Bangladesh yesterday got the first tranche of the $1 billion loan pledged by Japan to bounce back from economic whiplash brought on by the global coronavirus pandemic.

Japan joins the likes of development partners such as the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank International Monetary Fund and the Islamic Development Bank in rallying behind Bangladesh.

The five multilateral development lenders have altogether provided about $2 billion in Bangladesh's efforts for economic recovery.

Japan normally provides project aid to Bangladesh and now would call the planned support as budget aid, which came after Dhaka sought help following the outbreak of coronavirus in the country in March that necessitated a two-and-a-half month-long general shutdown.

While the virus could not be snuffed out, the shutdown caused great damages to the economy.

The pandemic stands to wipe off the gains made in poverty reduction in the past decade, according to the World Bank; and as per estimates, more than 1.5 million of the poor and the vulnerable have lost their livelihoods for the shutdown.

This means the need to spend substantially on social safety net programmes and job creation has become imperative. At the same time, its purse strings have been tightened for the near-collapse of economic activities.

"So, Japan has committed $1 billion to aid in economic recovery," said an official of the Economic Relations Divisions involved in the proceedings.

And the agreement signed yesterday between ERD Secretary Fatima Yasmin and Japanese Ambassador Ito Naoki and JICA Country Chief Hayakawa Yuho were for the first tranche of the loan, he said.

"Like the others, Japan do not sign agreements for the entire loan amount at once. They do it in phases."

The remaining portion of the loan would be given in two phases soon, he said requesting anonymity as he is not authorised to speak with the media.

The first tranche, which is of $320 million (35 billion yen), would be used to fund the government's stimulus packages amounting to Tk 103,117 crore, which is about 3.7 percent of the country's GDP, announced to shake off the ill effects of the pandemic.

"This is timely support for Bangladesh amid the COVID crisis," the Economic Relations Division said in a press release yesterday.

The funds will contribute to the health and economic recovery, which will eventually contribute to promoting the country's social and economic stabilisation and development efforts, it added.

The interest on the loan would be 0.01 percent and the repayment period 15 years including a four-year grace period, according to the ERD press release.

The loan would not have any impact on the financing of the projects JICA have already committed, the ERD official said.

Japan is the single largest bilateral development partner of Bangladesh, providing financial support for the country's socioeconomic development. Until June, Japan has provided $14.23 billion in official development assistance.

The Fareast nation will provide another $1.7 billion to Bangladesh under the 41st ODA package for seven ongoing projects.

The projects include the construction of the Bangabandhu Sheikh Mujib railway bridge that would go over the Jamuna river, the Matarbari ultra supercritical coal-fired power plant and the Dhaka Mass Rapid Transit.

The loan agreement is expected to be signed next week, another ERD official told The Daily Star yesterday wishing not to be named.

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