The World Bank has cancelled a $1.2bn loan for Bangladesh's Padma bridge project, saying the government had not co-operated in investigating "high level" corruption in the project.
"The World Bank cannot, should not, and will not turn a blind eye to evidence of corruption," it said on Friday about the loan being cancelled immediately.
The proposed 6.2km bridge over the Padma river, the local name for the Ganges, is meant to connect the capital Dhaka to the country's coastal districts.
The $3bn bridge, planned to go into service in 2014, is designed to carry a highway and railway line and is aimed at transforming the country's impoverished south.
The loan was originally approved in February 2011, but allegations of corruption in the tender process led the bank to freeze the loan by October.
The World Bank said it had provided evidence from two investigations into the bridge case to Bangladesh's prime minister, minister of finance and anti-corruption commission chairman in September 2011 and April 2012.
"We urged the authorities of Bangladesh to investigate this matter fully and, where justified, prosecute those responsible for corruption," the World Bank said.
"We only finance a project when we have adequate assurances that we can do so in a clean and transparent way," the bank said.
The corruption allegations also involve Canadian contractor SNC-Lavalin. Late last year, Ottawa launched charges against two former company executives after a year-long investigation using evidence supplied by the World Bank.
"Investigation and prosecution are ongoing but the court filings to date underscore the gravity of this case," the bank said of the Canadian case.
The World Bank said that it had nevertheless decided to proceed with developing the bridge project because of its importance for the country's and region's development -- "provided the government took serious actions against the high level corruption we had unearthed.
The bank said it had asked Dhaka to place on leave all public officials suspected of involvement in the corruption until the investigation is completed.
It also had asked for the government to name a special inquiry team within the corruption office to run an investigation, and to agree that they work closely with a panel of experts named by the World Bank who would provide guidance and ensure the fairness of the probe.
But the lack of follow-through by Dhaka led to Friday's cancellation of the financing.