MediumVI Energy Politics & Supply Security24 October 2026, Saturday
Bangladesh turns to sukuk for a coal plant lenders refused
Bangladesh is weighing domestic sukuk, a sovereign dollar bond or export credit to fund about 1.3 billion dollars for the 1,320 MW second phase of the Matarbari coal plant. JICA pulled out in 2022, and 7 lenders including the World Bank and ADB have refused under coal bans; a decision is expected in early November.
The Business Standard reported on 24 October that the government is considering financing Matarbari's 1,320 MW second phase through sukuk, an Islamic bond that pays a return on assets rather than interest, or through a sovereign dollar bond. The project costs about 1.3 billion dollars (16,000–17,000 crore taka), and the government wants the first unit running by June 2030. The Power Division and the Finance Division discussed the financing structure on 19 October, and a final decision is expected in early November.
The other 2 options on the table are export credit agency financing and interim payment certificates issued to the contractor against approved work; all would carry a sovereign guarantee. Power Division Secretary Mirana Mahrukh says local banks could provide 1–2 billion dollars at higher interest. Because about 80% of spending will be in foreign currency for imported equipment, the government prefers foreign-currency borrowing. Taka debt could push up electricity tariffs if the currency weakens.
The constraint is development finance that has closed its doors to coal. JICA withdrew in 2022, and the World Bank, ADB, IMF, JBIC, Korea Exim, the New Development Bank and EDCF have all declined under global coal rules. Qatar, Malaysia and Indonesia have submitted unsolicited offers, while a standard tender could delay the plant by up to 2 years. The Power Division reckons investment costs will be 70–72% lower because the port, coal yard and transmission line were built in the first phase. The existing 1,200 MW plant shut both of its 2 units on 2 November 2024 when coal stocks ran out (The Financial Express, 2024 data).
Talay assessment
Bottom line
Matarbari's second phase shows a coal project, shut out of multilateral finance by climate rules, turning to local banks and Gulf–Asian capital. A sovereign-guaranteed 1.3 billion dollars of debt adds to Bangladesh's currency and debt-service risk. The likeliest path is that a blended financing package is chosen in November and one of the unsolicited offers comes to the fore.
Likely effects
- Sovereign debtNegative1–6 months
A dollar bond or export credit increases the burden of sovereign guarantees and ties debt service to the value of the taka.
- Power supplyPositive6 months+
1,320 MW of baseload could reduce dependence on costly LNG and on electricity imports from India after 2030.
- Domestic bankingNegative1–6 months
Drawing 1–2 billion dollars from local banks could shrink the pool of credit left for the private sector.
Possibilities, ranked
- 1Blended package in November50%
The government picks a sovereign-guaranteed package combining sukuk with foreign-currency credit.
Watch: The Finance and Power divisions' financing decision in early November
- 2Talks on an unsolicited offer30%
Citing urgency, the government opens direct talks on the Qatari, Malaysian or Indonesian offer.
Watch: An unsolicited offer reaching the cabinet or the purchase committee agenda
- 3Project stalls again20%
The financing decision is postponed and the June 2030 target slips.
Watch: No financing decision announced by the end of November
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Phase 2 cost▼ $1.3bn
- Added baseload capacity▲ 1,320 MW