Bangladesh set to seal $2.80bn Jica loan deal for 6 projects

The government of Bangladesh hopes to ink an agreement on a $2.80 billion loan with the Japan International Cooperation Agency (Jica) under the Japanese fiscal year 2021 (April 2020-March 2021) as part of Jica's 42nd Official Development Assistance (ODA) package, according to Economic Relations Department (ERD) officials.

Earlier, a $3.15-billion-loan agreement was signed with Jica under the 41st loan package in 2020.

ERD sources said Bangladesh has asked for a loan for five infrastructure projects in the 42nd loan package – Dhaka Mass Rapid Transit Line 1 (2nd Tranche), Dhaka Mass Rapid Transit Line 6 (5th Tranche), Matarbari Coal Fired Power Project (6th Tranche), Matarbari Coal Fired Power Project (2nd Phase) and Southern Chattogram Regional Development Project.

Besides, the Japanese government has confirmed that it will provide a Health Sector Development Policy Loan in the Japanese fiscal year 2021. Last year, the government of Bangladesh sought $500 million in loan from the Japanese agency for the development of the health sector in Bangladesh.

The 42nd loan package agreement will have three phases. In the first phase, an agreement of $1.05 billion in the loan may be signed this month for the Matarbari Coal Fired Power Project (6th Tranche) and Dhaka Mass Rapid Transit Line 6 (5th Tranche).

ERD officials said almost the same amount of loan will be available for both projects.

Jica goes for loan agreements in several stages depending on the importance and progress of a project. The loan agreement will be signed for the sixth instalment for the Matarbari 1200 MW Coal Power Plant project and the fifth instalment for the Metrorail (MRT-6) project.

These two ongoing projects require a quick disbursement of funds. As such, the government wants to complete the loan agreement process in both projects beforehand.

Mohammed Shahid Ullah, Executive Director (Finance), Coal Power Generation Company Bangladesh Limited (CPGCBL), said final discussions between CPGCBL and Jica have concluded regarding the sixth instalment of loan for the Matarbari project. Now the ERD will complete the formalities regarding the loan.

Project stakeholders said work on the Matarbari power plant began in July 2014. The cost of the project has been increasing with work going on to increase the depth and width of the channel for the construction of ports under this project.

Therefore, a proposal to increase the cost of the project has already been sent to the Planning Commission.

Initially, Jica was supposed to lend Tk28,939 crore, which will now be Tk44,427 crore under the new proposal.

Although the project was supposed to have been completed in June 2023, the new proposal has extended the duration of the project to December 2026. Till June 2021, the physical progress of the project was 46.74%.

Meanwhile, CPGCBL is trying to finance another new project of 1200 MW coal power in Matarbari. Jica's initial consent has also been obtained in this regard. Based on this, a feasibility study has also started, CPGCBL officials have said.

Meanwhile, the government aims to launch Metrorail from Uttara to Agargaon in December next year. Till August, 88% of work on this route has been completed while from Agargaon to Motijheel work is 68% complete.

Dhaka Mass Transit Company Limited (DMTCL) officials hope that implementation will speed up as the Covid-19 situation has improved in the country. Consequently, the demand for foreign funding will also increase. Jica has agreed to finance the project in its 42nd ODA package.

The total loan provided by the Jica in this Tk23,490-crore-project is Tk16,594 crore.

Apart from Metrorail or MRT-6, Jica will also provide loans for the MRT-1 project for the second time. Construction work on MRT Line-1 is expected to start in June.

The project will also have a loan agreement from Jica for financing the second instalment, but ERD officials said discussions are still going on about the amount of the loan.

As per the Revised Strategic Transport Plan, MRT Line-1 will be divided into Airport Route and Purbachal Route. The total cost of implementation of the project is estimated at Tk52,561 crore. Of this amount, a loan of Tk39,450 crore will be available from Jica in various stages.

Meanwhile, Japan has expressed interest in assisting in the development of infrastructure in South Chattogram and Cox's Bazar district by focusing on Matarbari. To this end, Jica has primarily agreed to provide loan assistance under the 42nd ODA package.