DHAKA, BANGLADESH (18 July 2017) — The Asian Development Bank’s (ADB) Board of Directors has approved a $526 million multitranche financing facility (MFF) to help sustain and increase infrastructure investments in Bangladesh, particularly in financing public-private partnership (PPP) projects as well as renewable energy interventions.
The assistance consists of a $500 million market-based loan to finance medium and large-scale PPP infrastructure projects, and a $26 million concessional loan to finance small and medium-sized renewable energy and energy efficiency facilities, primarily in the rural areas of the country. Both loans are under the Third Public-Private Infrastructure Development Facility (PPIDF 3).
A $750,000 technical assistance was also approved from the Financial Sector Development Partnership Fund to further strengthen the capacity of the Infrastructure Development Company Limited (IDCOL), a state-owned financial institution mandated by the Government of Bangladesh to promote and finance PPP projects.
“Infrastructure development is an integral part of Bangladesh’s rapid economic growth, but it is undeniable that in order to sustain this growth, the country would need an increased investment in infrastructure that can be filled in by the private sector,” said Peter Marro, an ADB Principal Financial Sector Specialist. “We hope to continue our contribution to the country’s infrastructure development through PPIDF 3.”
Bangladesh has recorded steady average growth of 6.3% between 2011 and 2015, enabling it to attain lower-middle income status in July 2015. But real gross domestic product (GDP) growth would need to reach an average annual rate of 7.4% during the 7th Five Year Plan to move Bangladesh toward upper middle-income level. Such targets will require a substantial increase in public and private investments from about 29% of GDP in 2015 to 34.4% by 2020. The gap in infrastructure financing alone is estimated at between 5% and 6% of GDP or a shortfall of $9 billion to $10 billion a year.
PPIDF 3 is a continuation of the previous efforts of ADB and the Bangladeshi government and the strong partnership between ADB and IDCOL to address the country’s infrastructure deficiencies. The project builds on ADB’s support leading to the enactment of the PPP Act and institutional support to the PPP Authority and will promote commercial financing for PPP projects to reduce pressure on direct financing from the public budget to meet the growth target.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in cofinancing.