The Asian Development Bank (ADB) has offered a new lending product for Bangladesh in the public-private partnership (PPP) sector to make related projects attractive to investors, sources said.
Under the loan product, they said, the Manila-based lending agency will act as the guarantor of its interested PPP projects for covering risks including credit ones.
The guarantee will ensure the certainty of cash flow from market financial sources, resulting in lowering the interest rate, they added.
Though the similar product was also offered by the World Bank for the PPP sector, official sources, said it is still at initial stage. The ADB has already proposed to be the guarantor of the Dhaka-Chattogram expressway project, they added.
However, the Dhaka-Chattogram expressway project has been shelved after making it ready for inviting investors. ADB financed the project of Roads and Highways Department (RHD) for carrying out the feasibility study and detailed design work done in last six years.
After putting the PPP project on hold, the officials said, ADB has assured the government of becoming the guarantor in other big PPP projects.
"ADB has come forward with the new lending window in the context that its conventional financing windows would not be able to meet the need of the country after its graduation to the middle-income country," said an official.
He said the government has neither the capacity nor enough ADB fund to invest in infrastructure projects to be needed after achieving the MIC status.
However, sources said the ADB's offer will help increase the number of bidders in any PPP projects and overcome the country's low credit rating.
Bangladesh now uses ADB lending products through technical assistance, advisory services and loans in the development projects.
ADB sources said as it has also not enough fund in its lending basket to support SDG financing requirement for development assistance worldwide, the bank now offers market-oriented innovative products for the development.
The guarantee products are to shift the financing to the investors for collecting from domestic and other international lending agencies.
According to the PPP Authority, the ADB's risk guarantee product will cover transfer restriction, expropriation, political violence and breach of contract while credit risk covers commercial and political risks.
The debt funding requirement would be between US$ 800 million and $ 920 million.
PPPA officials said the guarantee ensures less financial involvement of the government in the projects. The new offer will only be applicable to new PPP projects which would meet ADB requirements like proper studies.
They said ADB wanted to be the guarantor in two phases of the Dhaka-Chattogram project because of its engagement with it from the beginning. But the offer may be used for the projects in the pipeline under government-to-government PPP arrangement.
The PPPA has so far made small PPP projects except the Dhaka-Chattogram expressway for investment. It has 72 projects approved from the cabinet committee on economic affairs and three of them had been completed. But none of mega PPP projects reached the implementation stage.
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