B Mirror Report: Japan International Cooperation Agency (JICA), one of Bangladesh’s largest development partners, has increased the interest rate on its loans to the country by around 30 percent, signaling a gradual shift away from highly concessional financing.

According to officials from the Economic Relations Division (ERD) under the Ministry of Finance, the new interest rate on JICA loans has been set at 3.05 percent, effective from April 15. Previously, the rate stood at 2.35 percent until April 14. Interest on consultancy-related loans has also risen to 1 percent from around 0.75 percent.

JICA has played a key role in financing major infrastructure projects in Bangladesh, including the country’s first metro rail, the Matarbari deep seaport, and the terminal at Hazrat Shahjalal International Airport. For years, Bangladesh benefited from low-interest loans from JICA, but those terms are becoming more limited.

Despite the increase in interest rates, the repayment structure remains unchanged, allowing a 25-year repayment period with a five-year grace period. JICA provides loans under Official Development Assistance (ODA) schemes, along with technical support and some grants.

Data from ERD show that since the 2022–23 fiscal year, the share of market-based foreign loans has been rising significantly. That year, such loans accounted for 25.9 percent of total external borrowing, and officials expect the share to increase further, possibly reaching two-thirds in the next fiscal year.

JICA is also expected to provide Bangladesh with an additional $500 million in budget support. Although the agreement is yet to be finalized, government officials remain optimistic that the funds could be disbursed within the remaining months of the current fiscal year.

The government has sought budget support from development partners to manage rising expenditures, including emergency fuel imports and social safety net programs. Meetings have already been held with major partners such as the World Bank, Asian Development Bank (ADB), JICA, Asian Infrastructure Investment Bank (AIIB), Germany’s KfW, and the OPEC Fund for International Development (OFID), with several agencies expressing willingness to assist Bangladesh during its economic transition.