Home ›› 05 May 2023 ›› News
South Korea will provide a $3 billion loan to Bangladesh to assist the implementation of different mega projects.
South Korea will disburse the amount through Economic Development Cooperation Fund (EDCF) in several phases in the next five years, from 2023 to 2027, according to sources from the Ministry of Finance.
The loan will be used to implement various development projects to be undertaken during these five years.
“A framework arrangement and two loan agreements have been signed between the governments of the two countries on Thursday,” Masuma Akter, joint secretary to the Economic Relations Division (ERD) under the finance ministry, told The Business Post.
The amount authorised by the newly signed arrangement has more than quadrupled compared to that of the previous EDCF Framework Arrangement which stipulated provision of up to $700 million for the year 2021 through 2025.
The signing ceremony took place in South Korean city of Incheon, on the occasion of the 56th Annual General Meeting of the Board of Governors of the Asian Development Bank (ADB).
ERD Secretary Sharifa Khan and Kisun Bang, South Korean first vice minister for Economy and Finance, signed the framework arrangement on behalf of their respective sides.
The signed arrangement will serve as a legal foundation for the South Korean government’s provision of up to 3 billion US dollars in concessional loans to the Government of Bangladesh for the next five years.
According to the arrangement, the repayment period of the EDCF loans will be 40 years, including 15 year grace period, with the annual interest rate between 0.01 per cent and -0.05 per cent.
According to the arrangement, candidate projects will be identified in the future in close consultation between the two governments.
On this occasion, a Memorandum of Understanding (MOU) on the cooperation for Dhaka MRT Line 4 and EDCF Loan Agreement for two projects, procurement of CNG-run buses and modernisation of railway signalling system, were also signed by concerned representatives from both sides.
Additional Secretary of ERD Md Shahriar Kader Siddiky and Hee-Sung Yoon, chairman and president of Korea Exim Bank, signed the two ‘loan agreements’ on behalf of their respective governments.
South Korean Ambassador Lee Jang-kuen said it is particularly meaningful to sign a new EDCF Framework Arrangement on the year of 50th anniversary of diplomatic ties between the two countries.
“With the substantial increase of the concessional loan to Bangladesh, it is expected that Korea will be able to support mega projects in Bangladesh, thus contributing to the continuous socio-economic development of Bangladesh,” he said.
MoU for MRT-4
The two countries also signed a memorandum of understanding (MoU) on the cooperation for Dhaka Mass Rapid Transit Development Project (Line-4).
Dhaka Mass Transit Company Limited (DMTCL) under Road Transport and Highways Division will implement this project, jointly financed by EDCF and Economic Development Promotion Facility (EDPF).
Two loan agreements
Among the two loan agreements signed on Thursday, one was for the modernisation of railway signalling system.
This loan will be used to implement the “Replacement and Modernisation of Signaling and Interlocking System of Stations of Ishurdi-Parbatipur Section in West Zone of Bangladesh Railway” project.
The $61 million project will be implemented by Bangladesh Railway.
The other loan agreement was signed to implement the “Procurement of CNG Single Decker AC Buses for BRTC” project. The $77.44 million project will be implemented by Bangladesh Road Transport Corporation (BRTC) under Road Transport and Highways Division.
Interest rate of these two loans is 0.01% and repayment period is 40.5 years (including 15.5 year grace period).
The 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 1993.
So far, the Korean government has supported 30 development projects with an aggregate amount of $1.7 billion through the EDCF, reports UNB.
As of now total commitment from the EDCF has been $1449.03 million. This is the second largest amount committed by the Korean Government for its development partners.
