The Asian Development Bank (ADB) Tuesday approved a US$526 million loan to facilitate execution of infrastructure development projects in Bangladesh under the Public-Private Partnership (PPP) initiatives, the Bank said.
The Board of the ADB in its meeting in Manila endorsed the multi-tranche financing facility (MFF) which will also help improve renewable energy in Bangladesh, a statement from the ADB Headquarters said Tuesday.
The ADB fund consists of a $500 million market-based loan to finance medium and large-scale PPP infrastructure projects, and a $26 million concessional loan to finance small and medium-sized renewable energy and energy efficiency facilities, primarily in rural areas of the country.
Both the loans are under the Third Public-Private Infrastructure Development Facility (PPIDF 3).
The fund will mainly be used for enactment of the PPP Act and institutional support to the PPP Authority. It is also designed to promote commercial financing for PPP projects to reduce pressure on direct financing from the budget to meet the growth target, officials said.
The Board also approved a $750,000 technical assistance from the Financial Sector Development Partnership Fund to further strengthen the capacity of the Bangladesh government-owned Infrastructure Development Company Limited (IDCOL) in order to promote and finance PPP projects.
ADB said the PPIDF-3 is a continuation of the previous efforts of the Bank and the Bangladesh government and it reflects strong partnership between ADB and IDCOL to address the country's infrastructure deficiencies.
Peter Marro, ADB Principal Financial Sector Specialist, said, "Infrastructure development is an integral part of Bangladesh's rapid economic growth, but it is undeniable that in order to sustain this growth, the country would need an increased investment in infrastructure that can be filled in by the private sector."
"We hope to continue our contribution to the country's infrastructure development through PPIDF 3," he added.
ADB said Bangladesh has recorded steady average growth of 6.3 per cent between 2011 and 2015, enabling it to attain lower-middle income status in July 2015.
But real gross domestic product (GDP) growth would need to reach an average annual rate of 7.4 per cent during the 7th Five Year Plan to move Bangladesh toward upper middle-income level.
Such a target will require a substantial increase in public and private investment from about 29 per cent of GDP in 2015 to 34.4 per cent by 2020.
The gap in infrastructure financing alone is estimated at between 5.0 per cent and 6.0 per cent of GDP or a shortfall of $9.0 billion to $10 billion a year, the Manila-based lender said.
