OFID to provide $70m support to offset Covid-19 impacts

The OPEC Fund for International Development (OFID) would provide US$70 million budgetary support to Bangladesh, for the first time, to weather the impacts of the Covid-19 pandemic on the economy.

The board of the Vienna-based lender had recently approved the financial package, to be injected into the Bangladesh's national budget for this fiscal year, officials said on Tuesday.

"We are now working with the OFID to finalise the terms and conditions for the loans. It is likely to be completed by next month. And then the loan agreement will be signed," Joint Secretary of the Economic Relations Division (ERD) AKM Shahbuddin said.

"The OPEC Fund had already sent a draft loan agreement to us for its finalisation. We will hold an inter-ministerial meeting on it next week. Then we will give our opinions on it and sent it back to Vienna," he said.

Another ERD official said the Vienna-based lender under its 'Covid-19 Active Response and Expenditure Support Programme' would provide the budgetary support for Bangladesh, for the first time, to help address the fiscal gap in implementing the budget.

The OFID is a development finance institution established by the member states of the OPEC in 1976 as a channel of aid to developing countries.

Meanwhile, the World Bank, Asian Development Bank, International Monetary Fund and Japan have provided budgetary support and some fiscal supports to offset the impacts of the coronavirus pandemic.

The ADB confirmed $500 million, the World Bank $250 million, the IMF $734 million and the JICA $330 million within a span of the last four months.

The ERD official said the OFID's US$70 million budget support loan will help implement social safety net programmes for the poor and vulnerable, day labourers and informal workers, as well as healthcare staff.

The loan will also contribute to the economic packages for the Bangladesh's export industry. Measures include zero-cost credit to support factory worker salaries and low-interest loans to factories and small- and medium-size enterprises.

Furthermore, around 600,000 tonnes of rice and wheat will be distributed to low-income households using the OFID-assured loan, he added.

According to the ERD, the $70 million loan would have to be repaid in 12 years, with three years as a grace period.

The Vienna-based lender will charge 1.25 percent interest rate and 1.0 percent service charge for the budgetary support credit.

The OFID is one of the important development partners for Bangladesh as it has been providing financial and technical supports for the country's development over the years.

It provides funds for infrastructure development, energy, education and health sector upgrade in Bangladesh.