Govt secures $1.06 billion in high-interest foreign loans for key projects

The government has finalised plans to borrow approximately $1.06 billion in non-concessional foreign loans to fund seven major development projects. 

The decision was made during a meeting of the Foreign Assistance Search Committee under the Economic Relations Department (ERD) on Wednesday. 

Discussions at the meeting also explored options for securing loans at lower interest rates.

The meeting, held at the NEC Conference Room in Sher-e-Bangla Nagar, Dhaka, was chaired by Finance Adviser Dr. Salehuddin Ahmed. 

ERD Secretary Md. Shahriar Quader Siddiqui and other officials attended. 

A total of 36 project proposals reliant on foreign loans were presented by various ministries and organisations, including several involving Chinese loans and grants. 

However, only seven projects were granted preliminary approval for loans on hard terms.

Hard-term loans carry market-based interest rates, which are higher than those of concessional loans. They also feature shorter repayment and grace periods. Such loans are often necessary for critical import, energy, and power infrastructure projects, as flexible loan options are limited. 

As Bangladesh aims to sustain its development as a middle-income country, access to concessional loans from institutions like the World Bank and the Asian Development Bank (ADB) has decreased, leading to greater reliance on non-concessional loans.

According to sources, the approved loans will support seven projects, including improvements to Dhaka’s water supply system, the construction of a climate-resilient bridge in the Mymensingh region, and enhancements to the power supply system in the northern region. 

Other projects include converting the Chittagong-Dohazari meter gauge railway to dual gauge, two Dhaka WASA initiatives, and a power distribution project in the northern region under NESCO.

Among the approved projects, the construction of five climate-resilient bridges in Mymensingh division is estimated to cost Tk3,745 crore, with Tk2,850 crore funded by a loan from the Islamic Development Bank (IDB).

For Dhaka WASA, the Sayedabad Water Treatment Plant Project (Phase-3) is projected to cost over Tk16,000 crore, with the European Investment Bank (EIB) providing a non-concessional loan of Tk11,448 crore (equivalent to $90 million or 80 million euros). 

Similarly, the Dhaka Environmentally Sustainable Water Supply Project, costing Tk10,973 crore, will receive a Tk674 crore loan from the EIB, also non-concessional, amounting to $90 million (80 million euros).

The conversion of the Chittagong-Dohazari meter gauge railway to dual gauge is budgeted at Tk10,797 crore, with the ADB providing a loan of Tk7,000 crore. 

The second phase of the Khulna water supply project, costing Tk2,598 crore, will be supported by a Tk1,821 crore loan from the ADB. Lastly, the NESCO power distribution project in the northern region, with a total cost of Tk1,184 crore, will receive a Tk965 crore loan from the ADB.