Dhaka: Bangladesh will receive US$1.11 billion (S$1.57 billion) in loans from Japan for infrastructure, investment and health projects, the Japanese embassy in Dhaka said on Sunday (13 December), announcing its largest loan package to Bangladesh since 1974.

The projects include a foreign direct investment promotion project, the strengthening of the Dhaka-Chittagong main power grid, bridge improvements in western Bangladesh, maternal, neonatal and child health projects, support for local governance and an urban building safety project.

For all these projects, interest rates are 0.01 per cent and repayment periods are 40 years with 10 years’ grace, said a statement from the Japanese embassy.

Last month donors told Bangladesh it should raise spending on infrastructure to US$12 billion annually, particularly in energy, transport and ports.

Bangladesh currently spends just 3 per cent of GDP in this sector.

At a meeting in November, donors including the World Bank, International Monetary Fund and USAID also told Bangladesh to reduce its dependence on foreign aid and to work more closely with the private sector on major projects.

Japan’s ambassador to Bangladesh and a senior official of the Ministry of Finance signed an agreement on the official development assistance (ODA) on Sunday.

During a visit by Bangladesh Prime Minister Sheikh Hasina to Japan in May 2014, Japanese Prime Minister Shinzo Abe pledged to provide up to US$5.1 billion of additional assistance to Bangladesh over the next four to five years.