Economy
“Bangladesh, World Bank ink $2.25bn loan deal for 5 projects”
Bangladesh has secured a $2.25 billion loan from the World Bank, which will be utilized to develop multiple sectors, such as regional trade and connectivity, disaster preparedness, and environmental management.
The financing agreements were signed by Sharifa Khan, the secretary of the Economic Relations Division, and Abdoulaye Seck, the Country Director of the World Bank in Bangladesh. The Ministry of Finance released a press statement confirming the loan agreement between Bangladesh and the World Bank.
During the signing of the financing agreements, both Prime Minister Sheikh Hasina and World Bank President David Malpass were in attendance.
The loan agreement, which amounts to $2.25 billion, encompasses five distinct projects.
The first of which is the $753.45 million, Accelerating Transport and trade connectivity in Eastern South Asia (ACCESS) – Bangladesh Phase-1 Project. This project aims to improve the effectiveness and resilience of regional trade and transportation in Bangladesh and will be overseen by the National Board of Revenue, Roads and Highways Department, and Bangladesh Land Port Authority. Implementation of the project is scheduled to take place from July 2022 to June 2028.
Another project included in the loan agreement is the Resilient Infrastructure Building Project (RIVER), with a budget of $500 million. The main aim of this project is to minimize the vulnerability of the population residing in cyclone and flood-prone coastal areas of Bangladesh. Furthermore, the project seeks to provide secure shelter for humans and their resources, including livestock, during natural calamities such as cyclones, tidal surges, and floods. The Local Government Engineering Department of the Local Government Division will oversee the implementation of the project over a six-year period, from July 2022 to June 2028.
Included in the loan agreement is the $500 million First Bangladesh Green and Climate Resilient Development (GCRD) project, which aims to support the government’s transition towards sustainable and climate-resilient development. The project’s objectives are twofold: to improve public planning, financing, and delivery of eco-friendly and climate-resilient initiatives, and to promote sector reforms that enhance greener and more efficient production and services. The main implementing agency for this program is the Finance Division, and the budget support will be disbursed by June 30, 2024, subject to the fulfillment of specific prior conditions.
Also included in the loan agreement is the $250 million Sustainable Microenterprise and Resilient Transformation (SMART) project. This project’s primary objective is to promote sustainable and resilient green growth of microenterprises (MEs) in Bangladesh. The project intends to drive the transformation of the microenterprise sector into a more dynamic, lower-polluting, resource-efficient, and climate-resilient sector. Palli Karma-Sahayak Foundation (PKSF) will be responsible for the implementation of the project, which will take place over a period of six years, from 2023 to 2028.
The loan agreement also includes the $250 million Bangladesh Environmental Sustainability and Transformation (BEST) project. The project’s primary objective is to enhance the Government of Bangladesh’s capacity for environmental management and to reduce pollution discharges. The Department of Environment (DOE) will lead the project’s implementation, with support from other agencies such as the Bangladesh Road Transport Authority (BRTA), Bangladesh Bank, and Bangladesh High-tech Park Authority (BHTPA). The project will be carried out over a period of five years, from July 2023 to June 2028.
Terms & Conditions
Bangladesh is receiving four out of five loans from regular IDA, with the First Bangladesh Green and Climate Resilient Development (GCRD) being the only one with both a Regular IDA loan ($176 million) and a Short-term Maturity Loan ($324 million). The Regular IDA loans are repayable over a period of 30 years, with a five-year grace period, and a service charge of 0.75% per annum and interest rate of 1.25% applied to the withdrawn amount. Additionally, a maximum annual commitment fee of 0.50% is payable on the unwithdrawn financing balance, although this has been waived by the World Bank for Bangladesh for many years, including the current financial year. The Short-term Maturity Loan, on the other hand, must be repaid over a period of 12 years, with a grace period of six years, and no service charge or interest applied to the withdrawn amount. The World Bank has been a key development partner of Bangladesh since 1972, committing a total of $40.4 billion in loan assistance and $722 million in grants for the country under 368 projects/programs.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
