KATHMANDU: The World Bank Group (WBG) has pledged to provide a soft loan of up to $500 million (approximately Rs 50 billion) to support the reconstruction efforts of the government in the aftermath of the devastating earthquake of April 25.

The WBG’s announcement comes two days before the International Conference on Nepal’s Reconstruction, during which the government is expected to seek financial assistance from foreign governments and multilateral agencies to rebuild parts of the country ravaged by the quake and its aftershocks.

Of the total fund pledged by the WBG, $200 million will go towards housing reconstruction. The WB’s board of executive directors is expected to approve the loan amount on June 29.

“This credit from the International Development Association (IDA), the WB’s fund for poorest countries, will provide grants to homeowners to rebuild about 55,000 houses for the poor in rural areas,” says a statement issued on Tuesday by the WBG.

The credit, which is being provided at 1.56 per cent interest, will be extended on standard IDA terms with maturity of 38 years and a six-year grace period — meaning repayments will have to be made only after six years of issuance of the loan amount.

“The first tranche of the loan can be extended as early as November,” said a WBG official, adding, “The entire credit amount would be disbursed in three to four tranches upon verification that houses that have been built are disaster-resistant.”

The WBG has also pledged to extend another $100 million for budget support. The WB’s board of executive directors is expected to sanction this loan amount on June 29 as well.

“This IDA credit will provide the government with much-needed short-term financial support to accelerate and expand relief and recovery efforts,” says the WBG statement.The WBG has also pledged to reallocate $100 million to $200 million from the existing portfolio to support the government’s recovery and reconstruction efforts.

In other words, up to $200 million in funds previously pledged by the WBG for various sectors, but are yet to be utilised, will be channelled towards recovery and reconstruction. “Any reallocated money will be replaced with additional funds,” says the WBG press statement.

Launching its five-year Country Partnership Strategy for Nepal in June last year, the IDA of the WBG had pledged financial assistance of $222 million in 2014 and $200 to $300 million each in 2015, 2016, 2017 and 2018.

The WBG has also pledged to provide liquidity facility of $50 to $70 million via the International Finance Corporation (IFC), the WBG’s private sector arm. “This facility will be available to clients of commercial banks so that they can support recovery of small and medium enterprises in tourism or housing,” the WBG statement says. “This US-dollar credit facility may also be used to import essential capital equipment and for working capital needs.”

Also, the IFC has pledged to make available another $9.8 million for clients in tourism and agribusiness sectors to ensure business continuity, the statement adds.

A report on Post Disaster Needs Assessment (PDNA), prepared by the National Planning Commission, has estimated the total value of disaster effects at Rs 706 billion. Of this amount, Rs 517 billion, or 76 per cent of the total effects, represents the value of destroyed physical assets, and Rs 189 billion reflects the losses and higher costs of production of goods and services arising from the disaster.

The report says the country will require at least Rs 669 billion for rehabilitation and reconstruction.