The Asian Development Bank (ADB) and the government of Bangladesh on Wednesday signed an agreement for a $100 million loan to help improve the capacity, efficiency and safety of railway systems in Bangladesh.
Secretary of the Economic Relations Division (ERD) Mohammad Mejbahuddin and Kazuhiko Higuchi, Country Director for ADB’s Bangladesh Resident Mission, signed the deal on behalf of Bangladesh and ADB respectively at a ceremony at ERD in the afternoon.
The loan is the third tranche of the $430 million multi-tranche financing facility agreed between ADB and Bangladesh in 2006 to revamp the entire railways system through the Railway Sector Investment Program.
Under the program, ADB has already provided $130 million and $150 million as first and second tranches respectively for double-tracking the Tongi-Bhairab Bazar section, implementing reforms, rehabilitating yards, extending loops at different stations in the Darsana-Ishwardi-Sirajganj section, and upgrading signaling at 11 stations between Ishwardi and Darsana.
The last tranche will help finance commissioning of 50 broad-gauge passenger carriages and 100-metre gauge passenger carriages for the railway’s main line network.
The new carriages will be added to Bangladesh Railway’s (BR) fleet of rolling stock and increase the transport capacity provided by BR. The new carriages will use the increased line capacity created with ADB assistance provided earlier, and thus improve BR’s position in the passenger market.
The assistance will help increase the number of annual railway passengers by 10 percent by 2017 from 66 million in 2011. By 2019, Bangladesh Railway is also expected to operate an additional 916 million passenger kilometers per year versus 8,787 million passenger kilometers in 2011.
The loan will have a 25-year term, including a grace period of 5 years and an annual interest rate determined in accordance with ADB’s London inter-bank offered rate -based lending facility.
Upgrading the railway network will reduce the transport costs for Bangladesh’s major exports, especially readymade garments.
The improved railway system will ease the pressure on the road network, which is congested, and thus benefit the transport sector as a whole. It will also help promote regional trade and investment by improving a cost-effective communication network.
The railway sector development is critical for accelerating economic growth and poverty reduction, which remains a formidable challenge in spite of the impressive economic and social progress over the recent years.
Given Bangladesh’s high population density, extreme vulnerability to floods, and scarcity of land, the railway is recognized as an environment-friendly and safe mode of transport for people, bulk freight, and containers.
$100mn loan deal signed with ADB for rly dev