Extending support to the State government’s comprehensive flood recovery efforts and plan to build greater resilience to future shocks, the World Bank on Wednesday agreed to provide a development policy loan (DPL) of $250 million as the first tranche for the Rebuild Kerala Initiative (RKI).
For the State, the money is like a lottery as it was expecting only the first instalment of $150 million of the $500-million DPL agreed to by the World Bank. The gesture has thrown open the gates for more financial aid.
The World Bank’s commitment was made after three days of tripartite negotiations among the Kerala government, Union Department of Economic Affairs (DEA), and World Bank officials in New Delhi.
The terms and the repayment conditions were worked out and vetted by officials from the State led by Manoj Joshi, Additional Chief Secretary, Finance; Sanjeev Kaushik, Principal Secretary, Finance Resources; and V. Venu, Principal Secretary, Revenue and Disaster Management.
Bandana Preyashi, Director, DEA; Dr. Venu, who is also the CEO of the RKI; and World Bank Task Team Leader Balakrishna Menon were the signatories to the agreement for the first tranche of DPL signed in the afternoon.
The Board of Governors of the World Bank will meet on June 27 to approve the DPL to enable the release of the funds to the State through the DEA, official sources told The Hindu . Of the $250 million being provided, sources said $160 million was reaching the State on ‘easy terms’, i.e., interest of less than 1.5% with a repayment period of 30 years. For the balance, the interest will be 4% and repayment period will be 20 years plus the ‘grace period’ or moratorium of five years.
The aid will be made available to the exchequer as budgetary support and the State will have the ‘flexibility’ on disbursing the funds for achieving targets set under the RKI, sources said. The State has identified eight key sectors and has submitted ‘prior actions’ to the World Bank.
The DPL, being made available to the State for the first time, is provided by the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD). The World Bank commended the repayment capabilities of the State and its robust growth, sources added.