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Bangladesh, ADB Ink $400M Deal for Inclusive Climate Development

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The Asian Development Bank (ADB) and the government of Bangladesh have officially signed a policy-based loan agreement amounting to US$400 million. This financial support is directed towards assisting Bangladesh in the implementation of its National Adaptation Plan for the period 2023-2050. Additionally, the loan aims to facilitate the achievement of Bangladesh’s Nationally Determined Contributions 2021 Update to the Paris Agreement, focusing on fostering climate-resilient and inclusive development.

Md. Shahriar Kader Siddiky, Secretary of the Economic Relations Division (ERD), and Edimon Ginting, ADB’s Country Director, signed the agreement on behalf of Bangladesh and ADB, respectively. The signing ceremony took place at the ERD in the capital.

This funding marks the initial phase of the broader $700 million Climate-Resilient Inclusive Development Program. Bangladesh, identified as one of the world’s most vulnerable nations to the adverse effects of climate change, experiences an annual average loss of around US$3 billion, as stated in a press release.

Edimon Ginting, ADB Country Director, emphasized the institution’s commitment to supporting Bangladesh in strengthening its climate resilience, transitioning to a low-carbon economy, mitigating greenhouse gas emissions, and integrating gender equality and social inclusion in climate actions.

The program’s objectives include creating a conducive institutional and policy environment to mobilize climate finance, prioritizing climate actions in the national development agenda, and facilitating government-led reforms in critical climate sectors such as agriculture, disaster management, transport and infrastructure, urban development, and energy.

Part of the initiative involves establishing the National Committee for Environment and Climate Change, headed by the Prime Minister, to holistically implement the government’s climate priorities across ministries. The program is set to actively support the operationalization of the Bangladesh Climate and Development Partnership, introduced at COP 28.

Furthermore, the program focuses on mainstreaming climate priorities in government planning and resource allocation, as well as mobilizing climate finance through instruments like green bonds and sustainable finance policies.

At the sectoral level, the program promotes climate-smart and resilient agricultural practices, particularly those beneficial for female farmers. It also supports the adaptation of solar irrigation pumps, the implementation of climate-resilient infrastructure design and planning, and the development of a regulatory framework for the adoption of electric vehicles, including the introduction of electric buses in public transport fleets.

In line with ADB’s increased climate financing ambition, announced in October 2021 to deliver $100 billion from 2019 to 2030, this program seeks to expand access to climate-focused technologies and mobilize private capital for climate finance.

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Banks in Industrial Areas to Open June 14-16 for Eid Payments

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To ensure timely payment of salaries and bonuses to garment industry workers before Eid-ul-Azha, the branches of banks in key industrial areas will remain open on a limited basis on June 14, 15, and 16.

The Bangladesh Bank (BB) issued a notification stating that bank branches in Dhaka metropolitan, Ashulia, Tongi, Gazipur, Savar, Bhaluka, and Narayanganj will operate on these days to facilitate financial transactions for garment sector employees.

Typically, Friday and Saturday (June 14 and 15) are weekly holidays, and Sunday (June 16) will be closed for Eid. Despite these closures, the BB has mandated that banks in industrial regions stay open to manage the disbursement of wages and bonuses and facilitate the sale of export bills.

Additionally, bank branches in Chattogram metropolitan and industrial areas will also be open to support garment workers’ payments and the processing of export bills.

The BB has instructed banks to coordinate with local authorities to ensure adequate security at the branches during this period.

Eid-ul-Azha, one of the most significant religious festivals for Muslims, will be celebrated in Bangladesh on June 17.

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Cenbank Mandates Real-Time Reporting of Willful Defaulters

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The Bangladesh Bank (BB) has issued new instructions to banks to submit data on willful defaulters to the Credit Information Bureau (CIB) database. This directive was issued on Tuesday, requiring immediate compliance from commercial banks and non-banking financial institutions (NBFIs).

In a circular released by the CIB of the central bank, banks have been instructed to report their June data in real-time starting July 1. The circular has been sent to top executives of banks for prompt execution.

This move follows an earlier initiative by the BB, outlined in a circular on March 12, aimed at identifying willful defaulters within the banking sector. The central bank also detailed actions to be taken against such defaulters.

According to the circular, any client who takes a loan anonymously and misuses it will be classified as a willful defaulter. Banks were directed to establish a ‘willful defaulter identification unit’ by April 9 to facilitate this identification process.

The circular further stipulates penalties for non-compliance. Banks that violate these conditions will face fines ranging from Tk 50 lakhs to Tk 1 crore. Continued violations will incur additional fines of Tk 1 lakh per day.

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Cenbank Raises Dollar Price to Tk 117

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The Bangladesh Bank has adjusted the dollar price to Tk117 from Tk110 by introducing the crawling peg exchange rate mechanism.

Under this new approach, the bank will buy and sell dollars with Tk117 as the mid rate.

This decision was reached during a meeting of the monetary policy committee on Wednesday, May 8th.

Additionally, the committee has opted to discontinue the SMART lending rate mechanism, allowing banks to set their lending rates based on dollar demand and supply, according to a circular issued after the meeting.

The crawling peg system permits a currency with a fixed exchange rate to fluctuate within a specified band of rates, combining features of both fixed and floating exchange rate regimes.

On May 5th, Bangladesh Bank Governor Abdur Rouf Talukder announced the adoption of a market-based interest rate and the implementation of a crawling peg system to stabilize the foreign exchange rate.

He stated that the central bank is collaborating with prominent economists and bankers to devise a contractionary monetary policy aimed at curbing inflation and restoring macroeconomic stability.

Earlier, on April 2nd, the World Bank stressed the importance of a crawling peg mechanism aligned with market-clearing exchange rates to narrow the gap between formal and informal exchange rates, as outlined in the latest Bangladesh Development Update report.

Meanwhile, the International Monetary Fund (IMF) has advocated for a market-based dollar rate. In January 2023, the IMF attached several conditions to a $4.7 billion loan facility over a three-and-a-half-year period. Bangladesh has received two installments of the loan by fulfilling nearly all conditions, except for the reserve requirement.

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