Dhaka expects over $3b loan from Seoul in 5yrs

The Economic Relations Division (ERD) is negotiating with the South Korean government to secure over $3 billion in loans for implementing several development projects.

“We are expecting to receive the money in the next five years,” a senior ERD official told The Business Post on Tuesday.

The deal for the rest of the loan is likely to be signed between ERD and South Korea’s state-owned Exim Bank in two months, the official said.

In this regard, ERD has planned a framework, “Economic Development Promotion Facility (EDPF),” to get official development assistance (ODA) from South Korea, the official added.

Under the framework, the loan will charge only a 1 per cent interest rate and the maturity period will be 30 years. The grace period will be seven years, according to ERD.

However, loans from key development partners like the Asian Development Bank (ADB), the World Bank (WB), China and Japan are getting costlier.

The interest rate of concessional loans from WB has reached 1.75 per cent, China 2 per cent and ADB over 2 per cent.

ERD is preparing proposals for 10 development projects, which will be implemented after getting the fund from South Korea.

South Korea has assured to finance Chattogram MRT and two other metro lines — MRT-5 (southern portion) and MRT-4 — in Dhaka. They also want to help construct Dhaka Ring Road, which aims to ease traffic congestion in the capital, ERD officials said.

The other projects are — Eastern Refinery Limited Unit-02, the construction of a rail-cum-road bridge at Kalurghat, the upgrading of the Barishal-Patuakhali-Kuakata road to a four-lane highway with service lanes, and Dhaka-Chattogram Expressway.

The South Korean government has been providing soft loans through the Economic Development Cooperation Fund (EDCF) for the development of socio-economic, infrastructure and ICT sectors in Bangladesh since 1997.

Fifteen projects of $469.77 million have been completed with assistance from EDCF and currently, eight more projects of $666.28 million are ongoing.

The Korean Exim Bank will provide $700 million as project assistance to Bangladesh for various infrastructure development projects.

A “Framework Arrangement” was signed between the ERD of the Finance Ministry and the South Korean government to provide a soft loan of $700 million for the period 2021-2025.

At the end of FY2020-21, the total commitment from EDCF has been $1,330.48 million. This is the second largest amount committed by the South Korean government to its development partners.

The loan agreements to be signed under the Framework Arrangement will bear an interest rate of 0.01 per cent to 0.05 per cent with 40 years repayment period and a 15-year grace period.