Govt approves $3.3b in foreign loans on hard terms

The government has approved foreign borrowing of US$3.3 billion on non-concessional terms to finance essential fuel-oil and LNG imports and upgrade the country’s power-distribution network.

Officials said the Standing Committee on Non-Concessional Loans, chaired by Finance Minister Amir Khosru Mahmud Chowdhury, approved two loan proposals at a meeting held at the Bangladesh Secretariat on Wednesday.

The loans will be provided by the International Islamic Trade Finance Corporation (ITFC) and the Asian Development Bank (ADB).

A senior Economic Relations Division (ERD) official who attended the meeting said the proposals were approved in view of the country’s critical and urgent needs, as well as the public importance of the projects.

Of the total financing, the ITFC will provide $2.5 billion to the Bangladesh Petroleum Corporation (BPC) to finance petroleum imports and another $600 million to Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) for LNG imports.

The ITFC financing is a short-term, non-concessional loan carrying an annual interest rate of 5.377%, based on the six-month US dollar SOFR plus a 1.70% margin. An additional administrative fee of 0.20% will apply to the six-month facility.

Meanwhile, the ADB will provide $200 million on hard terms for the Power Distribution Network Enhancement Project. The loan carries an interest rate based on SOFR plus a 0.50% spread and a 0.10% maturity premium, making it a non-concessional facility.

Under the project, the Bangladesh Rural Electrification Board (BREB) aims to improve the reliability, efficiency and climate resilience of electricity distribution systems operated by 13 Palli Bidyut Samities (PBSs) around Dhaka metropolitan area.

The project will expand new and existing substations, build overhead and underground distribution lines, install insulated conductors and fault-locating equipment, deploy environment-friendly GIS technology, introduce digital monitoring systems and strengthen the institutional capacity of BREB.