Bangladesh to pay more for China loan than for Indian loan

DHAKA - To set up a fertiliser factory and lay out a telecom network, Bangladesh will be paying more for a Chinese $770 million loan than for India’s $1 billion commitment.

It is accepting the Chinese condition for selecting two Chinese firms because it has no alternative source of funding for these projects, officials said.

Such selection of contractors is required under the new lending policy of China, The Daily Star newspaper said quoting sources at Economic Relations Division (ERD).

This will leave no scope for Bangladesh to get the best price offer or look for technology options, the newspaper said Tuesday.

Interest rate on the Chinese loan is two percent and it is payable within 20 years with a five-year grace period. Besides, the commitment charge is 0.2 percent and management fees are 0.2 percent.

ERD sources mentioned that the interest rate is “slightly higher” than that of the recently signed deal for $1 billion credit from India — for a range of projects particularly in the transport and communication sectors.

The rate of interest on Indian credit is 1.75 percent and commitment charge is 0.5 percent.

Dhaka has agreed in principle to accept the Chinese loan after discussing the issue at several high-level meetings “as it has no alternative source of funding for these two projects”, the officials told the newspaper.

Once the prime minister gives the go-ahead, the ministries concerned will take steps to ink the deal.

Of the loan amount, $559 million will be for the setting up of Shahjalal Fertiliser Factory and $211 million for the introduction of 3G technology and expansion of the existing 2.5G network, ERD sources added.

A meeting chaired by Finance Minister A.M.A. Muhith noted that in signing the commercial contract, the highest caution has to be exercised to ensure that Bangladesh’s interests are upheld.