Inadequate funding, execution roadblock to green growth in Bangladesh: World Bank

Infographics: TBS

Bangladesh faces formidable challenges in advancing its green-growth agenda due to inadequate allocation and low implementation rates, as outlined in a new World Bank report released today (13 June).

Titled "Framework for Implementing Green Growth in Bangladesh – 2023," the report identifies critical gaps in the country's development strategies.

Key challenges highlighted include the insufficient prioritisation of public investments supporting green initiatives under the Annual Development Programme.

Additionally, limited coordination between programme formulation and budget processes results in suboptimal management of public investments, leading to inadequate funding for key projects and low execution rates.

To address these obstacles and pave the way for a sustainable future, the advisory document proposes a comprehensive framework of recommendations. These recommendations aim to facilitate Bangladesh's transition towards a green and climate-resilient development pathway.

Richard Damania, chief economist of the World Bank's Sustainable Development Practice Group, presented the report during its formal launch at a Dhaka hotel.

He emphasised the urgent need for enhanced financial commitment, estimating that Bangladesh requires at least $176 billion over the next two decades to finance climate actions and achieve its mitigation targets.

The report underscores the need for additional funding in the billions to fully implement complementary plans and initiatives in Bangladesh related to environmental protection and climate change. It calls for increasing spending on these programmes to 3% of GDP by 2031 and 3.5% by 2041.

Bangladesh faces challenges compared to other emerging markets due to structural weaknesses in its banking system, limiting the availability and diversity of green finance instruments. Developing capital markets is identified as a top policy priority to enable long-term finance for green investments.

The report proposes a strategic framework of recommendations aimed at prioritising action to foster green growth, outlining a roadmap for coordinated investment that aims to make Bangladesh more environmentally sustainable, climate-resilient, and economically prosperous in the future.

At the launch ceremony, Environment, Forests, and Climate Change Minister Saber Hossain Chowdhury highlighted the need for effective use of allocated funds.

"At the current rate of temperature rise due to climate change, even if the entire budget is allocated to climate action, it will not be enough. We need to ensure that the people most at risk from climate change are receiving the benefits of these funds properly," he said.

Minister Saber Hossain stressed the importance of focusing on coastal areas, displaced populations, and saline areas.

He also pointed out that climate funds are distributed across 25 ministries, not solely within the Ministry of Environment.

The minister mentioned plans to scrutinise upcoming budgets to determine how much each ministry receives for climate-related initiatives. In the current fiscal year, Tk35,000 crore has been allocated to the climate sector.

The report highlighted that Bangladesh's economic growth has led to neglecting public goods like clean air and water, which are crucial for health and economic productivity but are often overlooked in economic assessments.

According to the World Bank report, Bangladesh is less efficient in managing natural resources compared to other countries at a similar income level.

The report also noted low agricultural labour productivity and poor water productivity in Bangladesh. The country generates low economic value per unit of greenhouse gas emissions, and its spending on reducing air pollution could be more efficient and cost-effective.

While Bangladesh shows strengths in governance effectiveness and digital access, it faces challenges with inefficient supply chain logistics and limited internet availability.

For Bangladesh to reach its goal of becoming an upper-middle-income country by 2031, it must address critical vulnerabilities to climate change and other environmental challenges.

The country's assets, human capital, and overall well-being are at significant risk from natural disasters. Additionally, urban areas in Bangladesh are particularly vulnerable to climate impacts.

The report suggests that green growth, which balances economic prosperity with environmental protection, can drive sustainable growth effectively.

The World Bank report outlines nine key policy directions aimed at achieving three main goals— improving environmental governance and transitioning to cleaner energy sources, fostering new sectors for green growth, and ensuring a fair shift toward a resilient, environmentally friendly society.

These policies include enhancing environmental governance, promoting renewable energy trading, investing in green industries and human resources, and enhancing public health and well-being. Coordination among these policies is crucial for their success.

Abdoulaye Seck, World Bank country director for Bhutan and Bangladesh, said that unsustainable growth harms the environment in the long run. In contrast, green growth not only helps alleviate poverty but also protects our environment, acting as a catalyst for sustainable development.

The report recommends that financial institutions train their staff to integrate environmental considerations into all operations. Financial analysts should assess not just the borrower's financial health but also the potential environmental impact of proposed green practices and technologies.

Bangladesh's economy and job market can expand through green industries like transportation, plastic and waste recycling, and ship recycling, contributing significantly to a more sustainable economy with the right policies and skills in place.

Small and medium-sized enterprises, including cottage industries, require support to enhance their management and technical capabilities to develop and implement viable green projects.

The report suggests that the Small and Medium-Sized Enterprise Foundation establish a specialised unit to assist entrepreneurs in preparing bankable projects. This unit would facilitate communication between financial institutions and entrepreneurs, ensuring smoother project execution.