China offers BD exclusive low-cost dev funding

China has agreed to slash interest rate on its concessional loans to Bangladesh in an exclusive offer of low-cost development funding, which may "significantly improve" the country's debt portfolio.
The interest rate on the Chinese loans will be pared down to 1.0 per cent from the previous level of above 2.0 per cent, sources in the finance ministry said.
They said the Chinese side conveyed this major shift in their position during the recent visit of the chief of its development agency.

"To honour the longstanding friendship and to strengthen the economic cooperation between the two countries" the Chinese side confirmed that they would be considering making special adjustments to the interest rates and the repayment period of Chinese government concessional loan (GCL.) for Bangladesh, sources said.
As agreed, they said, 'such arrangements shall only be known to the two countries'.
According to the soft-loan offer, the annual interest rate is lowered to 1.0 per cent with the repayment period being 20 years and grace period 5 years.
In response to Bangladesh request on relaxed repayment period the Chinese side said the tenure could be extended to 30 years and grace period to 10 years but, in that case, the interest rate will be 2.0 per cent.
Economists believe this decision will be a major relief for Bangladesh, which has been implementing most of its megaprojects in infrastructure development with Chinese financing.
"This will improve our long-term debt portfolio significantly," economist Dr Abdur Razzaque told the FE when asked about the decision.
"This is definitely a very good deal for Bangladesh," he opines.
Earlier, Bangladesh also had requested China to provide RMB worth 5.0 billion US dollars for trade-facilitation support with an interest rate of 1.0 per cent.
The request was first made during a meeting between the Bangladesh state minister for commerce and his Chinese counterpart on the sidelines of the 13th WTO Ministerial Conference.
Recently, China said that they in principle agreed on this and requested Bangladesh to send a detailed list of projects for which the RMB will be spent, officials concerned told the FE correspondent.
Both the countries decided that 'direct communication could be made between ERD and CIDCA and a Technical Team could be formed to deal with the day-to-day implementation-related issues'.
Dhaka recently requested extending loan-availability period, grace period and loan-maturity period of Chinese government concessional loans citing difficulties under the current volatile world economic landscape.
Beijing was also told that the terms and conditions of other multilateral and bilateral development partners were more relaxed than China's.
Several MoUs were signed during the visit of Chinese President Xi Jinping to Bangladesh in 2016 on 27 investment projects worth about US$20 billion.
So far, loan agreements on 8 projects worth about US$ 7.80 billion have been signed, out of which $3.95 billion has already been disbursed, officials informed.
Beijing, however, responded that the Chinese assistance is very cost- effective and brings substantial benefits.
For getting the Chinese loan more easily, China suggested Bangladesh side to take necessary steps to ensure detailed and comprehensive feasibility study, land availability, and timely utility shifting to ensure timely and smooth implementation of the projects.
China also assured that steps would be taken by the Chinese side to expedite the approval procedure of the China-aided projects. Beijing "is ready to work closely with Bangladesh to ensure smooth implementation of projects".
In this connection, China mentioned that director general-level working mechanism had already been suggested.
While offering the cut-down rate on lending, China highlighted the continuous and longstanding economic, trade and development cooperation, and reaffirmed that this relationship would remain "rock solid with closer economic, investment and production-capacity cooperation in coming days", sources said.
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