The hard-term loan committee today may approve a $2.6 billion financing for the Padma rail link project, paving the way for the signing of a deal with the Exim Bank of China next month.

The committee is scheduled to hold a meeting with Finance Minister AMA Muhith in the chair at his office.

A finance ministry official said the loan agreement was likely to be signed in Beijing in the middle of next month. A high profile team from Bangladesh may attend the signing ceremony.

The Chinese State Council, the highest policymaking body of the East Asian nation, last month gave the consent to the loan for the project.

Of the 26 projects committed by China during its president's visit to Dhaka in 2016, the rail link is the most pressing one, receiving the highest amount of loan. Primarily, the Chinese loan amount for the project was estimated at $3.14 billion. 

The credits to be given to the 26 projects are of three types: concessional, preferential buyers' credit (PBC), and commercial.

The financing for the Padma rail link project will come in the form of PBC, 15 percent of which will be provided by the government. As a result, the Exim Bank's loan for the project would be $2.6 billion and the currency would be US dollar. The loan carries 2 percent of the interest rate. 

The concessional loan is given in the Chinese currency.

The finance ministry official said the interest rate, the repayment period and other terms and conditions for both the loans remain the same.

Since 2017, the government has taken several initiatives to sign the agreement for the rail link project but to no avail.

Out of desperation, the government in January this year even thought of sending a high-powered team led by MA Mannan, state minister for finance and planning, to China.

Later, the plan was dropped after the Exim Bank in a letter on February 2 informed the Bangladesh government that it would soon start the process of signing the agreement, said an official of the Economic Relations Division.

The Chinese lender has sent the draft agreement to the Bangladesh government at the end of last month and it will be placed before the hard-term loan committee following vetting by the law ministry.

More than Tk 7,000 crore has been earmarked for the project in the annual development programme in the current fiscal year.

The rail link project is scheduled to be implemented by 2022, but a portion of it would be completed by December 2018 when the government plans to open the Padma bridge.

The project will be connected with the Padma bridge and will enable a direct rail link between Dhaka and the southern parts of Bangladesh, particularly the Mongla port and the Benapole land port.

Railway ministry officials said the preparatory work for the project has already started even though the signing of the loan agreement has been delayed.