European Investment Bank to lend €705m for two railway projects
Bangladesh has also sought support from the European Union for manufacturing European-standard railway locomotives, coaches and wagons domestically
The European Investment Bank (EIB) is set to invest in improving Bangladesh's railway system, with plans to provide loans for two major projects.
At a bilateral meeting held today (23 April) between the Economic Relations Division (ERD) and representatives of the European Union and the EIB, the lender agreed in principle to finance the Laksam-Chattogram Dual Gauge Double Track project and the electrification of the Joydebpur-Dhaka-Narayanganj commuter line.
According to ERD officials, the government expects to secure a total of €705 million in loans for the two projects.
Bangladesh has also sought support from the EU for manufacturing European-standard locomotives, coaches and wagons domestically. Officials said assistance has been requested for upgrading railway workshops in Saidpur, Ishwardi and Chattogram, including the supply of machinery and training for production.
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The bilateral meeting was held at Sher-e-Bangla Nagar, with ERD Secretary Shahriar Kader Siddiky and EU delegation head Libuše Soukupová leading their respective sides.
Officials noted that the Dhaka-Chattogram railway route has not yet been fully converted to broad gauge. One of the key missing segments is the Laksam-Chattogram section. The EIB will co-finance this project alongside the Asian Development Bank, with the EIB expected to provide €600 million in loans, while the ADB will contribute $400 million in the first tranche.
Another project aimed at completing the dual-gauge double-track network on the Dhaka-Chattogram corridor is the Tongi-Bhairab Bazar-Akhaura Dual Gauge Double Track project, which is also expected to receive ADB financing. Previously, the EIB co-financed the Laksam-Akhaura Double Track Rail Project with a €135 million loan.
Meanwhile, railway authorities are preparing to begin implementation this year of the country's first electric train project – known as electric traction – on the Narayanganj-Dhaka-Joydebpur route. Officials expect that electrification will reduce operating and maintenance costs by about 35% compared to diesel-powered trains. The European delegation confirmed loan support for this project during the meeting.
The estimated cost of the electrification project is Tk4,282.86 crore. Of this, Tk1,452.25 crore will come from government funds, while Tk2,830.61 crore is expected to be financed through foreign loans. Both ADB and EIB have expressed preliminary interest in co-financing the project. ERD sources said EIB is expected to provide €105 million in loans for this initiative.
In addition, the European delegation expressed interest in supporting cross-border electricity connectivity and investing in power generation and transmission infrastructure among Bangladesh, India, Bhutan, Nepal and Sri Lanka.
EU representatives also showed interest in providing technical assistance for reforms in Bangladesh's banking sector, along with potential grant support. They emphasised the importance of reducing non-performing loans (NPLs) and recommended against injecting fresh capital into banks facing capital shortfalls.
On average, the EU provides development assistance to Bangladesh amounts to approximately €90-100 million annually. Notably, all EU assistance is extended in the form of grants. The key sectors of EU support include economic development, human rights, good governance, and environmental sustainability.
At present, 14 development projects are being implemented with EU assistance. Meanwhile the EIB, the financing arm of the EU, has reaffirmed its growing engagement in Bangladesh, with total commitments reaching €1.145 billion, highlighting its role as a key development partner.
Established in 1958 under the Treaty of Rome, the EIB has been working with the Government of Bangladesh since 2000. It currently supports six ongoing projects in key sectors such as health, water supply, transport, and communications, with investments of around €635 million.
In October 2023, the EIB approved a €350 million framework loan to support Bangladesh's development priorities. The Bank primarily provides long-term financing for sustainable development initiatives.
Globally, the EIB operates in over 160 countries, focusing on climate action, environmental sustainability, infrastructure, SMEs, innovation, and skills development. To date, total disbursement to Bangladesh stands at €262 million, reflecting steady implementation of committed funds.
The EIB's expanding portfolio underscores its strategic interest in supporting Bangladesh's development, particularly in climate resilience and infrastructure modernisation.
