The Asian Infrastructure Investment Bank (AIIB) has approved a $200-million loan to Bangladesh to increase access to electricity and improve service efficiency in the capital of Dhaka and the country's western zone.
While the government of Bangladesh has implemented various programmes to meet growing demand for power, mainly as a result of rapid industrialisation and urbanisation, a lot of the population still lack access to electricity.
It is estimated that poor power supply has resulted in about 2-3 per cent loss to Bangladesh's gross domestic product annually, with significant sums spent on diesel generators for backup.
By 2025, the $750-million Dhaka and Western Zone Transmission Grid Expansion Project is expected upon completion to reduce the number of annual power outages to 15 from 60, reduce transmission loss to 2.50 per cent from 2.76 per cent and add 7,440 megavolt-amperes of power transmission capacity, said the Beijing-based lender in a statement yesterday.
The project, which will lead to the construction of 408 kilometres of transmission lines, will also have a positive environmental impact, reducing average annual carbon dioxide emissions by 455,785 tonnes.
The objective of the proposed project is also to strengthen institutional capacity of state-run Power Grid Company of Bangladesh (PGCB).
"AIIB's investment gives much-needed financing to provide affordable, reliable and modern energy, especially in areas where people lack basic infrastructure," said AIIB Vice President and Chief Investment Officer DJ Pandian in the press release.
The project will also help the power sector tackle climate change impact, making the grid more climate-resilient, he added.
The latest lending took the total approved and proposed loans to Bangladesh to $1,915 million.
Bangladesh is currently the fastest growing economy in South Asia, growing at more than 7.5 per cent per annum in the last three years.
The country is also rapidly urbanising with nearly half its population expected to live in urban areas by 2025.
These trends, combined with a policy push to achieve universal electricity access for Bangladesh's population, present a tremendous growth opportunity for the country's infrastructure sector in the near future.
Co-financed with the Asian Development Bank, the project is expected to help Bangladesh achieve its target to provide electricity for all by 2021 and supply uninterrupted electricity to industries by 2020.
The AIIB loan has a maturity period of 25 years, including a grace period of five years.
Of the project financing, $300 million will come from the ADB, $0.75 million from China's Poverty Reduction and Regional Cooperation Fund and $249.25 million from PGCB, according to the project document.
The project area will comprise 20 districts. The expected date of the project completion is June 30, 2024.