The Asian Development Bank (ADB) is providing assistance to further develop the power sector of Bangladesh to help ensure the delivery of reliable electricity supply to its people, as part of an overall initiative to promote sustainable economic growth in a country where nearly half the population remains poor.
The government of Bangladesh will receive loans totalling US$465mn from ADB to support the country’s sustainable power sector development programme.
“The programme supports the government’s goal of providing reliable electricity to the entire country by 2020, and will result into better and more affordable services to the public,” says Pil-Bae Song, head of the project administration unit of the ADB’s South Asia department. “Only one third of the households have access to electricity and those with access receive poor, unreliable service due to insufficient power generation capacity, poor transmission and distribution systems.”
Bangladesh’s macroeconomic performance has been good over the past decade, but inadequate electricity supply has been a major constraint to economic growth and poverty reduction. He notes that per capita gross domestic product was just US$445 in 2005.
“At about 158kW-hours annually, per capita generation is among the lowest in the world,” says Song. “The current dependable power generating capacity of Bangladesh is about 4,120MW, while the country’s peak demand is about 4,700MW.”
The power sector program, which is in line with ADB’s country and strategy programme for Bangladesh, has two financing components. The programme loan, valued at US$60mn, will be released in two stages. The loan carries a 24-year term including an eight-year grace period and will come from ADB’s Special Fund resources. The programme loan will help reform the power sector through financial and organisational restructuring, improved governance, and promotion of private sector partnerships.
The other financing component is the project loan. It consists of a US$400mn loan with a 25-year term including a five-year grace period and will be sourced from ADB’s ordinary capital resources, and a US$5mn loan from its Special Funds resources, which will have a 32-year term including an eight-year grace period.
The US$400mn project loan will assist in expanding clean fuel generation capacity, enhancing transmission network reliability and efficiency, and improving the quality of supply in the capital of Dhaka and its surrounding areas, which account for majority of the country’s power demand.
The US$5mn loan will be used for capacity development of the power sector to improve utility performance and promote sustainable operations.
“The project loan is expected to reduce system losses and improve quality of supply, leading to more efficient use of energy and making more power available to support sustained economic growth, while offsetting growth in greenhouse gas emissions,” he says. “It will also directly benefit 820,000 existing consumers in Dhaka area by providing reliable power supply. Reliable power supply will also help manufacturing and service industries, including the garment sector that employs several million poor people.”