Another $1 billion budget support expected this year for Bangladesh

The funding is to support the country's efforts towards climate change mitigation and/or adaptation and low-carbon development.

Rejaul Karim Byron

Rejaul Karim Byron

The Daily Star


File photo of Asian Development Bank. PHOTO: The Daily Star

August 28, 2023

DHAKA – Bangladesh is expecting another $1 billion in budget support towards the end of the year in a financing arrangement led by the Asian Development Bank.

Of the $1 billion, the Manila-based lender would be providing $400 million; Japan International Cooperation Agency, the China-led Asian Infrastructure Investment Bank and other donors would be providing the rest.

The funding is to support the country’s efforts towards climate change mitigation and/or adaptation and low-carbon development, following in the leads of the World Bank and the International Monetary Fund, which earlier provided $500 million and $1.4 billion respectively.

“A low-lying, densely populated country with a high poverty rate, Bangladesh is particularly vulnerable to the impact of climate change,” the ADB said in a project document.

Bangladesh is also a country highly vulnerable to climate risk, ranked seventh on the Global Climate Risk Index 2021, it said.

Subsequently, the Manila-based lender has taken the initiative to support Bangladesh’s climate risk mitigation and adaptation (including renewable energy, energy efficiency and green transportation sector).

For Bangladesh, the $1 billion would go some way towards propping up its strained dollar stockpile, which stood at $23.2 billion as of August 23, according to data from the central bank.

Last week, the ADB team met with officials of the finance ministry and the ministry of environment, forest and climate change to work out the conditions for the funding, The Daily Star has learnt from officials involved with the proceedings.

One of the conditions pertains to arresting pollution of the water bodies.

An enforcement guideline must be drafted for the polluters complete with an environment court and penalty for pollution.

Similarly, a multisectoral action plan must be drafted to control air pollution.

The government will also have to come up with a green energy policy.

“Rapid economic development has significantly increased power consumption and greenhouse gas emission (GHG) in Bangladesh. The carbon dioxide (CO2) emission per capita has grown from 0.2 tons in 2000 to 0.64 tons in 2020,” the ADB said.

In 2021, 60.2 percent of the country’s power generation came from liquified natural gas, 22.5 percent from heavy fuel oil and 6.2 percent from coal.

Besides increased CO2 emissions and other pollutions, high reliance on imported fossil fuels drains public and private resources and exposes the country to energy security issues, the ADB said.

Renewable energy accounts for 3 percent of power generation, far short of the government target of 10 percent.

Bangladesh has committed to the implementation of the Paris Agreement under the Nationally Determined Contributions (NDC), setting an ambitious goal of a 6.73 percent reduction in GHG emissions by 2030 (15.12 percent conditional reduction in GHG emissions with support from the international community) versus the business-as-usual scenario.

To achieve these targets, sizeable investments will be required, with the appropriate policy, and regulatory and institutional support, the ADB said.

The state-owned enterprises will also have to adopt a climate-related policy and the government will have to come up with a solid action plan for implementation of its Delta Plan 2100.

The General Economic Division will have a Delta wing and will monitor whether environment-friendly projects are being onboarded by the ministries and divisions.

The local government division will also have a cell for environmental risk identification and mitigation.

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