ADB launches $526m financial facility for Bangladesh infra projects

The Asian Development Bank (ADB) has launched a $526-million multi-tranche financing facility (MFF) to boost the public-private partnership (PPP) infrastructure in Bangladesh which includes renewable energy interventions.

ADB’s board of directors approved the MFF assistance consisting 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 the rural areas of the country.

Both loans are under the Third Public-Private Infrastructure Development Facility (PPIDF 3). It is a continuation of the previous efforts of ADB and the Bangladeshi government and the strong partnership between ADB and IDCOL to address the country’s infrastructure deficiencies.

The project builds on ADB’s support leading to the enactment of the PPP Act and institutional support to the PPP Authority and will promote commercial financing for PPP projects to reduce pressure on direct financing from the public budget to meet the growth target.

A $750,000 technical assistance was also approved from the Financial Sector Development Partnership Fund to further strengthen the capacity of the Infrastructure Development Company Limited (IDCOL), a state-owned financial institution mandated by the Government of Bangladesh to promote and finance PPP projects.

“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,” said ADB principal financial sector specialist Peter Marro.

Bangladesh recorded a steady average growth of 6.3 per cent between 2011 and 2015, enabling it to attain lower-middle income status in July 2015. But ADB said, real gross domestic product (GDP) growth would need to reach an average annual rate of 7.4% during the 7th Five Year Plan to move Bangladesh toward upper middle-income level.

“Such targets will require a substantial increase in public and private investments from about 29 per cent of GDP in 2015 to 34.4 per cent by 2020,” ADB said in its statement. “The gap in infrastructure financing alone is estimated at between 5 per cent and 6 per cent of GDP or a shortfall of $9 billion to $10 billion a year.”

Marro said ADB hopes to continue its contribution to Bangladesh’s infrastructure development through PPDIF 3.

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