ADB approves $200m power-grid upgrade as Bangladesh growth forecast cut to 4%
The Asian Development Bank has approved a $200 million loan to strengthen electricity distribution around Dhaka as the lender cut Bangladesh’s economic growth forecast to 4% for FY2027, citing energy shortages among constraints on industry and investment.
The Power Distribution Network Enhancement Project will upgrade infrastructure across 13 Palli Bidyut Samities serving industrial and rapidly urbanising areas surrounding the capital.
The project will install 1,150 megavolt-amperes of new transformer capacity across 52 substations and add 115 MVA at 12 existing substations. More than 2,600 kilometres of distribution lines will be built or upgraded, while 900 fault locators will be deployed to speed up restoration after outages.
“This project will help future-proof the power system in key growth corridors around Dhaka through advanced technologies, stronger infrastructure, and enhanced resilience measures,” ADB Country Director Qingfeng Zhang said.
The latest financing adds to ADB’s investments in Bangladesh’s electricity network. In 2023, the lender approved a $160 million loan to strengthen Dhaka’s distribution system under a project implemented by Dhaka Electric Supply Company. The programme was designed to improve supply for about 1.1 million existing customers and provide connections to another 200,000.
ADB has also financed transmission and distribution upgrades elsewhere in the country, including projects aimed at expanding grid capacity and improving reliability outside Dhaka.
The new investment comes as Bangladesh continues to face a gap between installed generation capacity and electricity that can reliably be supplied to the grid.
The country has close to 30,000MW of installed generation capacity, but actual output frequently remains well below that level because of fuel constraints, maintenance and plant outages. Gas shortages have particularly affected gas-fired plants, while failures at large generating units have periodically pushed load-shedding above 3,000MW.
The distribution investment is therefore focused not on adding generation but on improving the network carrying electricity to consumers in some of the country’s fastest-growing industrial corridors.
ADB’s September 2026 Asian Development Outlook, released Tuesday, forecast Bangladesh’s GDP growth at 4% in FY2027, down from the 4.5% it projected in July. Growth in FY2026 was estimated at 3.7%.
Economic activity slowed in the final quarter of FY2026 because of supply-chain disruptions linked to the Middle East conflict, ADB said.
The lender expects consumption and investment to strengthen as political uncertainty eases following the general election earlier this year. Services and agriculture are expected to support growth.
Industry and investment, however, will remain constrained by energy shortages, high borrowing costs, limited access to credit, weak external demand and structural problems, according to the outlook.
Private consumption, supported by remittances, is expected to remain the main driver of growth.
Inflation eased to an estimated 8.7% in FY2026 from 10% the previous year but is forecast to rise to 9% in FY2027.
ADB cited energy shortages, high production and transport costs, possible shipping disruptions and the delayed impact of El Niño on food prices among factors likely to keep inflation elevated.
The current-account deficit is forecast to widen to 0.6% of GDP in FY2027 from an estimated 0.3% in FY2026 as imports grow faster than exports. Remittances are expected to remain resilient despite tensions in the Middle East.
ADB identified a prolonged Middle East conflict, higher oil prices, shipping disruptions, weaker demand in major export markets, banking-sector stress and delays in fiscal reforms among the downside risks to its outlook.
“Bangladesh's economy is beginning to recover, but the recovery remains vulnerable to external shocks and domestic constraints,” Zhang said.
The $200 million power project will be financed alongside contributions from the government and the Bangladesh Rural Electrification Board, with additional technical assistance from the Republic of Korea e-Asia and Knowledge Partnership Fund.
--