Moscow mum on extending $11.38b utilisation timeline

Russia has yet to extend the timeline for its $11.38-billion loan utilisation for Bangladesh although the credit tenure already expired in December last, officials said Wednesday about a looming uncertainty surrounding the funding.

About a year back, Dhaka had requested the Russian lender to extend the loan-utilisation deadline by two more years as works for building the Rooppur nuclear power plant have yet to see the finishing line, they said.

The Economic Relations Division (ERD) had written to the Russian lender for time extension for the loan being utilised to construct the $12.65-billion-cost Roopur nuclear power plant in Pabna.

"We have already requested Russia for extending the deadline by at least two more years up to December 2026. We are hopeful of getting extension formally within a shorter possible time," said ERD Secretary Shahriar Kader Siddiki.

"Since we have completed all discussions with the development partner, we are expecting the loan extension shortly," he told the FE.

Bangladesh signed $11.38-billion-loan agreement with Russia in July 2016 for setting up the maiden nuclear power plant in the country to meet perennial electricity shortages.

Another $500 million worth of loan deal with Russia was signed in November 2013 for the feasibility study of the plant.

The 2400-megawatt nuclear power plant is being built with collaboration of the Russian state-owned atomic company Rosatom.

Some 90 per cent of the project is financed through the Russian loan, repayable within 30 years with a 10-year grace period up to June 2026.

Another ERD official says: "We've good negotiations with Russia regarding the loan-period extension. So, we are hopeful of getting the extension within his month for at least two years."

Asked about the unexplained delay, he said: "There were some reasons behind the delay. We had to go for negotiation with Russia over some extra charges, proposed by Moscow for Dhaka's loan-utilisation delays. Dhaka declined to pay that extra charges. Finally, the lender agreed to scrap their extra charges."

He added: "Since all the settlements have been done in the negotiation meeting, we are expecting the loan-utilisation deadline extended for at least two more years up to December 2026."

According to the draft protocol sent by Russia, the loan tenure, originally set from 2017 to Dec 2024, will be extended by two years as Bangladesh could not complete the project on time.

During a meeting with Chief Adviser of the current interim government Prof Muhammad Yunus on February 26 this year, Rosatom Director-General Alexey Likhachev agreed to amend the Intergovernmental Credit Agreement.

The 10-year grace period would expire in June 2027 and then the Bangladesh government will have to pay back the principal and also pay the interest.

During this grace period between FY2017 and FY2027, Bangladesh needs to pay the interest on the loan only.

Meanwhile, the government has also requested the repayment of the principal and interest to be started from March 2029.

The first installment of the principal amount of the country's largest-ever foreign loan is slated for payment on 15 March 2027. But the government now seeks this cut-off time to be extended up to March 15, 2029.

According to the $11.38-billion-loan deal, Bangladesh will have to repay the loan at LIBOR-plus 1.0 to 3.0 per cent rate. But the interest rate will not exceed 4.0 per cent.

Besides, a commitment fee of 0.5 per cent on the unutilised loan amount, capped at $0.25 million annually, with payments required in the first quarter of the subsequent year.

Officials from both the ERD and the Ministry of Science and Technology have said some factors, including the Covid-19 pandemic, prevailing global conditions, international sanctions impacting the transportation of equipment and goods for Russian organisations, and the sluggish pace of the power-transmission lines' construction, have led to the delays in completing the project.

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