The Asian Development Bank (ADB) greenlights a $400 million loan for Bangladesh to tackle climate change challenges.

The loan received the nod during an ADB board meeting held yesterday, marking a potential relief for Bangladesh’s declining foreign currency reserves.

Bangladesh has been grappling with significant losses due to climate change impacts, averaging about $3 billion annually. Aminur Rahman, ADB’s principal public management economist, highlighted the disruptive effects of climate shocks on Bangladesh’s growth and poverty alleviation efforts.

The country’s foreign currency reserves have dwindled for the past 18 months due to higher import expenses compared to relatively moderate earnings from exports and remittances. As of December 6, the reserves stood at $19.13 billion, a notable decline from $40.7 billion in August 2021.

The IMF is expected to greenlight Bangladesh’s proposal for the second tranche of a $4.7 billion loan, approximately $681 million, during its board meeting scheduled for December 12. These financial injections from ADB and IMF could potentially increase Bangladesh’s forex reserves by $1.08 billion.

The approved ADB loan, part of the broader Climate-Resilient Inclusive Development Programme, aims to support Bangladesh’s National Adaptation Plan-2023-2050 and Nationally Determined Contributions 2021 Update to the Paris Agreement.

This initiative aims to foster climate resilience, transition toward a low-carbon economy, mitigate greenhouse gas emissions, and integrate gender equality and social inclusion into climate actions.

To secure the loan, Bangladesh met specific conditions, including addressing water pollution through enforcement guidelines and establishing an environment court with penalties for polluters. The country also formulated a multi-sectoral plan to curb air pollution and designed a green energy policy.