South Korea and Bangladesh signed a new framework arrangement in Incheon, Korea, on Thursday, providing Bangladesh with $3 billion in concessional loans from the Economic Development Cooperation Fund (EDCF) for 2023-2027.
The signing took place during the 56th Annual General Meeting of the Board of Governors of the Asian Development Bank (ADB), reads a press release.
Kisun Bang, the first vice minister for economy and finance in the Republic of Korea, and Sharifa Khan, secretary of the Economic Relations Division (ERD), represented their respective countries.
A memorandum of Understanding (MoU) for Dhaka MRT Line 4 cooperation and two EDCF loan agreements for CNG bus procurement and railway signalling system modernization were also signed.
The arrangement will be the legal foundation for the Korean government's provision of up to $3 billion in concessional loans to Bangladesh over the next five years.
Repayment terms for the EDCF loans include a 40-year period, a 15-year grace period, and an annual interest rate between 0.01%-0.05%.
Both governments will collaborate to identify candidate projects in the future.
With this arrangement, Bangladesh has become Korea's second-largest recipient of official development aid (ODA) worldwide.
The $3 billion authorization is a significant increase from the previous EDCF framework arrangement, which provided $700 million for 2021-2025.
The Korean government has supported 30 development projects in Bangladesh, totalling $1.7 billion, through the EDCF.
Ambassador Lee Jang-keun emphasized the significance of signing the new EDCF framework arrangement during the 50th anniversary of diplomatic ties between the two countries.
“With the substantial increase of the concessional loan to Bangladesh, it is expected that Korea will be able to support mega projects in Bangladesh, thus contributing to the continuous socio-economic development of Bangladesh,” he said.
“I hope the $3 billion support will improve daily life for Bangladeshis in transportation, health, and education sectors while strengthening the friendship between the two nations,” he added.