Bangladesh wants an additional two years to pay the loan installments of Rooppur nuclear power plant

Bangladesh has taken a loan of 12.65 billion dollars from the Russian Federation for the construction of Rooppur nuclear power plant. The government has formally requested an extension of two years to start paying the first installment of the loan.

The first installment of the country’s largest foreign debt is due on March 15, 2027. Now the government wants to pay the first installment on March 15, 2029.

After an inter-ministerial meeting on March 27, the Economic Relations Department (ERD) decided to seek an extension of two years for the tenure of this loan and repayment of the first installment.

Bangladesh and Russian Federation have a joint coordination committee for implementation of Rooppur nuclear power plant construction project. A meeting of this committee was held on February 14. In the meeting, senior officials of Rosatom, the main contractor of the project, advised Bangladesh to send a formal letter to the Russian Ministry of Finance in this regard.

Why is Bangladesh asking for extra time?

Officials from the ERD and Ministry of Science and Technology cited several important reasons behind the request. These include the impact of the corona pandemic, the ongoing global situation, international sanctions against Russian companies in the transportation of machinery and goods, and the slow pace of construction of power transmission lines.

A senior official of the Ministry of Science and Technology said that the operation of Rooppur nuclear power plant has been hampered due to various reasons. Corona epidemic is one of them. At that time the activities had to be stopped for two consecutive months. Then came the impact of US sanctions on Russia.

Following the start of the Ukraine-Russia war, the US imposed sanctions on key Russian organizations. Since the ban, Bangladesh has not been able to trade directly with Russia. Consequently; An escrow account is being opened and deposited with Sonali Bank owing to ROSATOM, the main contractor for the construction of Ruppur Nuclear Power Plant.

The US has also imposed sanctions on Russian ports, ships, etc. Due to which it has become difficult to bring the goods and equipment required for the construction of Rooppur nuclear power plant from Russia.

Slow down in construction of transmission lines

Meanwhile, the construction of electricity transmission line from Rooppur is also progressing slowly. Construction of transmission lines especially over the Padma and Yamuna rivers is taking longer than planned. On the other hand, the country’s foreign exchange reserves are also under pressure. One of the main reasons is the need to extend the loan repayment period of Rooppur Nuclear Power Plant.

Since the beginning of the Russia-Ukraine war in February 2022, the foreign exchange reserves of Bangladesh started to decrease. It has fallen from $40 billion before the war to less than $20 billion today. After the start of the war, the cost of importing commodities like food, fuel and fertilizers from the world market increased significantly, which also contributed to the decline in reserves. In addition, the local currency also experienced a massive depreciation against the dollar. This devaluation of money has been up to 40 percent. Where earlier one dollar could be bought for 86 rupees, after the war it had to be bought for 120 dollars.

Terms of the loan agreement

Officials of the Ministry of Science and Technology said that an Inter-Governmental Credit Agreement (IGCA) was signed between Bangladesh and Russia on November 2, 2011 to implement the Rooppur Nuclear Power Plant construction project. According to this agreement, a ‘General Contract’ worth USD 12.65 billion was signed on December 25, 2015 between the Bangladesh Atomic Energy Commission and JSC Atomstroyexport of the Russian Federation.

According to the minutes of the meeting held at ERD, 90 percent of this loan will be used for the construction of Rooppur nuclear power plant. On July 26, 2016, an agreement was signed between the Department of Economic Relations of Bangladesh and the Ministry of Finance of the Russian Government for this construction cost of 11.38 billion dollars.

The terms of the agreement are that the loan utilization period is 7 years from 2017 to 2024. And the repayment period is 30 years with a grace period of 10 years.

According to the agreement, installments of this loan will be paid twice a year. One on March 15 and the other on September 15. 379.33 million US dollars in principal repayments per year. 189.66 million dollars to be paid in each installment.

ERD asked Bangladesh Bank for a reliable method of loan repayment

One of the key decisions taken at the inter-ministerial meeting on March 27 was to establish an alternative, safe and secure payment method for the payment of debts to the Russian Federation due to the existing international sanctions.

According to the minutes of the meeting, the ERD tasked the central bank with establishing a reliable and secure payment framework. Currently, Bangladesh is unable to pay due to sanctions on various Russian companies and businesses.

An additional director of Bangladesh Bank who was present at the meeting said that recently a delegation of three people from Bangladesh Bank visited China, and held a meeting with officials of relevant departments including the Central Bank of China to discuss Russian payments.

From the experience of the trip, Bangladesh Bank is working on developing a payment modality. He also said that Bangladesh is planning to pay the amount owed to Russia in Chinese currency to the Chinese bank account.

Progress of construction of Rooppur Power Plant

According to the data of the Implementation Monitoring and Evaluation Department (IMED), 65.52 percent of the physical activities of the Rooppur nuclear power plant construction project have been completed till March 31.

For this reason, from July 2016 to last March 71 thousand 89 crores have been spent. Which is 62.82 percent of the cost allocated to the project. The total cost of implementing this project has been estimated at 1 lakh 13 thousand 93 crores. Out of this, Bangladesh government is giving Tk 22 thousand 53 crores and a loan of Tk 91 thousand 40 crores is being taken from the Russian Federation. The project is scheduled to be completed by December 2025.

On September 28, 2023, the first shipment of nuclear fuel from Russia arrived in Dhaka. Then this fuel was handed over in a ceremony on October 5 last year. Where Russian President Vladimir Putin and Bangladesh Prime Minister Sheikh Hasina participated virtually.

At that event, Putin said that Bangladesh’s Rooppur power plant will be operational at full capacity in 2026.

By acquiring uranium from Russia, Rooppur Nuclear Power Plant has now become an internationally recognized nuclear facility.

But, doubts have arisen whether this power plant can be commissioned in 2026 or not. Because the electricity produced by this power plant needs special transmission lines to supply it to the national grid. That transmission construction project is not progressing as expected. Once construction of the transmission line is completed – 2,400 MW of power from the two units at Rooppur will be connected to the national grid.