WASHINGTON, January 31, 2017—The World Bank today approved $300 million financing to empower the local governments at grassroots level with discretionary funds that would enable communities decide and implement local development priorities.
Built on the success of two predecessor projects, the Local Governance Support Project - 3 (LGSP-3) will cover all the 4550 Union Parishads, the lowest tier of the local government, and benefit over 115 million residents. The project will establish national budget transfers as a norm to the Union Parishads.
The project will also expand to the urban local government, and pilot a fiscal transfer system in 16 Pourashavas (municipalities) in all eight Divisions of the country. For the first time, the eligible municipalities will receive block grants with discretionary power to select sub-projects aiming to improve service delivery.
“The World Bank has been a long-standing partner in supporting the government’s vision of advancing decentralization and empowering the local governments,” said Rajashree Paralkar, World Bank Acting Country Director for Bangladesh, Bhutan and Nepal. “A predictable and transparent financial resource transfer system will help the Union Parishads and the participating Pourashavas to further improve planning, participatory budgeting, public finance management, and accountability.”
To institutionalize the fiscal transfer system, starting from the fourth year of the project, the government will fully finance the Union Parishad block grants out of the national budgetary allocations, with all the principal features. This will allow the Union Parishads respond to local needs more effectively, and further strengthen the accountability linkage between Union Parishads and their citizens.
“Like its predecessors, LGSP-3 will also place a strong emphasis on gender empowerment. At least one third of the Ward Committees and Supervision Committee members will continue to be women,” said Shenhua Wang, World Bank Team Leader for the Local Governance Support Project - 3. “To ensure women’s decisions are implemented, 30 percent of the grant will be earmarked for schemes prioritized by women.”
Since 2011, through the predecessor LGSP, all Union Parishads have been receiving annual block grants with full discretion to deliver local services, after undergoing rigorous audit process. The available funds that a Union Parishad receives annually for discretionary spending grew by more than 11-fold since 2006, when the first Local Governance Support Project pioneered the provision of block grants to the Union Parishads. The LGSP-3 will maintain the momentum and continue to support transfer of enhanced fiscal resources to Union Parishads.
The credit from the World Bank’s International Development Association, which provides grants or zero-interest loans, has a 38-year term, including a six-year grace period, and a service charge of 0.75 percent.