The Asian Development Bank (ADB) has approved $1 billion as loans to give a boost to Bangladesh's power supply system and to develop the country's capital market.
The lender will give $700 million for the power supply system, which will reduce outages and power shortfall.
ADB is expected to sign a deal at the Economic Relations Division today to give $300 million loan under the Second Capital Market Development Programme.
“Supply shortages are putting a severe strain on businesses and undermining quality of life, with poor communities suffering the most,” said Herath Gunatilake, lead energy economist in ADB's South Asia Department.
“Providing more electricity more reliably is absolutely critical for Bangladesh's growth and development.”
Some 450,000 households will receive new power connections through the multitranche facility's financing of an expansion and upgrade of generation, transmission and distribution facilities, ADB said in a statement yesterday.
Carbon emissions will also be reduced by almost 2.5 million tonnes per year, according to the statement.
Investment over the last 15 years has substantially improved Bangladesh's power supply network, but more than half the population still has no access to electricity, ADB said.
"Outages are frequent, especially in peak periods. Demand is rising, and is already nearly double the current generating capacity. The cost of supply interruptions to the economy is estimated at around 0.5 percent of annual gross domestic product."
The programme of $700 million will boost the efficiency of several generating facilities to increase capacity by up to 700 megawatts, it said. "The programme will also fund hundreds of kilometers of new transmission and distribution lines and improve supply equipment."
The first $185-million tranche loan will be used to convert a gas-fired power plant in Khulna into a more efficient, cleaner-burning combined cycle plant, according to the lender.
Power system and financial management training will be given to staff in sector institutions, and a pilot project with around 200 solar energy-driven irrigation pumps will be established, benefiting around 4,000 poor farming families, it said.
"The investments are part of a broader government plan to reform and strengthen the power sector, tapping private sector financing. The goal is to raise generating capacity to more than 12,500 megawatts and the rate of electrification to 68 percent by 2025."
The overall programme, costing $1.6 billion, includes co-financing from the Agence Française de Développement, the European Investment Bank (EIB), and the Islamic Development Bank, as well as a government contribution of $222 million.