The Islamic Development Bank ( IDB) has withdrawn $175.5 million fund commitments for two projects in Bangladesh as the country could not comply with policy deadlines.
The bank’s Director General for Country Relations and Services Walid Abdelwahab informed Finance Minister AMA Muhith about its decision on withdrawing the cumulative undisbursed commitments or CUC in a letter on Jan 7.
It said they took steps to cancel the projects – ‘Prepayment Metering System’ and ‘Sustainable Housing for Low Income Urban Communities’ – in order to maintain AAA rating from all major rating agencies.
The estimated cost of the ‘Prepayment Metering System’ project was $155.5 million while the remaining $20 million was meant for the ‘Sustainable Housing for Low Income Urban Communities’ project.
The IDB said it had not been enforcing strictly the policy deadlines, set by its board of executive directors, “mainly due to accommodating special requests and needs of member countries”.
“This has led to significant increase in the level of CUC. Therefore, in order to control the level of CUC, the Bank from now on will be obliged to strictly enforce rules that govern projects cancellation,” the letter read.
In this context, it added, the bank had taken steps to cancel the two projects, “taking into consideration the overall country portfolio stance and based on thorough internal technical consultations”.
Economic Relations Division Secretary Kazi Shofiqul Azam, however, is hopeful of getting funds for the two projects from other agencies.
Speaking he said, “The IDB approved the proposed funds for the projects in its board meeting. But our ECNEC has not yet endorsed them. That’s why we hope we will manage funds for the projects from other agencies.”
Abul Khayer Md Aminur Rahman, a joint secretary at Power Division, said they could not take the ‘Prepayment Metering System’ project ahead because the IDB stipulated ‘some extra conditions that were hard to fulfil’.
He said that any of the companies working under the division may implement the project with its own funds or bank loans after the withdrawal of the funds by IDB, according to bdnews24.
An ERD official said the IDB cancelled the ‘Prepayment Metering System’ project after Dhaka Electric Supply Company or DESCO failed to appoint a consultant for the project and identify the ways to initially implement it in past one year.
The ERD official, who spoke on condition of anonymity as he was not authorised to speak over the issue, also said there were ‘enough reasons’ behind cancelling the housing project for low- income urban communities.
He said the government agency that was supposed to implement the project could not even start acquiring the land for the project six months into signing of the deal with the IDB on May 16 last year.
According to the IDB rules, work of a project must start within six months from the day the deal is signed.
And if the bank cannot clear the committed money for a project, it will affect its rating negatively.