The two multilateral donor agencies have asked the government to constitute a steering committee under the Planning Commission to co-ordinate project preparatory work and implementation to ensure project quality and oversee procurement and disbursement.

"We reiterate the need to target the most affected areas on a priority basis, and to ensure streamlined implementation and adequate attention to operation and maintenance," the WB and ADB said in a joint letter to the government last week.

Economic Relations Division (ERD) sources said the ADB would provide $200 million in fresh loan and reallocation of the existing portfolio. Seventy percent of the amount will come from the bank's newly formed Emergency Assistance Loan (EAL) fund while the rest will be mobilised from the existing project funds.

"Although we understand the funding constraints of the government, we are concerned with the diversion (reallocation) of funds allocated for regular maintenance and rehabilitation activities," said the letter.

A country programme confirmation mission of the ADB will visit Bangladesh at the end of this month to suggest the modality of fund reallocation from the existing portfolio and determine the priority sectors for disbursement.

On the other hand, the WB will provide $190 million including $40 million as budget support. The rest will be mobilised through reallocation of existing portfolio.

The bank will extend the budget support to compensate for the expenses incurred in the initial rehabilitation activities undertaken to assist the affected people through agriculture rehabilitation and initial repair of infrastructure networks.

The rehabilitation of key infrastructure will however cost $140 million, including $50 million for roads and bridges, $45 million for damaged schools, $15 million for municipal bodies, $15 million for water management, $9.5 million for water supply and sanitation, and $5.5 million for agriculture.

Apart from this, the bank will provide a $10 million credit line for livelihood rehabilitation to be disbursed through Palli Karma Sahayak Foundation.

The WB has prepared a list of ongoing projects for potential reallocation of funds that includes Primary Education Development Programme II, Health and Population Programme II, Dhaka Urban Transport Project, Private Sector Infrastructure Development Project, and Arsenic Mitigation Water Supply Project.

In line with the bank's suggestion, the ERD has already consulted the ministries concerned and apprised the WB of their no-objection to the reallocation plan.

Earlier, a joint mission of WB and ADB in September assessed flood losses and assured the government of extending assistance in three phases. The second phase commitment will be made after the government makes a need assessment.

"The final amount of financial assistance for the post-flood recovery programme will be based on the assessment made by the mission, taking into consideration the country's implementation capacity and availability of incremental funds," the letter said.

The WB, however, proposed to support medium term rehabilitation of flood management infrastructure and initial disaster preparedness activities in FY 2004-05 through additional resources to the tune of about $40 million from its soft-loan window, International Development Association (IDA).

The WB and ADB have estimated $2.16 billion assets and output loss during the July-August floods. The estimated need for public sector rehabilitation and reconstruction related to physical infrastructure is between $669 million and $714 million.