Bangladesh yesterday secured the first tranche of the billion dollar loan pledged by Japan to recover from the economic boost caused by the global coronavirus pandemic.
Japan joins development partners such as the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, International Monetary Fund and Islamic Development Bank in rallying to Bangladesh.
The five multilateral development donors have contributed a total of about $ 2 billion to Bangladesh’s efforts for economic recovery.
Japan normally provides project aid to Bangladesh and would now call the planned support as budget aid, which came after Dhaka requested help following the coronavirus outbreak in the country in March that required a general stop of two and a half months.
Although the virus could not be extinguished, the shutdown caused great damage to the economy.
The pandemic risks erasing gains made in poverty reduction over the past decade, World Bank says; and it is estimated that over 1.5 million poor and vulnerable people have lost their livelihoods due to the closure.
This means that it has become imperative to devote substantial sums to social protection programs and job creation. At the same time, its purse strings have tightened for the near collapse of economic activity.
“Thus, Japan has committed $ 1 billion to help with economic recovery,” said an official from the economic relations divisions involved in the proceedings.
And the agreement signed yesterday between ERD Secretary Fatima Yasmin and Japanese Ambassador Ito Naoki and JICA Country Head Hayakawa Yuho was for the first tranche of the loan, he said.
“Like the others, Japan does not sign deals for the full loan amount all at once. They do it in phases.”
The remaining part of the loan would soon be granted in two phases, he said on condition of anonymity as he is not authorized to speak with the media.
The first tranche, which is $ 320 million (35 billion yen), would be used to finance the government’s stimulus packages amounting to Tk 103,117 crore, or about 3.7% of the country’s GDP, announced to get rid of the ill effects of the pandemic. .
“This is timely support for Bangladesh amid the COVID crisis,” the Economic Relations Division said in a press release yesterday.
The funds will contribute to health and economic recovery, which will ultimately help promote the country’s stabilization and social and economic development efforts, he added.
The interest on the loan would be 0.01% and the repayment period of 15 years, including a four-year grace period, according to the ERD press release.
The loan would have no impact on the financing of projects that JICA has already undertaken, said the ERD official.
Japan is Bangladesh’s largest bilateral development partner, providing financial support for the socio-economic development of the country. Until June, Japan provided $ 14.23 billion in official development assistance.
The Far Eastern nation will provide an additional $ 1.7 billion to Bangladesh under the 41st ODA program for seven ongoing projects.
The projects include the construction of the Bangabandhu Sheikh Mujib railway bridge that would cross the Jamuna River, the ultra-supercritical Matarbari coal-fired power plant and the Dhaka Mass Rapid Transit.
The loan deal is expected to be signed next week, another ERD official told The Daily Star yesterday, wishing not to be named.