Beijing is learnt to have remained non-responsive to Dhaka's proposals for lowering the interest rate and relaxing other terms and conditions of its loans being offered to Bangladesh for funding major development works.
At the recent Joint Economic Commission (JEC) meeting in Kunming, Bangladesh had requested the Chinese government to cut their lending rate to 1.50 per cent from the existing 2.0 per cent. Also, grace period was proposed to be extended to seven years from the existing five years for the repayment of the loans, officials concerned said Tuesday.
The two sides at the JEC meeting between Dhaka and Beijing, held early June in the Chinese city, discussed different issues of bilateral economic and trade cooperation between the two economies.
Beijing is one of the biggest trade partners of Dhaka and also a major bilateral development partner for bankrolling Bangladesh's infrastructure- development projects.
A senior Ministry of Finance (MoF) official said they had placed the requests with the Chinese government during the talks.
Currently China offers credits for Bangladesh's development at 2.0 per cent interest rate with the maturity of 20 years which have five years' grace period.
At the last JEC meeting, there was another request made to allow opening tender on the Chinese market for selecting contractor for the project works in Bangladesh with China's assistance.
Currently, China selects a specific contractor for Bangladesh project works that it finances.
"We have requested the Chinese side in the JEC meeting to relax some terms and conditions on its loans. But they didn't respond. Even they did not say yes or no," a member of the Bangladesh delegation told the FE.
The existing rate does not comply with the concessional loan definition of the Bangladesh government as well as of the International Monetary Fund (IMF). This mismatch creates problem for the government in borrowing more from different bilateral and multilateral development partners.
As per definition of the IMF, any loan will have to have grant element of at least 35 per cent for becoming concessional loan.
The IMF and the Government of Bangladesh discourage the public project- implementing agencies from borrowing non-concessional or hard loan for executing any development scheme.
As per the existing terms and conditions tagged to the Chinese credits, the grant element stands at nearly 27 percent, said an Economic Relations Division (ERD) official.
He said Bangladesh needs more than 35 per cent of the grant element for any loan to match with the definition of concessional one.
Bangladesh needs huge foreign investment to develop its poor infrastructures and change people's socioeconomic condition to achieve the cherished advances.
Bangladesh's major loan providers are the World Bank, the Asian Development Bank, and the Japan government.
The government receives loans from the aforesaid bilateral and multilateral donors with 0.01 percent to 1.75 per cent rate. These loans are more concessional than those extended by other donors.
BD proposal to lower rates, relax terms gets lukewarm response
FHM Humayan Kabir | Published: June 25, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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