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Two top global lenders on Thursday approved loans amounting to US$1.54 billion to support banking-sector reforms, economic development, climate-impact resilience, and energy security in Bangladesh.
Of the total, the Asian Development Bank (ADB) will provide $900 million while another $640 million will be available from the World Bank (WB), according to press statements.
The financial support comes at a time when the country is dire need of foreign currency to finance its external trade and development projects.
The ADB will provide a $500 million policy-based loan to help stabilise and reform the banking sector in Bangladesh by strengthening regulatory supervision, corporate governance, asset quality, and stability.
The Stabilizing and Reforming the Banking Sector Program, Subprogram-1, aims to focus on policy reforms to promote finance sector resilience by enhancing banking sector governance, increasing the effectiveness of Bangladesh Bank's liquidity management framework, and introducing immediate measures to resolve significant nonperforming loans in the banking system.
The measures under the program are to support phased compliance with international banking norms, leading to integrity in asset quality information.
"The key binding constraints in the banking sector include a lack of robust asset quality, tight liquidity, and inadequate financial intermediation leading to low rates of financial inclusion," , said a press statement, quoting ADB Principal Financial Sector Specialist Sanjeev Kaushik.
"The program will bring significant value addition through building the regulator's capacity for ensuring compliance with international norms, augmenting the capitalisation of the banking sector and improving access to affordable finance for micro, small and medium enterprises," he was also quoted as saying.
In addition to that, the ADB will also provide $400 million in loan to help Bangladesh enhance its resilience against climate impacts, cut emissions in climate-critical sectors, and promote inclusive development, according to the press statement.
The funding aims to support the second phase of the Climate-Resilient Inclusive Development Program (CRIDP), which includes nearly $113 million in co-financing from the Agence Francaise de Developpement (AFD) and $400 million from the Asian Infrastructure Investment Bank (AIIB).
"The program will help Bangladesh achieve its climate goals more efficiently by bringing government agencies together and aligning their work with national policies," said ADB Senior Public Sector Economist Sameer Khatiwada was quoted as saying.
"It will also remove obstacles to mobilising climate finance, reinforce adaptation efforts in priority sectors, and speed up actions to reduce climate impacts," he said.
Under the CRIDP, Bangladesh Climate Development Partnership will be established to secure climate finance and help government ministries to develop, implement, monitor and evaluate climate projects more effectively.
A new framework will scale up local youth-related and gender-responsive local adaptation measures, it said, adding that the program is to support a national disaster risk financing strategy including instruments like crop insurance, disaster risk insurance, and contingent disaster financing.
Additionally, the programme aims to support the update of the Revised Strategic Transport Masterplan for Dhaka (2025-2034), and implementation monitoring of the renewable energy components of the Integrated Energy and Power Master Plan, which aims to promote climate-friendly transport systems and renewable energy.
On the other hand, a $640 million worth of loan will be available to help Bangladesh improve gas supply and air quality.
"Enhancing energy security and air quality are critical economic and development priorities for Bangladesh," said a press release, quoting World Bank's Interim Country Director for Bangladesh Gayle Martin.
"By addressing the root causes of gas supply constraints and urban air pollution, these two projects will help Bangladesh boost economic growth, improve productivity, and create jobs," he said.
The $350-million Energy Sector Security Enhancement Project is to help improve gas supply security by facilitating access to cost-effective financing for Petrobangla.
The project will utilise an IDA guarantee to mobilise up to $2.1 billion in private capital over seven years for new Liquefied Natural Gas (LNG) imports.
The backing of an IDA guarantee will improve Petrobangla's creditworthiness to secure LNG supplies, the WB statement mentioned.
The $290-million Clean Air Project will initiate a comprehensive approach to tackle air pollution.
In Bangladesh, air pollution caused over 159,000 premature deaths and 2.5 billion days of illness, with estimated health costs equivalent to 8.3 per cent of the gross domestic product (GDP) in 2019.
Dhaka remains one of the most polluted cities in the world with annual levels of fine particulate matter (PM2.5) exceeding by 18 times the WHO Air Quality Guidelines.
The project will focus on air quality management by strengthening Department of Environment's air quality monitoring network with new and improved stations.
The project aims to improve vehicle emissions control and introduce a fleet of 400 zero-emission electric bus services by replacing aging, polluting diesel buses.
These buses will operate under a unified "single operator per franchise" model for better service quality, according to the project.
Under the project, depots will be established for charging, parking, and maintaining the electric buses.
Besides, it will construct five new Vehicle Inspection Centers, upgrade two non-functioning ones, and deploy mobile Vehicle Inspection Centers and 20 mobile vehicle emissions testing units.
"This will be the first in a new series of projects to improve the country's air quality," said Ana Luisa Gomes Lima, World Bank Lead Environment Specialist and Task Team Leader for the project.
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