Asian Development Bank board yesterday approved $744 million loan for Bangladesh so that the country can face the world economic recession fallout.
“ADB is extending the loans to help Bangladesh government overcome the impact of the global economic crisis and implement public policy reforms,” said an ADB press release yesterday.
The support includes a $500 million loan under the counter-cyclical support facility (CSF) and three loans totalling $244 million under the public expenditure support facility (PESF).
The ADB press release said the $500 million CSF loan would support the government’s efforts to mitigate the worst effects of the global economic crisis in the short term and to continue its development programmes.
The $244 million PESF loans will support government measures to introduce economic and social policy reforms essential for achieving higher and more inclusive long-term growth and strengthening social safety net programmes, the press release added.
“The CSF loan will provide crucial support to the government as it acts to stimulate Bangladesh’s economic recovery and push ahead with its social safety net programmes to cushion the impact of the crisis on the poor and vulnerable while maintaining macroeconomic stability,” said Kunio Senga, director general of ADB’s South Asia department.
He said the PESF is equally vital to help the government deliver key public policy reforms to improve service delivery, enhance efficiency of social safety net programmes, especially for the poorest and most vulnerable, including women. It would also help the government promote public-private partnership, improve the investment climate, and strengthen management of scarce public resources, he said.
The loans follow a visit to Bangladesh in July by ADB President Haruhiko Kuroda, while he offered to provide additional ADB assistance to the government to counter the impact of the global economic crisis and maintain its development programmes to reduce poverty and promote growth. While Bangladesh has made significant progress in reducing poverty, an estimated 56 million people, or 40 percent of the population, still live below the poverty line, said the press release.
The release added that the Counter-cyclical Support Facility, established in June 2009, supports ADB’s developing member countries (DMCs) needing to increase fiscal spending to counter the global economic crisis. To be eligible to access the CSF, DMCs must be adversely affected by the global economic crisis, demonstrate sound macroeconomic policies, and have a counter-cyclical programme in place.
Finance ministry sources said a major part of the support is loans with hard terms. The rate of interest on these loans would be much higher than that of the soft loans. The interest rate of the loans with hard terms is three percent more than the London Inter Bank Offer Rate (LIBOR).
The rate of interest on soft loans is below one percent and time for payment of the loans is about 50 years. The interest rate on loans with hard terms would be higher than six percent and the deadline for payment is eight years.
However, when the loan plan was announced in May, the ADB president said, “The Counter-cycling Support Facility (CSF) will provide short-term loans faster and cheaper than ADB’s existing special programme loan (SPL) facilities.”
Source: The Daily Star, 14 October 2009