AIIB approves $200m loan to increase electricity access in Bangladesh

The Asian Infrastructure Investment Bank (AIIB) has approved a $200-million loan for Bangladesh to increase access to electricity and improve service efficiency in the capital of Dhaka and the country's western zone.

By 2025, the 'Dhaka and Western Zone Transmission Grid Expansion Project' is expected to reduce the number of annual power outages to 15 (from 60), reduce transmission loss to 2.50 percent (from 2.76 percent) and add 7,440 megavolt-amperes of power transmission capacity, said a press release here today.

The project, which will lead to the construction of 408 kilometers of transmission lines, will also have a positive environmental impact, reducing average annual carbon dioxide emissions by 455,785 tons, the release added.

While the government of Bangladesh has implemented various programs to meet the growing demand for power, mainly as a result of rapid industrialization and urbanization, about 22 percent of the population still lacks access to electricity.

It is estimated that poor power supply has resulted in about 2-3 percent loss to Bangladesh's gross domestic product (GDP) annually, with significant sums spent on diesel generators for backup.

AIIB Vice President and Chief Investment Officer DJ Pandian said AIIB's investment gives much-needed financing to provide affordable, reliable and modern energy, especially in areas where people lack basic infrastructure. "The project will also help the power sector tackle climate change impacts, making the grid more climate-resilient," he added.

Bangladesh is currently the fastest growing economy in South Asia, growing over 7.5 percent per annum in the last three years. The country is also rapidly urbanizing with nearly half its population expected to live in urban areas by 2025.

These trends, combined with a policy push to achieve universal electricity access for Bangladesh's population, present a tremendous growth opportunity for the country's infrastructure sector in the near future.

Co-financed with the Asian Development Bank, the project is expected to help Bangladesh achieve its target to provide electricity for all by 2021 and supply uninterrupted electricity to industries by 2020.