If the agreement is not signed, the country may not achieve the target to collect loan commitment from development partners in FY20
The loan agreement of the 41st official development assistance (ODA) package with the Japan International Cooperation Agency (Jica) will not be signed in June due to the Covid-19 pandemic.
The agreement is usually signed in June every fiscal year.
"All the processing has been finished but the pandemic is holding back the signing ceremony," said an official of the Economic Relations Division (ERD) of the finance ministry.
Coronavirus infections continue to rise in Bangladesh.
"Jica does not want to sign the deal amid the Covid-19 situation in Bangladesh. ERD is considering signing agreements with development partners without any ceremony," the official said.
Under the 41st loan package, Jica will give $2.18 billion for eight infrastructure projects in Bangladesh. If no loan agreement is signed with Jica for this package, the country may not achieve the target to collect loan commitment from the development partners in the current 2019-20 fiscal year.
The government has set a target to get $6 billion in loan commitments for development in 2019-20 fiscal year, but the development partners committed to providing $4.4 billion in the July-May period, down from $8.1 billion during the same period of the last fiscal year.
According to the ERD, activities of the partner development organisations have slowed down since January this year. Both the government and development partners have focused only on projects related to the novel coronavirus, along with budgetary support to help the country's economy recover from the fallout of the pandemic.
With the 40th loan package, Japan had a deal to provide $2.51 billion. One part of the package was signed on June 30 last year in Dhaka. Another part was signed during Prime Minister Sheikh Hasina's visit to Japan during May 28-31 last year.
The government signed a $1.83 billion loan agreement with Japan under the 39th loan package on June 14, 2018. On June 29, 2017, Japan signed a deal with Bangladesh to provide $1.64 billion in loan.
Jica will fund some important infrastructure projects, including the 41st official development assistance loan package.
The two-lane Chattogram-Cox's Bazar highway will be upgraded to a four-lane one under Public-Private Partnership (PPP). Jica will fund flyovers and bypasses at the busiest points on the highway, including Patiya, Dohazari, Keranirhat, Lohagara, and Chakaria.
The projects earmarked for Jica funding include the Dhaka Mass Rapid Transit Development (MRT-6), Dhaka Mass Rapid Transit Development Line-5, Food Value Chain Financing, Urban Development and City Governance, Economic and Social Development, and the Fourth Primary Education Development Programme.
The interest rate of Jica's loan is 0.94 percent. There is also a 0.01 percent consultation service fee and a 0.02 percent front-end fee. The loan must be repaid in 30 years with a 10-year grace period.
Meanwhile, the government is expecting $1 billion in loans as emergency budget support to tackle the impacts of the Covid-19 pandemic. Jica has initially confirmed that it will provide budget support and that is now under process.
Jica would provide budget support in several steps, said ERD officials.