Third terminal: Deal inked for last tranche of Jica loan with higher interest rate

Bangladesh has signed a deal worth 76.64 billion Japanese yen, equivalent to Tk5,600 crore, to secure the third and final tranche of support from the Japan International Cooperation Agency (Jica) for the construction of the third terminal at Hazrat Shahjalal International Airport (HSIA).

For the construction part, the government will have to pay a double interest rate compared with the previous tranche signed in August 2020. 

Besides, for the consultancy part, the interest rate for the loan reaches 20 times with the new agreement.

Shahriar Kader Siddiky, secretary of the Economic Relations Division (ERD) signed the deal on behalf of the government during a ceremony at the ERD on Sunday.

Iwama Kiminori, the ambassador of Japan to Bangladesh, signed the "Exchange of Notes" and Hiroshi Yoshida, senior representative, Jica Bangladesh Office, signed the loan agreement on behalf of the Government of Japan.

The Jica provided 156.83 billion yen for the project earlier and the total loan from the agency reached 233.46 billion yen after disbursing the amount under the agreement.

The Civil Aviation Authority of Bangladesh is implementing the Hazrat Shahjalal International Airport Expansion Project with an estimated cost of Tk21,399  crore, while the Jica is to lend Tk16,141 crore and the remaining amount is to be spent from the government fund.

A separate press release issued by the ERD and the embassy of Japan stated that the government will have to pay a 1.30% interest per year for the loan to be spent for construction works and 0.20% for consultancy services.

The interest rate for construction work was 0.65% for the second tranche worth 80 billion Yen signed in August 2020. The interest rate for consultancy services was only 0.01% in the second tranche.

The loan is to be repaid within 30 years including a 10-year grace period.

Officials said the project will increase the scope encompassing constructing a new passenger terminal building (Terminal 3), a new cargo complex, and multi-level car parking.

Ancillary facilities like connection with other transport modes, sewage treatment plants, and water supply systems are also being financed under the loan.

The project is poised to revolutionise the aviation landscape of Bangladesh. It will address the escalating demand for air and cargo traffic, enhance airport access, improve passenger terminal convenience, and bolster safety measures by reinforcing security functions, they said.

During the signing ceremony, Hiroshi Yoshida said the airport expansion project represents a pivotal step in redefining Bangladesh's aviation capabilities. 

"Beyond addressing immediate needs, it positions Bangladesh as a hub for economic growth and regional connectivity, thereby strengthening the bonds between our two nations," the Jica representative said.