A high-level delegation from Beijing is expected in Dhaka early next month for bilateral discussions focused especially on Dhaka's proposal for relaxing lending rate and other conditions binding Chinese credits, officials said Friday.
"China has recently sent us a letter seeking time. A delegation from economic cooperation wing of the government wants to visit Dhaka. We requested them to come early August," an additional secretary at the Economic Relations Division (ERD) told the FE.
Meanwhile, Dhaka has almost jettisoned its plan for borrowing from Beijing, pending settlement of the proposal for relaxing the lending terms and conditions.
At a recent 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. The grace period in repayment of the loans was also proposed to be extended to seven years from the existing five years.
However, the Chinese side had no ready reply to the pleas during the meeting in Kunming, officials concerned said.
Currently, China offers credits for Bangladesh's development at 2.0 per cent interest with 20 years as maturity time that includes five years' grace period.
The ERD official said, "Bangladesh is apparently unable to take the Chinese loan on the current terms and conditions as that don't support our government policy of taking soft loan."
He says, "China is one of our biggest trade partners and also a major bilateral development partner for bankrolling Bangladesh's infrastructure development. But we can't afford their hard-terms loan at this moment."
They hold the hope for relaxation of some of the terms and conditions tagged to Chinese credits after a fruitful discussion during the upcoming visit of the delegation.
The Deputy Director-General of the International Economic Cooperation of the Commerce Ministry is likely to lead the Chinese delegation on the planned Dhaka visit, the official said.
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 project works in Bangladesh with China's assistance.
The usual practice is China selects a specific contractor for Bangladesh's projects the it finances.
Another ERD official said the existing Chinese lending rate does not comply with the concessional loan definition followed by Bangladesh government as well as the International Monetary Fund (IMF). This mismatch creates problem for the government in borrowing more from different bilateral and multilateral development partners.
The IMF defines a loan having grant element of at least 35 percent as concessional.
According to the existing terms and conditions set on the package of China loan, the grant element stands at nearly 27 per cent, said the ERD official.
The IMF and the government of Bangladesh discourage the public project- implementing agencies from borrowing non-concessional or hard loan for funding any development scheme.
The ERD official said Bangladesh needs more than 35 per cent of grant element for any loan to match with the definition of concessional lending.
Bangladesh needs huge investment from overseas sources to develop its infrastructure for exploiting the country's immense potential and change 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 within a rate of 0.01 percent to 1.75 percent.
