Dhaka eyes $1.2b WB hard-term loan for three development projects

December 01, 2020 09:01:07

| Updated:

December 01, 2020 16:24:16

World Bank President Jim Yong Kim takes to the stage to deliver remarks at the plenary session at the IMF-World Bank annual meetings at Constitution Hall in Washington October 10, 2014 – Reuters/Files

Bangladesh is likely to seek a hard-term World Bank (WB) loan worth US$ 1.2 billion to finance three of its development projects, officials said on Monday.

They said the country may have to choose the alternative window as the Washington-based global lender has already pledged for providing around US$ 4.0 billion of concessional loan from its IDA for next three fiscal years (FY2020-23).

Officials at the Ministry of Finance (MoF) said the IDA fund would not be enough to finance the three projects – electricity distribution modernisation system project, Jamuna River economic corridor development programme and Bangladesh road safety programme.

When the government approached the WB for the IDA loan for financing the projects, the WB suggested taking $ 500 million, $ 400 million and $ 300 million respectively for the projects from its Scale Up Window (SUW) of lending.

He said the terms and conditions of the SUW loan are harder than that of the WB’s concessional lending window – the International Development Association (IDA).

ERD officials said the rate of interest on SUW loan is LIBOR or EURIBOR plus 1.5-2.0 per cent with a shorter repayment period (around 15 years) as compared to only 2.0 per cent for the IDA credit that offers 30-year maturity with a grace period of five years for repayment.

“Since the IDA-19 package is not enough to bankroll the pipeline projects, the WB has offered the loans from its SUW,” an official at the Economic Relations Division (ERD) told the FE.

He added that the WB has already formed a fund worth $ 82 billion under its IDA-19 package for a period between FY2021 and FY2023 for financing the member countries across the globe.

Bangladesh has no other option but to go for the comparatively hard term loan, he said, requesting anonymity.

When asked, the ERD official said they were scrutinising the SUW loan proposal to assess its viability and impact on our financial management. The ERD also requested the central bank to assess the possible impact.

“If the loan is considered viable, only then we would go for it,” said the ERD official.

A senior official at the MoF said the country needs huge investment, especially from the external sources, to develop its infrastructure and mitigate poverty.

“So, we are considering different options of financing sources from different bilateral and multilateral development partners,” he added.

Earlier, Bangladesh had sought funds worth US$ 5.0 billion from the IDA-19 package for the next three years to bankroll its socio-economic development activities.

In addition, the government had also requested the WB to confirm some $ 500 million budgetary support for the current fiscal year to offset the impact of Covid-19 pandemic on the economy.

Also, the government has approached the multilateral lender to provide $ 500 million more in assistance to procure Covid-19 vaccine.

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