A new $110 million loan facility from the Asian Development Bank (ADB) will provide much-needed investment in private-sector infrastructure projects in Bangladesh, including in renewable energy.
“Low investment in infrastructure is holding back development and economic growth in Bangladesh. Getting more power stations, roads, and water networks built would help those in rural areas in particular and could draw in more foreign direct investment,” said Peter Marro, Principal Financial Sector Specialist in ADB’s South Asia Department.
The government has been the main source of infrastructure spending in Bangladesh, but cannot alone provide the finance needed. Private investors, meanwhile, struggle to get the long-term financing they need from underdeveloped capital markets or from banks that are hesitant to provide funds with long tenors because of potential asset-liability mismatches. As a result, the country suffers from a chronic infrastructure shortfall. Electricity shortages cause an annual estimated loss of 2% of gross domestic product (GDP). Poor transport and communications networks also hold back the economy, while poor sanitation and water systems undermine health.
ADB will provide a $100 million credit line to the state-owned Infrastructure Development Company Ltd. (IDCOL) for investment in projects in power generation, water and sanitation, transportation, and information technology. IDCOL currently has a pipeline of eight energy projects with a total investment amount of around $235 million.
ADB will provide a further $10 million to IDCOL to expand its successful program to finance off-grid solar home systems for households and small businesses in remote rural areas. IDCOL hit its target of 2 million installations in 2013 and is now seeking to finance 2 million more by 2015.
The $110 million in financing builds on similar previous ADB financing to IDCOL of $165 million approved in October 2008 which has been fully committed.
The support is in line with Bangladesh’s sixth five-year plan (2011-2015) which stresses the need to triple investment in infrastructure development from 2% to 6% of GDP with substantial private sector participation through public-private partnerships.
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