B Mirror Desk : It is expected that Bangladesh would conclude two loan deals with Japan worth $1.074 billion when Chief Adviser Muhammad Yunus travels to Tokyo from May 28 to May 30.
Ahead of this visit, two loan deals and one grant arrangement are presently being concluded, according to top officials from the Economic Relations Division (ERD)
A loan of $656.16 million, or ¥92.08 billion, is part of one of the agreements for the extension of the Joydebpur-Ishwardi train line project. In addition, ¥63 billion, or $418 million, will be set aside for budget support.
Additionally, a $5.44 million (¥835 million) grant agreement for the “Improvement of Equipment for Air Pollution Monitoring Project” could be inked.
The two loan deals and one grant contract are almost ready to be signed during the chief adviser’s next trip to Japan, according to an ERD official who asked not to be named.
“Bangladesh is expected to earn a total of $1.079 billion from Japan through these agreements,” he said.
According to the official, the law ministry has already received and reviewed the draft loan paperwork created by the Japan International Cooperation Agency (Jica). The summary will be forwarded to the chief adviser for his approval after they have been approved.
The National Economic Council’s Executive Committee first approved the “Construction of Dual Gauge Double Line between Joydebpur–Ishwardi Section” project in 2019, with plans to carry it out through a government-to-government (G2G) agreement with China.
According to data from the Planning Commission, the project was originally approved for Tk14,250 crore, with China anticipated to contribute Tk8,757 crore. The Railway also entered into a Tk10,302 crore agreement with China Railway Engineering Construction Company.
Nevertheless, the Chinese proposal was met with criticism regarding its high costs.
In response to directives from the then prime minister, an inter-ministerial committee assessed the projected expenses in 2021 and identified an excess cost of approximately Tk217 crore.
When the Chinese contractor raised objections to the adjusted budget, the government sought alternative funding sources. Consequently, Japan was contacted through Jica, which consented to provide financial support.
Md Golam Mostafa, the project director, informed The Business Standard that Japan will initially extend $656.16 million, but additional foreign loans may be necessary as the project advances.
A Japanese consultancy firm is anticipated to be appointed within a year to develop the detailed design, which will assist in determining the overall financing requirements, he stated.
“The provision of further funds from Japan will depend on this design and the government’s future negotiations. Bangladesh Railway aims to finalize the project by 2030,” Mostafa added.
The budget support loan from Japan is also part of the initiatives to address the ongoing economic crisis in the country.
Sources from the ERD indicated that negotiations for the $418 million loan under Japan’s Development Policy Loan for Economic Reform and Strengthening Climate Change Resilience were concluded last week.
These discussions resumed after the International Monetary Fund (IMF) assured the release of the fourth and fifth tranches of its $4.7 billion loan in June.
Development partners such as the World Bank and Asian Development Bank generally await IMF’s approval before disbursing budget support. Although bilateral lenders are not required to adhere to this protocol, Japan does so voluntarily.
Japan has already finalized loan and grant agreements totaling $1.036 billion with Bangladesh in the current fiscal year. This includes $830.88 million in loans and $205.49 million in grants.
As of June 30th of the previous year, Japan’s total loans to Bangladesh amounted to $11.25 billion, making it the third largest among all development partners and the leading bilateral donor.
