Bangladesh signs $59m hard loan deal with World Bank for power project

Bangladesh has signed a $59 million credit agreement with the World Bank to fund its power system development.

This is the first hard loan from the global lender for Bangladesh, with more than thrice the usual interest rate of below 1 percent. 

The government signed the deal with the World Bank Group's International Development Association or IDA for the improvement of reliability and efficiency of the power system on Thursday.

Under the deal, Bangladesh will get the money from the IDA's scale-up facility on a 30-year term, including a nine-year grace period.

The interest rate for this credit will be 2.85 percent.

The interest rate for IDA credit from a fixed allocation is 0.75 percent for Bangladesh, a lower middle income country. As the amount of credit exceeds the allocation, Bangladesh is taking it from the scale-up facility. 

After the signing of the deal, World Bank Country Director Qimiao Fan said the Power System Reliability and Efficiency Improvement Project will 'save $1 billion annually' for Bangladesh.

Fan signed the agreement on behalf of the global lender and Economic Relations Division Secretary Kazi Shofiqul Azam on behalf of the government.

Azam said the government needs 'extra financing' as its capacity of implementation had increased.

He also said the interest rate, however, was 'not much higher' considering the importance and outcome of the project.

Besides benefiting the government with fiscal savings, the project aims to lower greenhouse gas emissions by reducing the use of carbon-intense fuel in electricity generation.

The project will also construct and rehabilitate a 40-kilometre transmission line.