IDB scraps 2 projects worth $175 million

The Islamic Development Bank (IDB) has cancelled two projects worth around USD 175 million due to the delay in their implementation and to maintain its credit rating. The projects are the USD 155.5-million prepaid metering system project and the USD 20-million sustainable housing project for the low-income communities. The secretary of the Economic Relations Division (ERD), Kazi Shofiqul Azam, blamed the respective implementing agencies for the cancellation of the projects.

The ERD secretary said that after Prime Minister Sheikh Hasina’s approval of the project, the IDB board had granted USD155.5 million for the Prepaid Metering System Project in February last year. However, over the last one year, the implementing agency, the Dhaka Electric Supply Co. Ltd (DESCO), has failed to make any progress, including the appointment of consultants, with the project.

The ERD could not even complete necessary negotiations with the IDB within the

stipulated time frame, though the bank approved funding for the project. Even, the DESCO has failed in identifying the initial project implementation modalities, which led the IDB cancelling the funding, the ERD secretary said.

Besides, the IDB has changed its funding rules for different projects. This is also a major reason for the cancellation of the project.

About the sustainable housing project for the low-income community, he said the implementing agencies could not acquire the land.

“So, the IDB has enough grounds to cancel the fund,” he added.

Agreement on the housing project was signed between the government and the IDB on May 16, last year. As per the IDB funding rules, implementation of the project has to start within six months of signing the agreement.

  On January 7, the IDB informed the ERD about the decision to cancel the funding.

In the letter, the IDB wrote that the bank has recently adopted its 10-year strategy, which was endorsed by the board of governance in its 2017 annual meeting with its president. The five-year programme aimed at transforming the bank will be aligned with the 10-year strategy.

It also wrote that the bank continues to enjoy AAA rating from all major rating agencies. But, these agencies are increasingly adopting stringent exposure and liquidity rules for MDBs. Therefore, to maintain its AAA rating, one of the immediate priorities of the bank will be to reduce the cumulative undisbursed commitments (CUCs).

The IDB board of executive directors (BEDs) approved the policy deadlines the projects must comply with to keep the number of CUCs at an acceptable level. While these deadlines are reflected in the financing agreements of all the projects approved by the BED, the bank has not been strictly enforcing these deadlines, mainly because it is accommodating special requests and needs of member countries.

In this context, considering the overall country portfolio stance and based on thorough internal technical consultation, the bank has taken steps to cancel the prepaid metering system project and the sustainable housing project for low-income urban communities.

The Power Division had taken the initiative to implement a prepaid metering system. As part of it, around 35,000 (31,500 single-phase and 3,500 three-phase) prepaid meters were supposed to be installed across the country.

IDB scraps 2 projects worth $175 million

The Islamic Development Bank (IDB) has cancelled two projects worth around USD 175 million due to the delay in their implementation and to maintain its credit rating. The projects are the USD 155.5-million prepaid metering system project and the USD 20-million sustainable housing project for the low-income communities. The secretary of the Economic Relations Division (ERD), Kazi Shofiqul Azam, blamed the respective implementing agencies for the cancellation of the projects. The ERD secretary said that after Prime Minister Sheikh Hasinas approval of the project, the IDB board had granted USD155.5 million for the Prepaid Metering System Project in February last year. However, over the last one year, the implementing agency, the Dhaka Electric Supply Co. Ltd (DESCO), has failed to make any progress, including the appointment of consultants, with the project. The ERD could not even complete necessary negotiations with the IDB within the stipulated time frame, though the bank approved funding for the project. Even, the DESCO has failed in identifying the initial project implementation modalities, which led the IDB cancelling the funding, the ERD secretary said. Besides, the IDB has changed its funding rules for different projects. This is also a major reason for the cancellation of the project. About the sustainable housing project for the low-income community, he said the implementing agencies could not acquire the land. So, the IDB has enough grounds to cancel the fund, he added. Agreement on the housing project was signed between the government and the IDB on May 16, last year. As per the IDB funding rules, implementation of the project has to start within six months of signing the agreement. On January 7, the IDB informed the ERD about the decision to cancel the funding. In the letter, the IDB wrote that the bank has recently adopted its 10-year strategy, which was endorsed by the board of governance in its 2017 annual meeting with its president. The five-year programme aimed at transforming the bank will be aligned with the 10-year strategy. It also wrote that the bank continues to enjoy AAA rating from all major rating agencies. But, these agencies are increasingly adopting stringent exposure and liquidity rules for MDBs. Therefore, to maintain its AAA rating, one of the immediate priorities of the bank will be to reduce the cumulative undisbursed commitments (CUCs). The IDB board of executive directors (BEDs) approved the policy deadlines the projects must comply with to keep the number of CUCs at an acceptable level. While these deadlines are reflected in the financing agreements of all the projects approved by the BED, the bank has not been strictly enforcing these deadlines, mainly because it is accommodating special requests and needs of member countries. In this context, considering the overall country portfolio stance and based on thorough internal technical consultation, the bank has taken steps to cancel the prepaid metering system project and the sustainable housing project for low-income urban communities. The Power Division had taken the initiative to implement a prepaid metering system. As part of it, around 35,000 (31,500 single-phase and 3,500 three-phase) prepaid meters were supposed to be installed across the country.