Undisbursed balance in ADB's agri-rural sector hits 69%

Infographics: TBS

Agriculture, food, nature, and rural development sectors have the highest percentage of uncontracted and undisbursed balances among the projects financed by the Asian Development Bank (ADB), standing at 68% or $349 million and 69% or $354 million, respectively, as of January this year.

This is mainly due to project delays caused by government changes amid a student-led mass uprising in August last year, according to an ADB report.  

The development partner released the report at the Bangladesh Tripartite Portfolio Review meeting, underway from 17 to 19 February in the capital, jointly chaired by the Economic Relations Division secretary and the ADB's country director.

As of 31 January, the Manila-based multilateral lender reported that 41% or $4.84 billion of Bangladesh's total ADB lending remained undisbursed, while 19% or $2.35 billion was uncontracted.  

In the human and social development sector, the undisbursed balance is 35% or $868 million, and the uncontracted balance is 20% or $497 million.  

In the energy sector, undisbursed balances were 52% or $1.14 billion, and uncontracted balances were 22% or $495 million.  

In the water and urban development sector, undisbursed and uncontracted balances stood at 46% or $1.11 billion and 19% or $458 million, respectively. In the transport sector, 34% or $921 million of the loan remained undisbursed, with 18% or 478 million uncontracted.  

The ADP report pointed out that insufficient financial and human resources, a complex and lengthy approval process, challenges in land acquisition, limited experience and capacity of executing and implementing agencies, among other factors, contributed to poor project readiness and frequent loan implementation delays.  

Only 22% of the total loan amount was disbursed, with infrastructure sectors receiving just 14.6% in the first four years of implementation.  

According to ADB data, as of 31 January 2025, the Bangladesh portfolio stood at $11.791 billion for 52 projects across seven sectors: five in agriculture, food, nature, and rural development; eight in human and social development; nine in energy; 12 in transport; 11 in water and urban development; six in finance; and one in public sector management and governance.  

The transport and human and social development sectors together accounted for 44.1% of the total portfolio.

Commitment charge implementation  

According to the ADB report, the current portfolio includes $7.07 billion in ordinary capital resources investment loans, with an undisbursed amount of $2.39 billion. A total of $30.89 million in commitment charges have been paid over time, including $3.58 million in 2024 alone.  

A commitment charge of 0.15% per year is imposed on all undisbursed ordinary capital resource loan balances, starting 60 days after loan signing and accruing upon loan effectiveness. The charge is calculated daily based on the undisbursed loan balance.

Price escalation impacts of long implementation period  

The ADB report stated that some projects were impacted by longer implementation periods, leading to price escalation. The Greater Dhaka Sustainable Urban Transport Project's cost increased from $255 million at approval to $494.39 million with a 94% rise, while the ADB loan amount grew from $160 million to $260 million with a 63% increase.  

Multiple factors contributed to significant time and cost overruns, including underestimated civil work costs at appraisal, changes in scope and design during implementation, delays in land acquisition and utility shifting, slow contractor mobilisation, and the impact of Covid-19.  

Land acquisition and resettlement, planned for completion in the fourth quarter of 2013, were delayed by over three years, while civil works contracts were awarded 3 to 3.5 years later than planned.  

The Power System Efficiency Improvement Project, approved in August 2011 with a loan of $300 million, had an original closing date of 30 December 2017.  

The loan was extended four times, with a total extension of seven years, revising the closing date to 31 December 2024, resulting in a 13-year implementation period.  

The loan experienced a 3% price escalation. Recently, the loan was extended for another year, until 31 December 2025, extending the implementation period to 14 years.  

The ADB Dhaka Environmentally Sustainable Water Supply Project, approved on 22 October 2013 with a loan of $250 million, had an original closing date of 30 June 2020. The closing date was later revised to 30 June 2023.  

The contract price of Package 1 was increased by 24.4% or $78.8 million due to implementation delays. Originally scheduled from May 2018 to May 2022, the package is now expected to be completed in August 2025. An additional $39.7 million budget will be required, raising the contract value by 36.7% from the original price.