Bangladesh and Germany have signed a combined loan and grant package worth €81 million to advance the country’s power distribution network under a new initiative titled “Promotion of Climate-Friendly Energy Supply (Smart Grids 2).” The agreement was formalised in Dhaka on 30 October 2025 between the Governments of Bangladesh and Germany.

Representing Bangladesh, Md Shahriar Kader Siddiky, Secretary of the Economic Relations Division (ERD), signed the agreements, while Carolin Gassner, Director for South Asia, and Christina Poppe, Portfolio Manager, signed on behalf of the German government through KfW Development Bank.

Boosting Capacity and Reducing System Loss

According to ERD, the Smart Grids 2 project aims to upgrade 25 existing outdoor substations, increasing their capacity from 842 MVA to 1,260 MVA. This enhancement is expected to significantly strengthen power reliability and reduce interruptions across targeted regions.

The project’s efficiency targets include:

• Reducing system loss from 6.62% to 5.82%
• Lowering the System Average Interruption Duration Index (SAIDI) from 332 minutes to 300 minutes
  These improvements are scheduled to be achieved within the project zones by June 2029.

The initiative will be implemented by the Bangladesh Rural Electrification Board (BREB) under the Power Division.

Project Financing Structure

The project’s total estimated cost stands at Tk 1,817.99 crore, sourced as follows:

• Tk 479.97 crore from the Government of Bangladesh
• Tk 1,080.67 crore in project aid
• Tk 257.35 crore from BREB’s own funds

As part of the agreement, €1 million will be provided as grant support for expert services. The project timeline runs from 1 July 2025 to 30 June 2029, following ECNEC’s approval on 17 August 2025.

A Continuing Partnership

Germany remains one of Bangladesh’s long-standing development partners. Since 1972, German financial and technical commitments to Bangladesh have reached approximately €4 billion. Currently, KfW Development Bank finances 12 projects across the country, amounting to €567.5 million in loans and €169 million in grants.

The new Smart Grids 2 initiative further deepens this partnership, supporting Bangladesh’s transition toward a more resilient, energy-efficient, and climate-friendly power distribution system.