Govt approves two hard-term loans worth $260m
To be invested in power transmission and road, terminal development
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The interim government on Wednesday approved two hard-term credits worth US$260 million to invest in power transmission, road and terminal development, officials said.
The Standing Committee on Non-Concessional Loans (SCNCL) of the government approved the loans at its meeting at the Economic Relations Division (ERD), with Finance Adviser Dr Salehuddin Ahmed in the chair.
ERD Secretary Shahriar Kader Siddiki, Finance Secretary Md. Khairuzzaman Mozumder and other high officials of the Ministry of Finance were present at the meeting.
In its last meeting in September 2024, the committee approved a $350 million loan from the ITFC of the Islamic Development Bank (IsDB) for the Bangladesh Petroleum Corporation.
Of the loans approved on Wednesday, the PGCB is borrowing $160 million from the Asian Infrastructure Investment Bank (AIIB) and the Bangladesh Infrastructure Finance Fund Limited (BIFFL), a government-owned specialised finance company, and $100 million from the Asian Development Bank (ADB).
The grant element of both the loans is below 25 per cent, the ERD officials said.
The grant element of a loan is the difference between the loan's face value and the present value of the discounted future debt-service payments, expressed as a percentage of the loan's face value.
A loan is considered hard-term if the grant element is less than 25 per cent.
The grant element is a measure of a loan's concessionality and the overall cost of borrowing. It's calculated when the loan is extended and is an estimate of the financial sacrifice made by the lender.
According to the ERD, the BIFFL will borrow $100 million loans from the ADB.
The ADB will charge SOFR-based interest rate where a 0.05- percent spread will be added.
The maturity of the loan is 20 years with a 5 years grace period, ERD officials said.
According to the ERD, the BIFFL will bankroll two public-private partnership (PPP) projects under the Ministry of Road Transport and Bridges and the Shipping Ministry.
The fund will be used to construct the Dhaka bypass project and the Patenga terminal in Chittagong, officials said.
ERD officials said the PGCB's loan is to upgrade its transmission line in the southern district of Bangladesh. The loan will be SOFR-based with shorter maturity.
Usually, the state-owned enterprises and autonomous organisations take non-concessional loans against government guarantees.
According to the ERD, the SCNCL approved the proposal for taking two non-concessional loans in FY 2021-22.
The government has endorsed a total of 78 proposals for non-concessional loans till June 2023, the official data showed.