TDS Desk:

The government has approved five loan proposals worth a total of $1.9 billion from development partners, of which about $1.6 billion is a ‘non-concessional’ loan with strict conditions.

A large part of this will be used as budget support.

The approval of these loans was given at a meeting of the Standing Committee on Non-Concessional Loans held at the Planning Ministry in Sher-e-Bangla Nagar on Tuesday (April 28).

The meeting was presided over by Finance and Planning Minister Amir Khasru Mahmud Chowdhury.

According to relevant sources, about $1.3 billion of the approved loan will be spent directly on budget support, which will help in dealing with the ongoing financial pressure.

The budget support package includes $450 million from the Asian Development Bank (ADB), $500 million from the Japan International Cooperation Agency (Jica), $250 million from the Asian Infrastructure Investment Bank (AIIB) and $100 million from the Opec Fund for International Development (OFID).

Officials said that these loans are being considered as non-recourse loans due to their relatively high interest rates, short grace periods and short repayment periods.

Under the ADB’s ‘Strengthening Economic Management and Governance, Subprogram-2’ program, $300 million of the total $750 million will be available as concessional loans and $450 million as OCR (Ordinary Capital Resources) loans.

The concessional portion will have an interest rate of 2%, a repayment period of 25 years and a grace period of 5 years, while the interest rate on the OCR loan will be around 4.13%.

Its term is 15 years, with a grace period of 3 years.

In addition, the interest rate on the Jica loan of $500 million is about 3.05%, the repayment period is 30 years and the grace period is 10 years.

The interest rate on the AIIB loan of $250 million is about 5.08%, the term is 35 years and the grace period is 5 years.

The interest rate on the Opec Fund loan of $100 million is about 3.6%, the term is 18 years and the grace period is 3 years.

Finance Ministry officials said that these loans are being taken to increase spending in the social security sector, strengthen revenue management and bring stability to the macroeconomy as recommended by the International Monetary Fund (IMF).

Apart from the budget support, another $300 million loan has been approved by the ADB for the ‘SASEC Dhaka-Sylhet Corridor Road Investment (Tranche-2)’ project to upgrade the approximately 210-kilometer highway from Dhaka-Kanchpur to Sylhet to four lanes.

The total cost of the project is estimated at Tk16,918 crore, of which the government will provide Tk3,674 crore and ADB will provide Tk13,244 crore.

Meanwhile, the committee has taken several important policy decisions to strengthen external debt management.

According to the decision, non-concessional loans will be taken only if concessional loans are not available. At the same time, the borrowers must have the ability to repay the loan through their own income.

It has also been decided that the annual repayment cost of non-concessional external debt should be limited to 10% of export earnings or 15% of government revenue, whichever is lower.

In addition, a target has been set to keep the total amount of non-concessional debt below 10% of GDP.

Officials believe that if these steps are implemented, transparency in external debt management will increase, risks will be reduced and economic stability will be further strengthened in the long term.