The proposal to invest in Asian Infrastructure Investment Bank (AIIB) for membership will go to cabinet shortly for its consent, official sources said.
Economic Relations Division recently sent a letter to Finance Secretary Mahbub Ahmed to take initiative in this regard.
ERD has already received opinion from the ministries and divisions including Law and Parliamentary Affair Ministry and Foreign Ministry.
A Finance Division official said AIIB fund will be instrumental for Bangladesh for infrastructure development.
He added that foreign investment will be affected as foreigners are leaving the country, feeling a sense of insecurity after the killings of two foreign citizens recently.
More than $25-$30 billion investment will be required for power sector alone in the next 5-7 years, said the official.
“We need a huge amount of fund from the infrastructure development bank, and so we are expediting the investment process to buy stakes.”
According to the AIIB article of agreement provision, the proposal needs the prime minister’s approval.
Besides, under the rule of business, the government will need the consent from the cabinet, but the proposal to pay for AIIB will not require the parliament’s approval, according to the Law and Parliamentary Affairs Ministry’s.
According to the proposal, the total capital subscription of Bangladesh is $660.5 million for 6,605 shares, but initially it is going to deposit $132.1 million in next January.
The AIIB was proposed by China in 2013 and the initiative was launched at a ceremony in Beijing in October 2014. The Articles of Agreement (AOA) were signed by 50 member countries on 29 June 2015.
MA Mannan, state minister for finance and planning, signed the deal on June 29 on behalf of Bangladesh.
Sources in Finance Ministry said: “Once the bank is functional, Bangladesh will apply for project loans and technical assistance, and the rate of interest would be competitive with those of the World Bank and the Asian Development Bank.
An official of the Economic Relations Division said the bank is likely to start off in next January and the terms and conditions of its loans would be similar to those of ADB.
At present, ADB gives two types of loans – one which carries an interest rate of 2.5% and another linked to Libor, which is normally within the range of 4.5% to 5%.
The rate of interest on loans from the WB is 0.75% and is repayable in 40 years after a 10-year grace period. In other words, the receiving country gets 50 years to repay the loan. Sources in the Finance Division said the new bank will provide loans for big infrastructure projects such as roads, railways and power.