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IDB to bankroll housing projects, € 95m loan deal tomorrow

Mehdi Musharraf Bhuiyan | March 31, 2018 00:00:00

The government is set to sign its long-awaited 94.75 million Euros loan deal with the Islamic Development Bank (IDB) next week, which would be used for the financing of rural and peri-urban housing in the country.

The loan deal will be signed during the upcoming annual meeting of IDB, opens in Tunisia tomorrow (Sunday).

An 11 member government delegation led by the Finance Minister AMA Muhith leaves the capital today (Saturday) to attend the five-day meeting.

Under the scheme, loans would be allocated to construct some 4,050 units of houses in rural areas, 2,825 units in peri-urban areas and 1,101 units for non-resident Bangladeshis, officials of the Economic Relations Division told FE.

The US$ 105 million loan, aimed at providing low-cost home financing to low-income groups in the rural and peri-urban areas, was earlier approved during the meeting of IDB board of directors in July last year.

Out of the total loan of 94.75 million Euros, some 85.12 million will be financed as installment sale under which the IDB purchases the machinery or equipment needed for a certain project then re-sells them to the beneficiary adding a mark-up, which is mutually agreed upon between the bank and the borrower. The mark up of this amount will be 1.97 per cent.

At the same time, the loan figure of the total amount will be 9.33 million Euros, the mark up of which will be 1.35 per cent. In addition, some 0.3 million Euros will come as grant.

The loan deal comes at a time when the IDB financing in the country is going through rough patches. In January, the IDB pulled out $175.5 million (Tk 14.22 billion) fund commitments against two projects in Bangladesh as the country failed to comply with policy deadlines.

The two projects, which saw the IDB axing, were 'Prepaid Metering System' and 'Sustainable Housing for Low Income Urban Communities'.

The estimated cost of the 'Prepaid Metering System' project was US$155.5 million while the remaining US$20 million was meant for the 'Sustainable Housing for Low Income Urban Communities' project.

ERD officials, however, said that the project cancellation was part of the IDB's global lending restructuring.

"Globally, the IDB has cancelled funding worth around US$ 3.0 billion as part of this restructuring", said an official.

"It is likely that there will not be any new IDB funding for Bangladesh until mid-2019", he said, preferring not to be named.

Insiders also said that the upcoming meeting is likely to discuss this ongoing restructuring of the IDB. However, relevant officials noted that Bangladesh is unlikely to directly raise the issue of the IDB's recent project cancellation during the meeting.

Apart from the regular agenda, there could be several side meetings with high dignitaries from the IDB and the host country Tunisia during the event, officials said.

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