The Bangladeshi government has approved non-concessional foreign loan proposals totalling $3.3 billion (£2.54 billion) to modernise the national power distribution network and maintain vital imports of crude oil and liquefied natural gas (LNG).
The decision was finalised during a meeting of the Standing Committee on Non-Concessional Loans (SCNCL), chaired by Finance Minister Amir Khosru Mahmud Chowdhury at the Secretariat. The approved funding comprises $200 million in fresh financing from the Asian Development Bank (ADB) for power infrastructure and $3.1 billion in retrospective approval for short-term energy import financing.
Power Distribution Network Modernisation
Under the Economic Relations Division (ERD) framework, $200 million will be allocated to the Bangladesh Rural Electrification Board (BREB) for the “Power Distribution Network Enhancement Project.”
According to ERD working papers, the ADB loan carries a floating interest rate based on the Secured Overnight Financing Rate (SOFR) plus a 0.50% margin. The facility spans a 25-year tenure with a five-year grace period, alongside a 0.10% maturity premium and a 0.15% commitment charge. Because the grant element stands at just 5.70%—well below the traditional 25% threshold required for concessional aid—the loan is classified as non-concessional.
The project, scheduled for implementation between October 2026 and July 2031, targets 13 Rural Electrification Societies (PBS) operating around Dhaka. Infrastructure upgrades will include expanding electrical substations, constructing underground and overhead distribution lines, installing insulated conductors, and deploying digital fault monitoring systems to reduce technical system losses and improve climate resilience.
Short-Term Financing for Energy Imports
To safeguard domestic energy security, the SCNCL granted retrospective approval for $3.1 billion in short-term non-concessional loans from the Jeddah-based International Islamic Trade Finance Corporation (ITFC) for the 2026–27 fiscal period.
The allocation covers two key state enterprises:
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Bangladesh Petroleum Corporation (BPC): $2.5 billion for petroleum products.
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Petrobangla: $600 million for LNG imports.
The six-month ITFC facility carries an interest rate of six-month Term SOFR plus a 1.70% margin, reflecting a slight reduction compared to the previous year’s borrowing rates. ITFC will provide $600 million directly from its own resources, while the remaining $2.5 billion will be raised through syndication and co-financing arrangements.
ERD guidelines specify that debt servicing for non-concessional foreign loans must not exceed 10% of total export earnings or 15% of government revenue in any given fiscal year. Official assessments indicate that national debt-servicing capacity and energy supply priorities fully justify the borrowing package.
