The government has formally requested a two-year extension to start the repayment of principal instalments of a $12.65 billion loan secured from the Russian Federation for the development of the Rooppur Nuclear Power Plant, Bangladesh's first-ever nuclear facility.

Initially, the first instalment of the principal amount of the country's largest-ever foreign loan is slated for payment on 15 March 2027. But the government now seeks to extend this deadline to 15 March 2029.

Following an inter-ministerial meeting on 27 March, the Economic Relations Division (ERD) decided to seek a two-year extension, both for the loan repayment time frame and the start of instalments.

Earlier, during the Joint Coordination Committee meeting between Bangladesh and Russia for the Rooppur project on 14 February, senior Rosatom officials recommended that Bangladesh formally address the Russian Ministry of Finance on this matter.

Why Bangladesh wants the extension

Officials from both the ERD and the Ministry of Science and Technology have outlined several compelling reasons behind the request. These factors encompass the ramifications from the Covid-19 pandemic, prevailing global conditions, international sanctions impacting the transportation of equipment and goods for Russian organisations, and the sluggish pace of the power transmission lines construction.

A senior official from the Ministry of Science and Technology said construction of the Rooppur plant faced hindrances due to multiple factors, including the Covid-19 pandemic that led to a two-month work stoppage, followed by the effects of US sanctions on Russia.

Since the onset of the Ukraine-Russia conflict, the US and Europe have imposed sanctions on major Russian entities that have affected direct transactions between Bangladesh and Russia.

Consequently, payments to Rosatom, the main contractor for the Rooppur plant, are now held in an escrow account at Sonali Bank.

Moreover, US sanctions on Russian ports and ships have further complicated the import of necessary equipment for the plant's construction.

Slow progress of transmission line

Meanwhile, slow progress of the Rooppur transmission line construction, especially crossing the Padma and the Jamuna rivers, is delaying the project.

Additionally, the strained foreign exchange reserves is a compelling reason to extend the repayment period for the Rooppur plant loan.

Following the onset of the Russia-Ukraine conflict in February 2022, Bangladesh faced a large decline in its foreign exchange reserves. Plummeting from over $40 billion to less than $20 billion now, this decrease can be attributed to the escalating prices of commodities including food, energy, and fertiliser. Concurrently, the Bangladeshi taka was depreciated by nearly 40%, falling from Tk86 per dollar to Tk120 in the aftermath of the war.

Terms and conditions of the loan deal

According to officials of the Ministry of Science and Technology, an intergovernmental credit agreement was signed between Bangladesh and Russia on 2 November 2011 for the Rooppur plant project.

Under this agreement, a general contract of $12.65 billion was signed between the Bangladesh Atomic Energy Commission and the JSC Atomstroyexport of the Russian Federation on 25 December 2015.

The ERD meeting minutes indicate that 90% of the loan will fund the Rooppur plant's construction. A contract was signed between Bangladesh's ERD and Russia's Ministry of Finance on 26 July 2016, for $11.38 billion of the construction cost.

The loan has a 7-year utilisation period from 2017 to 2024 and a 30-year repayment period with a 10-year grace period.

The agreement requires semiannual payments of the loan, due on 15 March and 15 September. Each year, $379.33 million is to be paid towards the principal amount, with $189.66 million per instalment.

ERD asks BB about reliable loan repayment methods

One of the key decisions arising from the inter-ministerial meeting on 27 March was the establishment of a secure and robust mechanism for repaying the loan to the Russian Federation amid prevailing international sanctions.

As per the meeting minutes, the ERD has tasked the central bank with formulating a dependable and secure payment framework. Bangladesh is currently unable to fulfil its repayment obligations to Russia due to the ongoing sanctions imposed on Russian companies and businesses.

An additional director of the Bangladesh Bank, who attended the meeting, said a three-member delegation from the central bank recently visited China. They met with officials from the Central Bank of China and other relevant departments to discuss Russian payments.

The Bangladesh Bank is now developing a payment method based on their experience from the visit as the country intends to settle its Russian dues using Chinese currency in a Chinese bank account, he said.

Rooppur Plant construction progress

As of 31 March, the Implementation Monitoring and Evaluation Division reports that 65.52% of the Rooppur plant construction project's physical progress has been completed.

From July 2016 to last March, Tk71,089 crore has been spent, which accounts for 62.82% of the project's total estimated cost of Tk113,093 crore. The Bangladesh government is contributing Tk22,053 crore, with a Tk91,040 crore loan from the Russian Federation. The project is set to finish by December 2025.

The first shipment of nuclear fuel from Russia arrived in Dhaka on 28 September 2023. It was officially handed over in a ceremony on 5 October of the same year, where Russian President Vladimir Putin and Prime Minister Sheikh Hasina participated virtually.

During the ceremony, Putin said the Rooppur plant would be fully operational by 2026. With the receipt of uranium from Russia, the Rooppur plant has gained international recognition as a nuclear facility.

However, there is doubt about the power plant's ability to start operating in 2026 due to delays in constructing the necessary transmission line for supplying electricity to the national grid. Once completed, 2,400MW of electricity from the two units of Rooppur will be connected to the national grid.