France to provide €300m in budget support for climate change initiatives

France has agreed to provide Bangladesh with €300 million in budget support for its climate change initiatives.

A framework agreement between the Bangladesh government and the Agence Francaise de Developpement (AFD) in this regard was signed today (20 May).

The agreement, titled "Policy Loan in Support of Climate Change Agenda", includes a concessional loan of €300 million and a €5 million grant to finance technical cooperation for the different stakeholders involved in the implementation of the policy loan, according to a Economic Relations Division (ERD) press release.

According to the ERD, the three-year programme, covering 2023 to 2026, aims to help the government fight climate change and support the country's climate-resilient and low-carbon development. 

This initiative aligns with the medium and long-term priorities defined in the National Adaptation Plan, the Mujib Climate Prosperity Plan, and the Nationally Determined Contributions.

The first instalment of €100 million is expected to be disbursed by June 2024, the release read.

Md Shahriar Kader Siddiky, secretary, ERD, and Cecilia Cortese, AFD deputy county director for Bangladesh, signed the agreement on behalf of Bangladesh and the AFD respectively. The Ambassador of France, Ms Marie Masdupuy was also present at the signing ceremony.

The AFD is a bilateral development agency implementing official development assistance on behalf of the French Government. The agency has been operating in Bangladesh since 2012, supporting projects in power and energy, environment and climate change, transport and communication, and the health sector. 

Currently, AFD funds 11 ongoing projects in Bangladesh with a total net assistance amount of €1.14b, including €1.122b in loans and €19.89m in grants, according to the ERD.

Since July last year, the government has received a budget support of $490m from the Asian Development Bank (ADB) and South Korea and deals have already been signed - $400m with the Manila-based lender and $90m with the East Asian country.

The government expects to receive $500m in budget support from the World Bank in the current financial year under the Second Recovery and Resilience Development Policy. However, it is seeking more $750m in budgetary support.

Meanwhile, the government has sought another $300m from ADB and $400m from the Asian Infrastructure Investment Bank as budget assistance loans in the ongoing fiscal year.

ERD data shows that up to the end of the last financial year on 30 June 2023, the government received $11.09 billion in budget assistance. The amount of government budgetary support has increased mainly after Covid-19, to purchase vaccines and facilitate economic recovery.

Moreover, the need for budget support increased further due to the economic impacts of the Ukraine-Russia war.

In recent years, the government received $1.769b in FY23, $2.597b in FY22, $1.09b in FY21, and $1b in FY20 in budgetary assistance. In the fiscal year before that, the budget assistance was $251m.