Bangladesh lifts loan ceiling to finance coal-based power plants

The decision aims to keep the flow of money uninterrupted to produce power, the central bank says

Bangladesh Bank has relaxed the rules for businesses to finance coal-fired power plants, exempting them from a cap on the loans they can take from banks.

Businesses were able to apply for loans worth up to 25 percent of their capital. The central bank exempted the financing of coal-based power plants from the ceiling in a notice on Tuesday.

The loans can be used for the purchase of land, machinery and raw materials, including coal. The exemption will be effective over the next five years.

The central bank said it will set a new ceiling.

It also said the decision aimed to keep the flow of money uninterrupted to produce power.

The central bank lowered the cap on lending to businesses to 25 percent from 35 percent of their capital in January.

The decision came a day after United Nations Secretary-General Antonio Guterres, speaking at the UN climate summit in Egypt, asked countries to agree to phase out the use of coal, one of the most carbon-intense fuels, by 2040 globally, with members of the Organisation for Economic Cooperation and Development hitting that mark by 2030.

Bangladesh is among the countries most vulnerable to the effects of climate change. Its government cancelled 10 planned coal-based power plants last year after taking their environmental impact into consideration.

But the country is struggling to cope up with an energy crisis, as depleting dollar reserves have put pressure on fuel imports, forcing authorities to ration power.