The government has approved $3.3 billion in non-concessional foreign loans to modernise the country’s power distribution system and continue importing fuel oil and liquefied natural gas (LNG) from the international market.
The approval was given at a meeting of the Standing Committee on Non-Concessional Loans (SCNCL), chaired by Finance Minister Amir Khosru Mahmud Chowdhury at the Secretariat on Wednesday.
Of the total amount, $200 million will be borrowed for a new power-sector project, while $3.1 billion has been approved retrospectively for emergency fuel imports, according to Economic Relations Division (ERD) officials.
The committee approved a proposal to borrow $200 million from the Asian Development Bank (ADB) for the Power Distribution Network Enhancement Project, being implemented by the Bangladesh Rural Electrification Board (BREB) under the Power Division.
According to the ERD working paper prepared for the meeting, the ADB loan will carry an interest rate based on the Secured Overnight Financing Rate (SOFR) plus a 0.50% spread.
The 25-year loan will have a five-year grace period, a 0.10% maturity premium and a 0.15% commitment charge. The grant element is only 5.70%, below the 25% threshold, making it a non-concessional loan.
The $200 million project aims to improve the reliability, environmental sustainability and climate resilience of electricity supply in 13 rural electricity cooperative areas surrounding Dhaka.
Scheduled to run from October 2026 to July 2031, the project will expand new and existing substations, construct underground and overhead lines, install insulated conductors and introduce digital monitoring and fault-locator technologies.
The measures are expected to reduce technical losses and improve the reliability and quality of electricity supply.
Meanwhile, the SCNCL retrospectively approved a $3.1 billion short-term non-concessional loan from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) for fiscal year 2026-27 to strengthen energy security and maintain regular supplies.
Of the amount, $2.5 billion will be used by the Bangladesh Petroleum Corporation (BPC) to import fuel oil and $600 million by Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) to import LNG.
According to ERD data, the six-month loan will carry an interest rate of six-month Term SOFR plus 1.70%, slightly lower than the annual rate in the previous year.
Of the $3.1 billion facility, ITFC will provide $600 million from its own resources, while the remaining $2.5 billion will be financed through co-financing by Bangladesh Bank.
The committee approved the loan retrospectively to ensure an uninterrupted fuel supply chain amid urgent import needs.
The meeting also stressed compliance with government guidelines on non-concessional borrowing. Under the guidelines, debt-servicing costs on such foreign loans must not exceed 10% of export earnings or 15% of revenue earnings in the relevant fiscal year, while the total foreign debt stock must remain within 10% of GDP.
The loans were approved considering the overall economic situation, the government’s repayment capacity from its own revenue and national priorities, according to the ERD report.
-DailySun
