The Financial Express

WB okays $59m 'costly' loan for power sector

| Updated: October 22, 2017 00:21:24

Evaly and Fianancial Express Evaly and Fianancial Express
WB okays $59m 'costly' loan for power sector

Bangladesh has got access to the World Bank's costly lending regime in a credit line valued at US$59 million.


While Bangladesh will be the first recipient of the bank's newly-introduced window, known as "Scale-up Facility," (SUF), its loan rate is higher than that of the global lender's soft-lending arm.


The government said the interest rate of the loan would be 2.85 per cent. In addition, the global lender would charge 0.25 per cent commitment fee and 0.25 per cent front-end fees for the loan.


The fund would be utilised by the state-owned Power Grid Company of Bangladesh (PGCB) to improve efficiency of the power supply system, and ensuring uninterrupted supply through reducing outages.


Economic Relations Division (ERD) Secretary Kazi Shofiqul Azam and World Bank (WB) Country Director in Bangladesh Qimiao Fan signed the loan agreement in Dhaka on Wednesday.


The repayment period will be 30 years with a nine-year grace period.


Before signing the loan from the facility, Bangladesh government usually borrows the concessional loan from the WB's soft-lending window-International Development Association (IDA), which carries 0.75 per cent interest rate. The maturity period of the IDA loan is 36 years with a six-year grace period.


According to the ERD's calculation, the grant-element of the WB-offered fresh $59 million loan is 27.88 per cent, which is defined as a non-concessional loan.


The government in the definition of the "non-concessional loan" says the grant element of this loan will be between 25 per cent and 35 per cent and when the grant element of a loan will cross 35 per cent then it will be treated as the concessional (soft) loan. 




The Washington-based lender's also approved $100 million loan for an investment promotion project and offered $500 million fresh credit for Bangladesh's power supply system improvement project from the costly SUF.


Asked, ERD secretary said the facility was the additional credit for Bangladesh based on the demand for viable projects in addition to the regular lending of IDA credit from the global lender.


Since the power sector project has had better returns from investments the government has chosen such as facility for the PGCB, he added.


The bank's country Director Qimiao Fun said Bangladesh could utilise the additional funds from the WB's facility in addition to the IDA credit for different development work.


Under the Tk 5.799 billion "Power System Reliability and Efficiency Improvement Project", the bank is providing Tk 4.30 billion ($59 million) funds to PGCB for modernising and upgrading Bangladesh's power system, including installing new software and hardware.


Officials said that this will help the country reduce power outages and load-shedding significantly.


The project will enable an automated and integrated operation of the power system and an optimal dispatch of electricity, resulting in reduction of fuel use.


Under the project, the PGCB will install double-circuit transmission grid in five districts including Barisal, Khulna, Comilla, Kustia and Feni; and upgrade the National Load Dispatch Centre (NLDC). 


The project activities will complete in June 2021.


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