After hectic negotiations, Bangladesh is finally poised to sign its first loan agreement with the New Development Bank (NDB) -- the lending arm of the BRICS group -- for two projects this year.
The projects are the Dhaka Water Supply Project -- for which the NDB will provide $320 million, and the Gas Network Strengthening Project -- which will receive $443 million from the bank.
These will be the first-ever loan deals between the NDB and Bangladesh -- a member of the lender.
While the NDB's interest rates are higher than those of the World Bank and the Asian Development Bank (ADB), officials say the loan terms are more favourable, with the added scope for a multi-currency loan option.
The draft of the water supply project's loan agreement has been finalised and is expected to be signed shortly, officials of the Water Supply and Sewerage Authority (WASA) told The Financial Express.
The gas network project's draft is currently under review.
According to the loan agreement draft for the water supply project, the "tenure of the loan is up to the loan repayment date, which shall be within 30 (thirty) years from the date of this loan agreement".
The interest rate will be a combination of the reference rate for the loan currency and a variable spread, says the draft.
The interest rate will be calculated by adding the Secured Overnight Financing Rate (SOFR) rate (currently 5.3 per cent) and a 1.6 per cent variable spread.
Besides, Bangladesh will have to pay a 0.25 per cent commitment charge and a 0.25 per cent front-end fee.
"The commitment charge shall accrue from and including the date which is 60 (Sixty) days after the date of the signing of the loan agreement to and including the date on which all amounts are withdrawn from the loan account or are cancelled," says the draft.
The loan terms stipulate that the borrower must pay a front-end fee on the loan amount no later than one business day before the first withdrawal.
The WASA project envisages major improvement and expansion of Dhaka's water supply services to address two pressing challenges: achieving universal access to water and improving the efficiency of the water distribution network to reduce non-revenue water.
The project has five components: water supply network for 16 unions, water supply network for Padma northwest sector, efficiency improvement of Dhaka water supply network, feasibility studies and designs for sewerage facilities and project management and capacity building.
The gas network strengthening project aims to replace around 2,700 km of pipelines to ensure a reliable gas supply in Dhaka and Narayanganj.
The project is meant to improve low gas pressure and significantly reduce leakage-related accidents and methane emissions, aligning with the country's broader environmental goals, according to officials of Titas Gas Distribution Company Ltd, the project's implementing authority.
The NDB primarily agreed to finance over $4 billion for various infrastructure development projects over the next five years, officials said.
This amount could be doubled if Bangladesh seeks NDB loans for mega-infrastructure projects like the second Padma bridge and the Barishal-Bhola bridge.
Recently, a high-level NDB delegation led by Vice President and Chief Operating Officer Vladimir Kazbekov visited Bangladesh to discuss funding opportunities with various ministries.
The Bridges Division alone discussed projects worth over $10 billion with the delegation, sources say.
Established by the BRICS group, the NDB usually offers loans to member countries in six sectors -- clean energy and energy efficiency, transport, infrastructure, water and sanitation, environmental protection, and social and digital infrastructure.
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