‘Indian $1 bn credit costly’

DHAKA - The one billion-dollar credit line India pledged to Bangladesh last month will be “costlier” than what Bangladesh gets from elsewhere, a newspaper Sunday claimed. It also said the “supplier’s credit” will “force” Dhaka to purchase Indian goods.

The newspaper quoted unnamed officials, experts and past advice from multilateral donors like the World Bank and the International Monetary Fund against a supplier’s credit.

Available public data showed Bangladesh had been receiving loans from many bilateral countries and multilateral lenders at a lower than 1.75 per cent interest rate.

A meeting between Bangladesh Finance Minister A.M.A. Muhith and Indian high commissioner to Bangladesh, Rajeet Mitter Saturday on the implementation aspects of the proposed billion-dollar credit indicated that the bulk of the amount would be in the form of suppliers’ credit, the New Age said.

Mitter told reporters after the meeting that technical works had already begun under the joint communiqu.

“Three components - supply of locomotives and passenger coaches, buses, and dredgers - were included in the joint communiqu, the technical works of which have already begun,” he said.

In reply to a question, he said they had talks with their Bangladesh counterparts about the required supplies and the specification.

The newspaper said: “…indications are there that Dhaka might be forced to swallow the ‘costly’ form of financial assistances, suppliers’ credit, under which New Delhi would sell out its products as a condition to bankrolling the credit.”

Prime Minister Sheikh Hasina’s economic adviser Mashiur Rahman told a seminar that the proposed loan programme under the Indian state credit had been offered at an interest rate of 1.75 per cent plus LIBOR (London Inter-bank Offered Rate) with a repayment period of 20 years after a grace period of five years.

“This will be the easiest loan Bangladesh has ever received from its big neighbours,” Communications Minister Abul Hossain told New Age.

His ministry is expected to receive a half of the amount for funding a dozen transport-related projects. The credit was sought during the prime minister’s visit to New Delhi in January, he said.

The credit India pledged, the highest it has given any country, was a highlight of the visit when long-pending issues were discussed and a number of them were resolved.

Quoting Economic Relations Division (ERD) records, the newspaper said more than one-third of the loans Dhaka received from New Delhi until 2008 were hard-term borrowings with higher than 5 per cent interest rate plus LIBOR and the suppliers’ credit which forced the recipient country to buy commodities from the lending country.

Since its independence in 1971, Bangladesh has received assistance of around $440 million in the form of grants ($113 million), commodity aid ($151.1 million) and project aid ($176) till 2008 from New Delhi, according to an ERD publication.