$3b from Korea on easy terms over next 5 years

Bangladesh is set to get $3 billion in concessional loans from South Korea over the next five years, becoming the second largest recipient of the East Asian nation’s official development aid.

The loan is being given under the Economic Development Cooperation Fund (EDCF) for 2023-2027. Korea provided $700 million under the EDCF for 2021-2025.

With the substantial increase of the concessional loan to Bangladesh, it is expected that Korea will be able to support mega projects in Bangladesh, thus contributing to the continuous socioeconomic development of Bangladesh, said Lee Jang-keun, the Korean ambassador, in a press release after the framework agreement for EDCF was signed yesterday.

Kisun Bang, the first vice-minister for Economy and Finance of Korea, and Sharifa Khan, secretary of the Economic Relations Division, signed the framework arrangement on the sidelines of the 56th annual meeting of the Asian Development Bank taking place in Incheon, South Korea.

“I hope this $3 billion support serves as a catalyst for improving the daily lives of Bangladesh people, such as in the areas of transportation, health and education, and for enhancing friendship between the people of Bangladesh and Korea,” Jang-keun added.

The repayment period of the EDCF loans will be 40 years, including a 15-year grace period. The interest rate would range from 0.01 percent to 0.05 percent, said the press release from the Korean embassy in Dhaka.

The terms appear to have become more favourable for Bangladesh at the time of putting pen to paper to the financing agreement.

In the letter of understanding signed in March, the interest rate was mentioned as 1 percent and the repayment period 30 years with a grace period of seven years, said a press release from the ERD then. There was also a 0.4 percent management fee.

So far, two transport sector projects have been selected for funding from the latest EDCF: procurement of CNG buses and modernisation of railway signalling system.

Some 340 air-conditioned buses will be procured for the state-owned Bangladesh Road Transport Corporation under the project, said its chairman Tazul Islam.

The other project will modernise the signalling system at 20 stations on the Ishwardi to Parbatipur route at a cost of Tk 648.08 crore. Of the total project cost, Tk 475.78 crore is expected in project aid.

Both the development project proposals have been sent to the planning commission for approval.

A Memorandum of Understanding was also signed on the cooperation for Dhaka MRT Line 4.

Korea has expressed interest to finance the feasibility study as well as the construction of the line, said Mohammad Abdur Rouf, company secretary of Dhaka Mass Transit Company Limited.

“This MOU would be furthering that interest,” he said.

According to the arrangement, candidate projects will be identified in the future in close consultation between the two governments.

The Korean government has been providing soft loans through the EDCF for the development of socioeconomic, infrastructure and ICT sectors in Bangladesh since 1993.

Already 16 projects involving $619.78 million have been completed with assistance from the EDCF and another seven projects involving $616.28 million are ongoing.