ADB to give Bangladesh $260m for infrastructure development

The Asian Development Bank (ADB) will provide US$260 million to Bangladesh for sustaining and increasing its investments in infrastructures, particularly financing public-private partnership (PPP) projects as well as renewable energy interventions.

“Like earlier, the ADB fund will provide for long-term debt financing and catalyzing private sector participation through the implementing agency, Infrastructure Development Company Limited (IDCOL) which substantially contributed to economic growth in the country,” an Economic Relation Division (ERD) official told BSS here today.

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A loan agreement to this end will be signed on November 19 at the NEC-II Conference Room at the ERD in the city’s Sher-e-Bangla Nagar area, the official added.

ERD Secretary Kazi Shofiqul Azam and ADB Country Director for Bangladesh Resident Mission, Manmohan Parkash will sign the agreement on behalf of their respective sides.

After successful implementation of earlier phases, the project titled “Third Public Private Infrastructure Development Facility-Tranche 1” will serve to catalyze commercial financing for PPP projects, thereby reducing the pressure of direct financing on the public budget.

The objective of the project is to help provide the rural population and small to medium enterprises with clean and affordable electricity either through grid-connected or off-grid energy efficiency and renewable energy solutions.

Solar Home Systems (SHSs) will not be financed under PPIDF 3 given the market saturation and availability of funding from partner donors.

A key design element of thePPIDF3 is the introduction of the Multitranche Financing Facility (MFF) Financial Intermediary (FI) lending modality.

The MFF-FI modality is particularly well suited for FI interventions which provide long-term funding to PPP infrastructure projects. These PPP interventions are typically developed in a phased manner based on project implementation requirements.

The MFF modality allows the borrower, IDCOL, to onlend financing for subprojects based on readiness criteria including finalization of risk-sharing arrangements, readiness of engineering procurement and construction, and phased release of equity.

The disbursement to a subproject can take place through multiple tranches with time-slicing given the typical characteristic of staggering of payments, and thereby providing IDCOL the flexibility to plan cost-effective disbursements of subprojects.

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