$3.3b hard loans approved for fuel imports, power network upgrades

The government has approved $3.3 billion in non-concessional foreign loans to upgrade the electricity distribution network and finance fuel oil and LNG imports.

The approval came at a meeting of the Standing Committee on Non-Concessional Loan, chaired by Finance Minister Amir Khosru Mahmud Chowdhury, at the Secretariat today (7 October).

Of the total, $200 million is for a new power distribution project, while $3.1 billion has been retrospectively approved for emergency fuel imports, according to the Economic Relations Division (ERD).

$200m ADB loan for power distribution

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.

The 25-year loan, including a five-year grace period, carries interest at the Secured Overnight Financing Rate (SOFR) plus 0.50%, along with a 0.10% maturity premium and 0.15% commitment charge.

With a grant element of just 5.70%, the loan is classified as non-concessional.

The project, scheduled for October 2026-July 2031, aims to improve power supply reliability and climate resilience in 13 rural electricity cooperative areas around Dhaka. It will expand substations, build underground and overhead lines, install insulated conductors, and introduce digital monitoring and fault-locator systems.

The measures are expected to reduce system losses and improve power supply quality.

$3.1b ITFC loan for fuel imports

The committee also retrospectively approved a $3.1 billion short-term loan from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) for FY2026-27 to strengthen energy security.

Of this, $2.5 billion will finance fuel oil imports by Bangladesh Petroleum Corporation (BPC), while $600 million will fund LNG imports by Petrobangla.

The six-month loan carries interest at six-month Term SOFR plus 1.70%. ITFC will provide $600 million from its own resources, while the remaining $2.5 billion will come through co-financing by Bangladesh Bank.

The ERD said the loan was approved to maintain uninterrupted fuel supplies and prevent disruptions in the energy supply chain.

The government's guidelines require debt servicing on non-concessional foreign loans to remain below 10% of export earnings or 15% of revenue in the relevant fiscal year, while total foreign debt stock must stay within 10% of GDP.

The loans were approved after considering the country's economic conditions, repayment capacity and national priorities.