The Asian Infrastructure Investment Bank is set to provide $60 million for a project to address Bangladesh's gas supply deficit -- the second loan for the country after the multilateral lender was formed last year.

The lack of gas supply would eventually impact Bangladesh's energy security and constrain the nation's economic growth, the China-led bank said in a statement yesterday.

The $60 million loan is for the Bangladesh Natural Gas Infrastructure and Efficiency Improvement Project, which is being co-financed by the Asian Develop-ment Bank.

The ADB has approved a $167 million loan in November for the project, which aims to diversify Bangladesh's gas supply through imports either by cross-border gas transmission pipeline or as liquefied natural gas.

The AIIB loan would have an interest rate of LIBOR plus 1.15 percent and a repayment period of 25 years with five years of grace period, said an Economic Relations Division official.

 LIBOR is the rate at which banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates. Other than the $60 million loan for Bangladesh, the AIIB board also approved $225 million for Indonesia.

“We value the ongoing collaboration with our multilateral development bank partners to be able to bring this much-needed financing to Indonesia and Bangladesh,” said DJ Pandian, vice-president and chief investment officer of AIIB, in the statement.

The loans approved by the AIIB's board of directors are different in their focus but united in their efforts to leverage infrastructure spending to stimulate growth and improve the quality of life for local communities, he added.

In June last year, the China-led bank had approved $165 million for a power distribution system upgrade and expansion project in Bangladesh. Established in January last year, the AIIB has so far lent upwards of $2 billion among its 70 members.

The bank expects to lend $10-15 billion a year in its first five or six years to meet Asia's growing infrastructure demands and contribute to social and economic growth in the region.