Bangladesh, World Bank ink $2.25b loan deal for 5 projects
The Bangladesh government and the World Bank have penned a $2.25 billion worth loan agreement, comprising five projects to develop various sectors, including regional trade and connectivity, disaster preparedness and environmental management.
Of the five projects, funds for the $500 million First Bangladesh Green and Climate Resilient Development project, which comes as budget support, will be released by the end of this month, according to sources at the Economic Relations Division (ERD).
For the remaining projects, officials expect at least 20% of the funds to be disbursed within the next year.
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Sharifa Khan, secretary of the ERD, and Abdoulaye Seck, World Bank country director in Bangladesh, signed the financing agreements on behalf of their respective sides on Tuesday, said a press release issued by the Ministry of Finance.
Prime Minister Sheikh Hasina and World Bank President David Malpass were present during the exchanges of the financing agreement.
The projects in a nutshell
- $753.45m for transport, trade connectivity in Eastern South Asia
The objective of the umbrella project – Accelerating transport and trade connectivity in Eastern South Asia (ACCESS) Bangladesh Phase-1 Project – is to develop efficient and resilient regional trade and transport in Bangladesh.
The National Board of Revenue (NBR), the Roads and Highways Department (RHD) and the Bangladesh Land Port Authority will implement the project between July 2022 and June 2028.
- $500m for resilient infrastructure
The project aims at reducing the vulnerability of the population across the cyclone and flood prone coastal districts of Bangladesh. Another objective is to provide safe shelter to human beings and their resources including livestock during natural calamities like cyclones, tidal surges and floods.
The Local Government Engineering Department will implement the project in 6 years (01 July 2022- 30 June 2028).
- $500m for climate resilient development
The main objective of this budget support programme is to support the Bangladesh government for transitioning to green and climate resilient development by enhancing public planning, financing, and delivery of green and climate resilient interventions; and promoting key sector reforms for greener and more efficient production and services.
The Finance Division is the main implementing agency for this programme. The budget support will be released by 30 June 2024 subject to compliance of certain prior conditions.
- $250m for microenterprise transformation
The project looks to increase resource-efficient and resilient green growth of microenterprises in Bangladesh. It will also promote and transform the microenterprise sector into a more dynamic, lower polluting, resource-efficient, and climate resilient sector. It will be implemented by the Palli Karma-Sahayak Foundation during the period 2023 to 2028.
- $250m for environmental sustainability
The objective of this project is to strengthen the capacity of the Government of Bangladesh in environmental management and to reduce pollution discharges.
The Department of Environment, the Bangladesh Road Transport Authority, the Bangladesh Bank, and the Bangladesh Hi-tech Park Authority will implement the project in five years (July 2023 to June 2028).
Terms and conditions
Bangladesh is getting four loans out of five from the World Bank's International Development Association (IDA). Only the First Bangladesh Green and Climate Resilient Development project has two types of credit – regular IDA ($176 million) and short-term maturity loan ($324 million). The regular IDA loan is to be repaid in 30 years with a grace period of five years.
A service charge of 0.75% per annum and interest at the rate of 1.25% shall be paid on the withdrawn amount of this loan.
Besides, a maximum annual commitment fee of 0.50% is payable on the unwithdrawn financing balance. It should be noted that the commitment fee has been waived by the World Bank for Bangladesh for a long time including the current financial year.
On the other hand, the short-term maturity loan has to be repaid in 12 years with a grace period of six years.
No service charge and interest will be applicable on the withdrawn amount of this loan.
Since 1972, the World Bank has been one of the main development partners of Bangladesh.
The World Bank has committed a total of $40.4 billion in loan assistance and $722 million in grants for Bangladesh under 368 projects/programmes till now.
