at least $1.57 billion in financing remains stuck as undisbursed across just four projects. 

These include the Bangladesh Private Investment and Digital Entrepreneurship Project, the Bay Terminal Project, the Enhancing Digital Government and Economy Project, and the Western Economic Corridor and Regional Enhancement Programme.

The report emphasises the need to ensure that loan proposals are submitted for approval promptly once project preparation has been completed.

Long delays between approval and effectiveness

The report also notes that newly approved and signed projects are taking one to two years to become fully effective due to complex administrative and policy procedures.

In four major projects, including the Bangladesh Road Safety Project and the Electricity Distribution Modernisation Programme, these delays in achieving effectiveness have alone added an additional $1.32 billion to the list of undisbursed funds.

The report calls for discussions with the relevant agencies to identify and implement an effective measure to reduce these delays.

Lack of coordination over extensions and additional financing

The report highlights a significant lack of coordination in policy decisions among the ERD, project implementing agencies and the World Bank authorities. It stresses the need to address the issue promptly.

It notes a tendency to seek project extensions without clearly stated or acceptable reasons in the Support to Health Sector Support Programme and the Covid-19 project. On the other hand, requests for additional financing were submitted without adequate consultation with all relevant stakeholders in the Bangladesh Sustainable Recovery, Emergency Preparedness and Response Project and the Recovery and Advancement of Informal Sector Enterprises Project.