Bangladesh is set to sign loan deals for US$ 60 million additional OFID funds for financing "unforeseen" cost-overruns of two major infrastructure projects, officials said.
Under the deals, the money coming from the OPEC Fund for International Development (OFID) will be apportioned into US$ 30 million worth of loan as additional funding for the construction of Lebukhali Bridge over Payra River and US$ 30 million to be used to meet an extra cost of SASEC Road Connectivity project.
In both the schemes, the government has resorted to asking for additional loans from the foreign donor to meet the unforeseen additional costs counted years after the projects were initiated.
The grant element in the proposed OFID loan for Lebukhali Bridge is 27.94 per cent, while in case of SASEC project the grants will be 25 per cent, making both the dollops non-concessional in nature.
Officials concerned, however, said since OFID is a multilateral donor and the grant elements in the both cases ranged between 25 percent and 35 percent, there will be no need for prior approval from the relevant standing committee on non-concessional credits.
The loan pacts are likely to be signed during the upcoming visit of Director-General of OFID Suleiman Jasir Al-Herbish to Dhaka on January 16-19.
Among the schemes, the 1.47-kilometre-long four-lane Lebukhali bridge is currently being constructed over Payra River with support from Kuwait Fund for Arab Economic Development.
Earlier, the government had signed a 14-million Kuwaiti Dinar (equivalent to US$ 48 million) loan deal back in 2012 with KFAED for construction of the bridge.
However, the DPP of the project was later revised in 2015 to accommodate cost increase by around Tk 8.6 billion.
As per the revised DPP, the cost increase is primarily in the civil works, consultancy services for design and supervision, NGO services for resettlement-plan implementation, hiring charge, security services, land acquisition and so.
"Cost for various components of the project has increased as the DPP was prepared based on RHD's rate of 2011 and the actual cost was found to be much higher during the project-implementation period," said a project official.
Although the Kuwait government eventually signed a 15-million Kuwaiti Dinar second loan agreement for the Lebukhali Bridge project in 2016,
KFAED at the time stipulated that the loan would not be disbursed until and unless additional financing was guaranteed from some other development partners.
In this context, the government later approached OFID to provide additional funds for the Lebukhali bridge scheme. Against this backdrop, the OFID governing body sanctioned the US$30 million worth of loan in 2017.
The interest rate on the OFID loan, in this case, will be 1.25 per cent while the repayment period is 20 years including a grace period of 5 years.
Meanwhile, the Tk 27.88 billion ($358. 59 million) SASEC Road Connectivity project was approved by the Executive Committee of the National Economic Council (ECNEC) back in April 2013.
The Asian Development Bank (ADB) earlier sanctioned US$178 million for the Project while the OPEC Fund for International Development (OFID) and Abu Dhabi Fund for Development allocated $30 million each under the original plan.
As part of the SASEC scheme, the 70-kilometre-long two-lane road connecting Jaydebpur, Chandra, Tangail and Elenga is set to be expanded to four lanes.
However, the Roads and Highways Department recently revised the DOP of the project to accommodate the two-lane service road all along the 70-kilometre road, five flyovers, seven underpasses for slow- moving vehicular transport and six for pedestrians.
In this context, RHD asked for an additional fund worth US$75 million from the ADB and US$ 30 million from the OFID to meet the increased demand.
"The additional US$ 30 billion from OFID will be used for the construction of a separate lane alongside the 10-kilometre Tangail- Elenga main road for slower vehicles," said a project official.
An OFID mission visited the capital, Dhaka, late last October to appraise the additional financing, ERD officials informed. Consequently, the additional funding was approved by the OFID governing body late last month (December). The draft loan proposal has now been sent to the Law Ministry for vetting, ERD officials said.
The annual charge for this US$ 30 million loan is 1.25 per cent while the service charge is 1.0 per cent. The loan's repayment period of 20 years also includes a rebate period of five years.
© 2024 - All Rights with The Financial Express
