The government has dropped the idea of sovereign bonds for money to finance the Padma bridge construction as the finance ministry has sought to use foreign exchange reserve and to put in fresh efforts to urge donor agencies.
The government has moved away from the plan to obtain more than $1 billion for the job because of an interest rate that could reach up to 7 per cent, a senior finance ministry official told New Age on Sunday.
‘We have ditched the plan,’ the official said. ‘Why should the government go for costly commercial borrowing before exhausting easy options?’
High finance officials believe that low-cost foreign funds, from the previous Padma bridge consortium members or from bilateral donor countries,
will not be difficult after financing the construction for two years with local funds.
‘We can have donors if we can finance the work for the first two of the five years,’ another official told New Age.
The finance ministry took steps in 2013 to borrow $1 billion in the first phase and $500 million in the second, if required, from sovereign bonds on the international market.
Ministry and Bangladesh Bank officials in the meantime held a series of meetings with foreign banks such as Hongkong Shanghai Banking Corporation, City Bank NA, Standard Chartered, JP Morgan of the United States and Commerze Bank of Germany before appointing two of them as underwriter banks in the process bond issuance, sources said.
The move was made after the lead financier of the project, the World Bank, had decided not to finance the bridge construction for ‘corruption conspiracy.’ Other financiers also follow the suit.
The government, according to the draft of the recently worked out self-financing mode, would require an estimated $1.3 billion to continue with the construction for two years.
Ministry officials said that they had already received indication that the Islami Development Bank and the Japan International Cooperation Agency, also members of the Padma bridge consortium led by the World Bank, could commit fresh loans after seeing the construction for the first two years.
‘If we fail to convince them, soft loans from China or the United Arab Emirate would be the next option for the government,’ a ministry official said.
He, however, said that financing modes by the Bangladesh Bank is the preliminary estimate for the Padma bridge, which would be remodelled after contract award formalities were completed latest by July.
The central bank recently decided the foreign currency financing modes for the bridge construction for five years banking on internal resources.
The bridge, which will be 6.15km long, will be the longest of its type. This will connect the capital to the country’s the south-west.
The bridge will be constructed by the 2017-18 financial year. An amount of $2.35 billion will be spent in foreign currency on the project — $200 million in the current financial year, $700 million in 2014–15, $600 million in 2015–16, $500 million in 2016–17 and $100 million in 2017–18, according to the Bangladesh Bank model.
