A substantial sum of US$900 million is being fed into Bangladesh's slim foreign-exchange purse from the World Bank as two loan deals were made Sunday, in a row of recent foreign funding.
Of the funds, $500 million comes as budget support and another $400 million for implementing resilient urban and territorial development project (RUTDP) by the Local Government Engineering Department (LGED).
Md Shahriar Kader Siddiky, Secretary of Economic Relations Division (ERD), signed the loan agreement for budget support and Farid Aziz, Additional Secretary of the ERD, inked the document on RUTDP project on behalf of the Bangladesh government.
Abdoulaye Seck, the World Bank Country Director for Bangladesh, signed on the agreements on behalf of the Washington-based lender at an event arranged in the ERD conference room in Dhaka.
Senior officials from the ERD and the World Bank and representatives of the project-implementing agencies attended the event.
The main objective of the budget -support programme titled 'The Second Bangladesh Green and Climate Resilient Development Policy Credit (DPC)' is to strengthen fiscal and financial sector policies to sustain growth and to enhance resilience to future shocks, including climate change, said ERD officials.
"The government has full mandate of spending money from budget support for any purpose of public spending. However, such supports come with conditions of complying with some conditions of ensuring reforms," says one official.
Finance Division is the main implementing agency of this programme, while Local Government Division, Bangladesh Bank, the Ministries of Planning, Environment, Forest and Climate Change, Power, Energy and Mineral Resources, and Science and Technology, Health Services Division and the National Board of Revenue will support implementation of the project.
The $400 million resilient urban and territorial development project will benefit about 17 million people living in select urban areas through improving climate-resilient and gender-responsive urban infrastructure and urban management capacities in seven city clusters along the economic corridor covering over 950 kilometers of the highway from Cox's Bazaar in the south to Panchagarh in the north of Bangladesh.
Selected municipalities and city corporations will receive grants under the project for constructing over 300 kilometers of footpaths, 10 regional bus terminals, 10 kitchen markets, 10 supermarkets, 10 parks, 10 community centers, 20 public toilets, 880 kilometers of urban roads, and, 2000 meters of bridges or culverts among others.
The project will be implemented by the Local Government Engineering Department (LGED) of the Local Government Division (LGD), the Ministry of Local Government, Rural Development and Cooperatives, till June 2030.
The World Bank Country Director said at the event that Bangladesh is one of the most vulnerable countries to climate change, impacting the people, whether they live in rural areas or in cities.
"These two financings will Bangladesh achieve green growth and build climate resiliency, across the sectors, including urban infrastructure. He said adding, The World Bank remains a committed partner to help Bangladesh achieve its development aspirations, while improving resiliency to climate change."
Lending terms and conditions have it that out of $500-million budget support, $250 million loan is being taken from World Bank's IDA-Regular window with an annual fee of 2.0 per cent while 1.75 per cent as interest rate and 0.25 per cent as service charge. A 0.50-percent commitment fee will be applicable on the unwithdrawn financing balance, which is normally waived by World Bank, said ERD officials.
The debt is to be served by the government in 30 years with a 5-year grace period.
The remaining $250 million is being taken from IDA-Shorter Maturity Loan (SML), repayable in 12 years with 6 years grace period.
This loan has no interest, service or other charges but only 0.50-percent commitment fee will be applicable. Officials said out of $400 million RUTDP project, $300 million would be managed from the SML window. Another $100 million is to be managed from scale-up window (SUW), which disburse relatively commercial loan from the World Bank.
The interest rate on the loan is based on the Tokyo Overnight Average Rate (TONA) plus a variable spread for the JPY-denominated loan.
A 0.25-percent front-end fee and a 0.5 per cent commitment fee will also be applicable on the amount.
The amount is repayable in 35 years with a 4-year grace period.
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