Exchange rate hike pushes MRT 1 foreign loan cost up by Tk36,000cr
“The rise in the dollar rate alone has had a massive impact,” a DMTCL official told TBS, adding that VAT and income tax, payable at 15% from government funds, would further burden the project
The cost of Bangladesh's inaugural underground metro rail project, MRT Line-1, is facing a staggering increase, with the foreign loan component projected to almost double due to the significant depreciation of the Taka against the US dollar since 2019.
Dhaka Mass Transit Company Limited (DMTCL), in a recent letter to the Planning Commission, said the foreign loan portion of the project could increase by Tk36,199 crore, a 92% jump compared to the original estimate. The loan component, initially approved at Tk39,450.32 crore, may now climb to Tk75,649 crore.
Officials attribute this sharp surge primarily to the Taka's 42% devaluation against the dollar since 2019, when one dollar was valued at Tk84.50, compared to Tk120 in 2024. Global inflation and higher construction material costs, exacerbated by the Russia-Ukraine war, are also contributing factors
"The rise in the dollar rate alone has had a massive impact," a DMTCL official told TBS, adding that VAT and income tax, payable at 15% from government funds, would further burden the project.
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The MRT Line-1 project – spanning 12 underground stations from Hazrat Shahjalal International Airport to Kamalapur and seven elevated stations from Natun Bazar to Pitalganj Depot – was approved in 2019 with an estimated cost of Tk53,977 crore. Of this, Tk39,450 crore was to be financed by Jica loans, and Tk14,526.75 crore from the government. The implementation period runs through December 2026.
Beyond currency fluctuations, project delays caused by the COVID-19 pandemic, design alterations, and higher-than-expected bids from contractors have also driven up expenses, DMTCL said. For eight of the 12 already-tendered construction packages, contractors' offers exceeded projections by Tk10,000 crore.
Project Director Abul Kashem Bhuiyan confirmed the rising costs but noted that expenses may adjust once all tenders are finalised. "The four remaining packages are yet to be opened. The final bill could go lower, but right now, per-kilometre costs have risen from Tk1,559 crore to about Tk2,398 crore," he said.
Land acquisition, another significant cost driver, has not been fully completed, while one civil works package had to be re-tendered after receiving no bids.
The letter warned that if a revised proposal is submitted now, it will not reflect the final project cost, and further revisions may later be required; an outcome that would be both administratively and financially undesirable.
Under the Guidelines for Preparation, Processing, Approval and Revision of Development Projects in the Public Sector (June 2022), repeated revisions are discouraged and cannot exceed two times.
The Planning Commission has been told that submitting a revised Development Project Proposal (DPP) at this stage would be premature, as costs are still fluctuating.
Therefore, DMTCL has decided not to submit a revision at this stage. Instead, it will wait until the contract prices for all packages are finalised, after which a comprehensive revised DPP will be submitted.
