Bangladesh will receive a $400 million loan from the Asian Infrastructure Investment Bank (AIIB) to help navigate the current economic crisis. Approval for the loan is expected at the AIIB board meeting on June 27.
This financial assistance aims to address Bangladesh's diverse economic challenges stemming from the COVID-19 pandemic and the Russia-Ukraine conflict. According to sources from the Ministry of Finance, preparations are underway to complete budget support and necessary procedural matters by June 30.
Bangladesh expects to receive $1.25 billion in budget support from various development partners this month, according to the Economic Relations Division (ERD). Upon signing the loan agreement, this assistance will be added to the country's foreign exchange reserves.
The soft loan from AIIB will have an interest rate of 1.28 per cent per year, with a grace period of three years and a repayment period of 26 years. Additionally, a one-time front-end fee of 0.25 per cent and a commitment fee of 0.25 per cent on the unspent amount will have to be paid.
The agreement was signed between ERD Secretary Sharifa Khan and AIIB Vice President Urjit R Patel.
According to the Ministry of Finance, Bangladesh's economy is facing diverse challenges due to the COVID-19 pandemic and the Russia-Ukraine war. These challenges include upward pressure on commodity prices, increased imports, trade deficits, and depreciation of the taka against the US dollar. In response, AIIB and other development partners have agreed to provide various budgetary supports for development.
AIIB has been initiating programmes in Bangladesh since 2016. To date, AIIB has provided loans totalling $3,037.79 million for investment projects in Bangladesh. Over the past three years, AIIB has extended loans amounting to $1,050 million for budget support to help the government cope with COVID-19 challenges, support its stimulus programme, and sustain post-COVID economic recovery and continuous growth.
According to ERD sources, the government is receiving budgetary support exceeding $2 billion for the second time in a single fiscal year. Previously, in the fiscal year 2021-22, the government had received a maximum of $2.597 billion in budgetary support.
Out of the expected budget support of $1.25 billion, $250 million will be from the ADB, $500 million from the World Bank, $400 million from AIIB, and $100 million from South Korea's arrangement.
