Govt expects to sign $10.8bn loan deals

The government expects to sign deals of around $10.8 billion in loans with the development partners in the current fiscal year for the implementation of 69 projects.

Among those, the Economic Relations Division (ERD) is prioritising the high probability of the implementation of 35 projects that will need around $6.75 billion in loans. The remaining ones will get into focus for signing later.

Loans and grants worth more than $3 billion have been signed off in the first half of the current fiscal year.

At the end of the last fiscal year, development partners pledged $9.8 billion as financial support.

Apart from these funds, the Japan International Cooperation Agency (Jica) will sign the 41st Official Development Assistance Loan package worth $2.18 billion in June 2020.

The Asian Development Bank (ADB) and the Chinese government have already ensured more funds.

Jica

Jica will fund some important infrastructure projects, including the 41st official development assistance loan package.

The two-lane Chattogram-Cox's Bazar highway will be upgraded to a four-lane one under Public Private Partnership (PPP). Jica will fund flyovers and bypasses at the busiest points of the highway at Patia, Dohazari, Keranirhat, Lohagora and Chakaria.

According to Planning Commission officials, the costs of some of the recently funded Jica projects have increased as per the demand of the Japanese bidder.

The costs of the Hazrat Shahjalal International Airport Expansion and Jamuna Railway Bridge Construction projects have also been revised.

The projects earmarked for Jica's funding in the next fiscal year are the Dhaka Mass Rapid Transit Development (MRT-6), Dhaka Mass Rapid Transit Development Line-5, Food Value Chain Financing, Urban

Development and City Governance, Economic and Social Development and the Fourth Primary Education Development Program.

Last year, Jica provided Bangladesh with $2.5 billion in loans for various development projects and $1.83 billion for the 39th loan package.

The interest rate of Jica's loan is 0.95 percent. There are also a 0.01 percent consultation service fee and 0.02 percent front end fee. The loan must be repaid in 30 years with a 10-year rebate.

World Bank

According to Economic Relation Division sources, two projects – Second Jobs Development Policy Credit and Dhaka Public Transport Improvement – have been selected for signing with the World Bank within this fiscal year.

The ERD considers these two projects as "highly probable".

For the Dhaka Public Transport Improvement project, the government will utilise the Scale-up Facility (SUF) comprising funds underutilised by other countries. The interest rates of SUF loans are usually very high.

For the Second Jobs Development Policy Credit project, the credit from the World Bank's International Development Association (IDA) will be utilised. The 30-year term credit, including a five-year grace period provides concessional financing with an interest rate of 1.25 percent, the service charge being 0.75 percent.

Shahabuddin Patwary, an additional secretary of ERD (WB), told The Business Standard, "The World Bank officials said Bangladesh received more than $4.5 billion from the 3-year IDA-18 package which will expire on June 30, 2020.The government has already signed an agreement with the World Bank."

But some ministries and divisions want the high cost SUF loan from the World Bank.  Therefore, the ERD has prepared another list, he said.

If it is not possible to sign those projects in the current fiscal year, the projects will go under the IDA-19 package to be started in July 2020-2021.

Ten projects have remained on standby as "probable" with regard to funding from the World Bank. The government has sought a loan of $2.4 billion from the World Bank for the implementation of these projects.

ADB

For the regional connectivity project, the ADB will finance the South Asia Sub-regional Economic Cooperation Dhaka-Northwest Corridor Road Project, Phase 2 - Tranche 1.

The project will improve the road connectivity and efficiency of the Dhaka-Northwest international trade corridor, the second busiest artery in Bangladesh, after the Dhaka-Chattogram road.

Burimari Land Port, which stands at the north-western end of the corridor, provides a gateway to Bhutan through India. Developing the transport infrastructure is expected to increase trade in the land port significantly.

The ADB will provide four loans in the current fiscal year, including this project.

The ADB will provide $400 million for the implementation of the SASEC Dhaka Improvement project and $100 million for Innovations in Tertiary Education for Competitiveness in Information Technology.

In the current fiscal year, the government has signed nine projects with the ADB, including The Dhaka and Western Zone Transmission Grid Expansion Project.

China

The construction of the Dhaka-Ashulia Elevated Expressway is expected to start next year. There will be an agreement with the Chinese government regarding the project.

The commercial agreement of this project was signed earlier while the deal on loans will be signed soon, according to Road, Transport and Bridges Minister Obaidul Quader, who was speaking at Setu Bhaban on July 11, 2019.

Bangladesh Bridge Authority signed the contract with a joint venture company for design review and supervision of the construction of the Dhaka-Ashulia Elevated Expressway project on the same day.

The joint venture firm comprises three companies --- from Spain, South Korea and Bangladesh.

As outlined in the project document, the work on the project will begin this year and will be finished in June 2022.

Once completed, the expressway will connect Hazrat Shahjahal International Airport with Abdullahpur, Ashulia, DEPZ and Chandra on the North Bengal Highway.

It will be an extension of the 26-kilometre Dhaka Elevated Expressway linking the airport with the Dhaka-Chattogram highway near Shanir Akhra.

The ERD officials said China will sign agreements by June this year to provide $2.13 billion in loans for the Dhaka-Ashulia Elevated Expressway and Power Grid Network Strengthening projects.

During Chinese President Xi Jinping's Dhaka visit in October 2016, China agreed to provide around $20 billion in loans for 27 projects.

An agreement on $5.71 billion for six projects has been signed.