The Chinese EXIM Bank is likely to select projects and affirm the US$9.0 billion financing plans for Bangladesh on relaxed terms and conditions at a meet in Dhaka today (Monday), officials said Sunday.
Economic Relations Division (ERD) officials said a delegation of the Chinese state-owned bank is already here to discuss with the Bangladesh government the issues involving its financial support to 15 projects.
A deputy general manager of the EXIM Bank would lead the Chinese side while ERD Additional Secretary Mohammad Asif-Uz-Zaman head the host side at the negotiating table, they said.
Earlier, Dhaka had sought US$9.03 billion worth of financial support from Beijing for 15 railway, energy, power, water supply and sanitation, ICT, and other infrastructure developments projects over a period of five years, ending in 2018.
"We've sought financial support for 15 projects from China in five years. At the meeting tomorrow, the EXIM Bank delegation is likely to select a number of projects out of the proposed 15 for financing in the current year," a senior ERD official told the FE.
The other projects are likely to be financed by the Chinese EXIM Bank over the next four years, he added.
Besides, the terms and conditions for the lending are likely to be discussed at the meeting, the official said.
Dhaka has almost halted borrowing from Beijing due to the latter's lack of response to the Dhaka's proposal on relaxing the terms and conditions binding the credits.
At the last Joint Economic Commission (JEC) meeting, Bangladesh had requested the Chinese government to cut their lending rate to 1.50 per cent from the existing 2.0 per cent and extend grace period to seven years from five years for the repayment.
However, Beijing failed to respond to the Dhaka's request during the meeting at Kunming, officials said.
Currently, China offers credits for Bangladesh's development charging 2.0 percent interest with the maturity of 20 years including a five-year grace period.
According to the ERD, Bangladesh had sought $9.03 billion worth of credits for implementation of 15 projects. The breakdown: $1.0 billion for building a dual-gauge double-track railway bridge parallel to the existing Jamuna Bridge, $1.50 billion for an elevated chord line from Dhaka to Comilla, $3.93 billion for Ganges Barrage and $334 million funds for setting up unit-2 of the Eastern Refinery Limited and Single-point mooring fuel oil-unloading terminals.
Another ERD official said Bangladesh is apparently unable to take the loans on the current terms and condition as that don't support government policy of taking soft loans.
"China is one of our biggest trade partners and also a major bilateral development partner for bankrolling Bangladesh's infrastructure- development projects. But we can't afford their hard loan at this moment," the ERD official said, requesting anonymity.
He said they are hopeful of seeing relaxation of some terms and conditions after a fruitful discussion today (Monday) in Dhaka with the EXIM Bank delegation.
Government officials said at the last JEC meeting, Dhaka had also requested Beijing to allow open tender on the Chinese market for selecting contractor for the project works in Bangladesh with Chinese assistance.
Currently, China selects a specific contractor for a Bangladesh project it finances.
Another ERD official said the existing Chinese lending rate does not comply with the concessional loan definition of the Bangladesh government as well as of the International Monetary Fund (IMF). This creates problem for the government to borrow 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 percent for becoming concessional loan.
According to the existing terms and condition of the Chinese loan, the grant element stands at nearly 27 percent, said the ERD official.
The IMF and the Bangladesh government discourage the public project- implementing agencies from borrowing non-concessional or hard loans for any development scheme.
The ERD official said Bangladesh needs more than 35 percent of the grant element for any loan to match with the definition of concessional credits. Bangladesh needs huge investment from abroad to develop its poor infrastructure and change the socioeconomic condition of the people.
Bangladesh's major loan providers are the World Bank, the Asian Development Bank, and the Japan government which provides soft loan at rates ranging from 0.01 to 1.75 percent.
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