ADB to provide $500 mn loan to Bangladesh to mitigate COVID-19 impact

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Desk report, May 11: The Asian Development Bank (ADB) and the government of Bangladesh on Monday signed $500 million loan agreements to strengthen Bangladesh’s efforts to mitigate the socio-economic impact of the novel coronavirus or COVID-19 pandemic.Economic Relations Division (ERD) secretary Fatima Yasmin and ADB Country Director Manmohan Parkash remotely signed the loan agreements on behalf of Bangladesh and ADB, respectively, according to a press release.

Of the $500 million loans, $250 million comes from concessional ordinary capital resources (OCR) with an interest charge at the rate of 2 percent per year during the grace period and, thereafter, for a term of 25 years, including a grace period of 5 years.

Another $250 million comes from the regular OCR fund with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility for a term of 15 years, including a grace period of 3 years.

“This assistance is all about lives and livelihoods, and it was processed very quickly in around one month. We are happy that this is being delivered when the country needs it the most,” Country Director Manmohan Parkash said.

He said he is confident that Bangladesh will return to its high economic growth path soon by successfully implementing its robust economic and fiscal measures to protect the poor and vulnerable, including women, and cushion trade and businesses.

The assistance package is expected to benefit over 15 million poor and vulnerable people in Bangladesh. Around 1.5 million workers, mostly women, in export-oriented industries will receive extended salary support while doctors, nurses, and medical workers fighting COVID-19 in government-run hospitals will receive special honorarium.

The government’s social protection programmes for people of old-age and women in distress will be expanded to cover all eligible senior citizens and women in the 100 poorest local government units in the country.

At least 2 million poor families across the country will be given about $23 each, while about 1 million poor and vulnerable families will receive food support of 20 kilograms per month during the pandemic emergency period.

Affected industries and sectors, and micro, small, and medium-sized enterprises are also eligible for loans with subsidized interest, the press release added.

The loans are supported by a $1 million technical assistance grant to help the government improve its institutional capacity, introduce new tools for service delivery, develop a gender-responsive plan to improve the social safety net, and improve monitoring and evaluation capacity.

Meanwhile, the Asian Infrastructure Investment Bank (AIIB) is planning to provide $250 million in co-financing with ADB to support the government’s programme.

The assistance is part of ADB’s COVID-19 Active Response and Expenditure Support (CARES) Program, which is funded through the COVID-19 pandemic response option (CPRO) under ADB’s Countercyclical Support Facility. CPRO was established as part of ADB’s $20 billion expanded assistance for developing member countries’ response to the pandemic, which was announced on April 13.

On April 30, ADB approved a $100 million concessional loan to support the government of Bangladesh in its efforts to address the immediate public health requirements of combatting the COVID-19 pandemic.

ADB also released a $350,000 emergency grant for the procurement of medical supplies and equipment, and $1.3 million from an existing project to provide one-time cash support to 22,619 trainees to enable them to continue their ongoing skills training programme.