The Civil Aviation Authority of Bangladesh (CAAB) stares into a financial squeeze as it prepares to begin hefty loan repayments next month for the Dhaka airport’s third terminal -- a facility unlikely to generate revenue before early 2027.
Originally scheduled to begin repayments in 2023, CAAB secured a three-year deferral. Now, the bill has arrived.
Against a Japanese loan of approximately Tk 17,000 crore, CAAB must pay Tk 1,200 crore in June and another Tk 1,000 crore in December, according to SM Lablur Rahman, member (administration) at CAAB.
This Tk 2,200 crore first-year repayment will almost entirely consume the authority’s typical annual profit. While the annual instalment will drop to around Tk 1,000 crore after two years and continue until 2056, the immediate financial strain is acute.
Officials warn that CAAB will have to dip into its savings to fund regular operations and development. There are concerns that this could interrupt crucial nationwide airport maintenance, safety upgrades, and the procurement of navigation and fire safety equipment.
CAAB will pay the loan instalments to the finance ministry which will then disburse the money to the Japanese authorities, said Lablur.
The financial bind highlights a broader issue: the mismatch between the pace of incurring foreign debt and the speed at which those projects become productive.
Despite being 99 percent complete, the terminal missed its 2024 operational target. The primary hurdle is an unresolved disagreement over management and revenue sharing between CAAB and a Japanese consortium comprising Japan Airport Terminal Company, Sumitomo Corporation, Nippon Koei, and Narita International Airport Corporation.
Progress on the agreement nearly stalled during the 18-month tenure of the interim government. Talks resumed in March, shortly after the BNP-led government assumed power, according to CAAB officials.
Air Vice Marshal (retd) M Mafidur Rahman, CAAB chairman from June 2019 to June 2024, blamed the interim administration for lacking the negotiation capability to expedite the process.
When contacted, SK Bashir Uddin, former interim civil aviation adviser, claimed that they had held several rounds of intensive negotiations in an effort to reach an agreement.
Aviation expert Kazi Wahidul Alam criticised CAAB’s handling of the negotiations, noting that a deal should have been struck immediately upon the terminal’s completion.
“In that case, CAAB could have paid loan instalments from its own [terminal] income,” said Wahidul, a former member of the Biman Board of Directors.
Even when a deal is reached, immediate revenue is out of the question.
Talking to this correspondent recently, CAAB Chairman Air Vice Marshal Md Mostafa Mahmood Siddiq said it would take at least three months to finalise the agreement.
Following the signing, a mandatory test run -- Operation Readiness and Airport Transfer (ORAT) -- will require another six months to a year, pushing the actual opening into 2027.
The airport loan sits within a rapidly growing national debt narrative. Bangladesh’s total external debt nearly doubled over three years -- rising from Tk 4,95,793 crore in June 2022 to Tk 9,59,311 crore by December 2025. Over the same period, the country’s overall debt-to-GDP ratio climbed from 33.79 percent to 38.61 percent.
Loan disbursements from international financial institutions have been sluggish, reaching only 11 percent of the full-year budget target in the first half of the current fiscal year.
Meanwhile, Japan remains Bangladesh’s single largest bilateral creditor, accounting for 18 percent of all external bilateral debt. As 22 percent of Bangladesh’s total external debt is denominated in Japanese yen, every weakening of the taka against the yen inflates the effective cost of repayment.
Built by the Aviation Dhaka Consortium (Mitsubishi Corporation, Fujita Corporation, and Samsung C&T Corporation) at a total cost of Tk 21,300 crore, the third terminal saw a “soft inauguration” under the Awami League government in October 2023.
The terminal boasts a floor space of 230,000 square metres, housing 115 check-in counters, 66 departure immigration desks, 59 arrival immigration desks and three VIP immigration desks.
Once fully operational, the airport’s annual passenger and cargo handling capacity is expected to more than double from the current eight million passengers and 500,000 tonnes of cargo per year.
