The credit is designed to support the government' s plans to transform Bangladesh Railway into a well-managed and customer-focused organisation.

This is the World Bank's first major development policy credit support in the railway sector in Bangladesh. Development policy credits have short-term focus (one to three years) and can provide quick-disbursing external financing to support policy and institutional reforms.

The World Bank's credit of US$ 40 million, which would be considered by the World Bank Board on October 19, is scheduled to be followed by another development policy credit of US$ 60 million for the Railway Reform Programme in 2009, said a World bank release Friday.

The World Bank also envisages an additional US$ 200 million to support another government initiative that aims to improve infrastructure and network expansion of railways in 2009.

The government's National Strategy for Accelerated Poverty Reduction notes that the railway system could be improved to better meet the transport needs of Bangladesh's growing economy. In close coordination with the World Bank, ADB and the Japan Bank for International Cooperation (JBIC) have also joined in a multi-year, multi-donor partnership with the government.

World Bank Country Director Christine Wallich said: "The donor-supported investment programme is based on government's own medium-term transport sector investment programme. It will support reforms to improve Bangladesh Railway's organisational structure and management practices, along with a revamped policy environment for railways."

The railway sector reforms programme will help restructure Bangladesh Railway so that it can improve its commercial and customer focus.

A corporatised Bangladesh Railway would operate like a line of business organisation, while remaining fully government-owned.