With streaming credit flow, AIIB set to emerge as a key lender

The Asian Infrastructure Investment Bank (AIIB) is set to turn up as a key development partner of Bangladesh, as the Beijing-headquartered lender loosens the purse strings for the country's infrastructure, power and energy and sustainable river management, said officials.

Currently, multinational lenders such as the World Bank and the Asian Development Bank (ADB) top the country's borrowing outlook.

"In the future, the AIIB is likely to rise as a major lender like the World Bank or the ADB," said Pear Mohammad, additional secretary at the finance ministry's Economic Relations Division (ERD).

He said AIIB's increasing assistance will strengthen the country's infrastructural development further and boost the economic growth.

Established in 2016, the AIIB so far has financed $2.6 billion in 13 Bangladeshi projects, while the credit flow in the next two years may double, according to ERD officials.

The updated borrowing report of the ERD shows the government expects $3.8 billion from the AIIB in the next three years. Besides, the lender has promised $2.3 billion to Bangladesh jointly with the WB in a sustainable river management project.

Top lender ADB's funding promise in 19 projects now hovers around $3.35 billion, less than AIIB's loan pledges, according to the report.

Economists said Bangladesh will gain from the streaming AIIB credit flow in terms of infrastructural development.

"There will be fewer flexible loans for Bangladesh after its LDC graduation in 2026. Therefore, the country should speed up the infrastructural works with the increasing AIIB credit," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI).

The economist emphasised proper use of the funding and enhancing project implementation capacity.

The AIIB will chip in with $500 million to Bangladesh for Covid vaccine purchase in the current fiscal year. A deal in this regard is slated for March this year.

Besides, the AIIB says it is ready to provide the government with assistance for this year's budget implementation.

Managing river better for sustainable future

The AIIB and the WB have proposed Bangladesh to plough in around $2.3 billion jointly in "Sustainable Management of Brahmaputra and Jamuna rivers" aiming at river channelisation and riverbank stabilisation.

Under the project, riverside lands will be reclaimed for setting up economic corridors. The Water Development Board will implement the project initially estimated to cost $2.4 billion.

ERD officials said the WB is now conducting the feasibility, and the actual cost could be known once the study is done. Then the government will determine which financier will be picked up and how much it would fund.

Power and energy in focus

The AIIB has been carrying out its lending in Bangladesh with a highest focus on power and energy sector, said officials concerned.

In continuation to that, the Asia-based lender has come up with assistance in six more power projects.

Key projects include Madunaghat–Bhulta 765 KV transmission line, modernization and capacity enhancement of BREB network (Rajshahi-Rangpur) and gas sector energy efficiency improvement.

Now is the time for big infrastructure works

ERD officials said the AIIB will pump into $200 million in the "Multi Sector On-Lending Facility" project of the state-owned Infrastructure Development Company Limited (IDCOL).

The government and the AIIB may sign a deal in April to that end.

The project aims to promote infrastructure investment by providing long-term financing to the private sector in Bangladesh. It is aligned with Bangladesh's goal to bridge its infrastructure deficit and achieve sustainable growth, as highlighted in Bangladesh's Perspective Plan 2021-2041.

Besides, AIIB's loan pledges include financing an infrastructural development project in old Dhaka.