Bangladesh signs $564m budget support deals with Japan, AIIB

Bangladesh has signed budget support agreements worth a total of $564 million with Japan and the Asian Infrastructure Investment Bank (AIIB) to strengthen macroeconomic stability and enhance energy sector capacity.

Of the total amount, $314 million will come from Japan, while $250 million will be provided by AIIB under separate agreements.

In a press release issued today (9 June), the Economic Relations Division (ERD) said that the Government of Bangladesh and the Government of Japan signed a loan agreement titled "Emergency Assistance Loan for Strengthening Economic Resilience and Ensuring Stable Energy Supply."

The agreement was signed on behalf of Bangladesh by ERD Secretary Md Shahriar Kader Siddiky, and on behalf of Japan by Ambassador to Bangladesh Saida Shinichi and Takahashi Junko, chief representative of Jica Bangladesh. The signing ceremony took place at the ERD office in Sher-e-Bangla Nagar, Dhaka.

Under the agreement, the Japan International Cooperation Agency (Jica) will provide ¥50 billion (approximately $314 million or Tk3,850 crore) as budget support. This assistance is expected to play a vital role in addressing Bangladesh's urgent macroeconomic and energy sector needs amid ongoing Middle East tensions and global economic uncertainties.

According to the ERD, the loan is part of the Strengthening Economic Management and Governance Program (Subprogram-2), which is being implemented with support from the Asian Development Bank (ADB). The programme aims to strengthen macroeconomic reforms, revenue management and energy sector stability.

The Japanese loan carries an indicative interest rate of 3.05%, with a repayment period of 30 years, including a 10-year grace period. The grant element has been estimated at 24.01%, making it a relatively concessional loan.

Meanwhile, a separate agreement for $250 million in budget support was signed online with AIIB the previous day. Under the same programme, AIIB is acting as a co-financier alongside ADB.

The AIIB loan has an interest rate of SOFR plus 1.45%, which, based on the SOFR rate of 3.63% as of 20 April 2026, stands at approximately 5.08%. The loan tenure is 35 years, including a five-year grace period, and includes a 0.25% front-end fee.

ERD analysis shows that the grant element of the AIIB loan is -0.68%, indicating a negative value and classifying it as a relatively non-concessional loan.

Officials said Bangladesh's economy has faced significant external pressures in recent years due to the Covid-19 pandemic and volatility in global energy and commodity prices. This budget support is expected to enhance the government's fiscal capacity and help sustain ongoing reform initiatives.

In particular, policy measures in the energy sector under this programme are expected to reduce power generation costs and ensure uninterrupted energy supply for both households and industries.