The government has approved a total of $3.3 billion in hard-term foreign loans to modernise the country’s electricity distribution network and maintain imports of fuel oil and liquefied natural gas (LNG) from the international market.
The approval was given at a meeting of the Standing Committee on Non-Concessional Loans (SCNCL), chaired by Finance Minister Amir Khasru Mahmud Chowdhury at the Secretariat on Wednesday.
Of the total amount, $200 million will finance a new electricity-sector project, while $3.1 billion has been approved retrospectively for urgent fuel and LNG imports.
According to officials of the Economic Relations Division (ERD), the committee approved a proposal to borrow $200 million from the Asian Development Bank (ADB) for the Power Distribution Network Enhancement Project, being implemented by the Bangladesh Rural Electrification Board (BREB) under the Power Division.
According to an ERD working paper prepared for the meeting, the ADB loan will carry an interest rate based on the Secured Overnight Financing Rate (SOFR) plus a 0.5% spread.
The 25-year loan will have a five-year grace period, along with a 0.10% maturity premium and a 0.15% commitment charge.
The loan has a grant element of only 5.70%, which is below the government’s 25% threshold for concessional financing, making it a hard-term or non-concessional loan.
The $200 million project aims to improve the stability of electricity distribution, promote environmentally friendly technologies and strengthen climate resilience in 13 rural electricity cooperative areas around Dhaka.
The project is scheduled to be implemented from October 2026 to July 2031. It will include expansion of new and existing substations, construction of underground and overhead lines, installation of insulated conductors, and deployment of digital monitoring and fault-locator technologies.
These measures are expected to reduce technical losses in the distribution system and improve the reliability and quality of electricity supply.
### $3.1b from ITFC
The SCNCL also retrospectively approved $3.1 billion in short-term hard loans from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) for fiscal year 2026-27 to strengthen energy security and maintain regular fuel supplies.
Of the amount, $2.5 billion will finance fuel oil imports by the Bangladesh Petroleum Corporation (BPC), while $600 million will be used by the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) to import LNG.
According to ERD data, the six-month loan will carry an interest rate based on the six-month Term SOFR plus 1.70%, which is slightly lower than the annual rate applicable in the previous year.
ITFC will provide $600 million from its own resources, while the remaining $2.5 billion will be arranged through co-financing.
The approval was deemed necessary to ensure an uninterrupted fuel supply chain and meet the country’s urgent energy import requirements.
The ERD said the meeting also stressed compliance with government guidelines governing non-concessional foreign borrowing.
Under the guidelines, annual debt-servicing costs for hard foreign loans must not exceed 10% of export earnings or 15% of government revenue in the relevant fiscal year.
Officials said the large-scale borrowing was approved after considering the country’s overall economic situation, its capacity to repay loans from its own income and the importance of the projects to national priorities.
