Govt seeks $18b from China in hard loans

Bangladesh has sought $18 billion in hard loans from China out of the total $24.5 billion committed during the visit of Chinese President Xi to Dhaka in October 2016.

Bangladesh signed a Memorandum of Understanding (MoU) with China for a loan of said amount for 26 projects.

Of these, China has started lending to only six projects. The rest of the projects have been pending for four and a half years, but China has not confirmed the loan.
In this circumstance, the Economic Relations Division (ERD) made the request in a letter to the Chinese government, which wanted to invest $ 24.5 billion in development projects. ERD Deputy Secretary Mosura Akter sent a letter to the Economic and Commercial Counsellor Liu Zhenhun Chinese High Commission in Dhaka.

According to sources, the ERD under the Finance Ministry has sought two types of loans for 26 projects. These are Government Concessional Loan (GCL) and Preferential Buyers Credit (PBC).

In this case, if the loan amount for a project is less than $ 300 million, it will be GCL. And if the loan amount is more than $ 300 million, China will give loans as PBC which obligates the recipient to finance at least 15 percent of the contract price.

Apart from this, there are also conditions for GCL and PBC processing obligating the Chinese government to create a fund reserve for GCL or PBC. It will not last more than five years. That means you have to use the loan within five years.

Meanwhile, in the case of GCL, a framework agreement will be signed between the Exim Bank of China and the ERD of Bangladesh before the final loan agreement, which will last for three years. The project bidding process and loan agreement will have to be signed. However, in the case of PBC, there will be no such rules.

Former advisor to the past caretaker government Dr AB Mirza Azizul Islam said Bangladesh is one of the biggest receivers of Chinese investment in South Asia.
Many experts warn against the growing reliance on Chinese funds which will make Dhaka beholden to Beijing, he said.
Referring to Sri Lanka's experience where Colombo had to cede control of its southern port of Hambantota to China on a 99-year lease after it failed to repay its debts, he said.
However, the projects require about $18 billion in hard loans from China. Of this, $11.522 billion has been sought for 17 projects in the previous proposal. And six new projects have been asked for $7.415 billion dollars. It has also proposed to cancel loans for four projects ($3.321 billion) to be implemented by China.

According to the letter, the first meeting of the Investment Co-operation Working Group (ICWG) between Bangladesh and China was held on December 2, 2019. ERD sought loans for 17 projects on a priority basis. Of this, $ 970.02 million is for strengthening PGCB's grid network.

To establish the digital connectivity a project will be taken with a cost of $837 million. Balancing Modernisation Rehabilitation and Expansion (BMRE) of the public sector jute mills of Bangladesh project to be taken with a cost of $280 million.
Chinese Economic Zone Project in Chattogram will cost $221.18 million.
Construction of Dhaka-Ashulia Elevated Expressway will cost $1155.18 million while Double Lane (Dual Gauge) between Joydebpur-Ishwardi section $1,045.59 million.

Rajshahi WASA surface water treatment plant will be constructed of $276.25 million. Construction of six BTV stations will cost $ 125.12 million.

Infrastructure expansion and modernization of Mongla Port Facilities will cost $353.52 million while system loss reduction by replacing 5 million electric meters project will cost $ 467.95 million.

A project to be formulated with a cost of $2,856,56 million for construction of Marine Drive Expressway from Sitakunda to Cox's Bazar.

Besides, the government has also sought $200 million for the construction of a new ICD near Dhirashram Railway Station.
The replacement of overload distribution transformers across the country with a cost of $230.59 million.
For the development of the sewerage system in small municipalities with a cost of  $150 million and $500 million loans has been sought to modernise the ICT system in urban and rural areas.

Among the newly-proposed projects include $155.41 million for construction of Sheikh Hasina Hi-Tech Park, $120.22 million has sought for setting up a sewage treatment plant at Dasherkandi of Dhaka city.

Under the new proposal, the government has sought $805.4 million for strengthening and expansion of the power distribution system in the DPDC area.
It seeks $853.05 million for Teesta River Comprehensive Management Project.
Around $250 million is sought for the purchase of six ships, $535.92 million for the development of the four-lane Barisal-Patuakhali-Kuakata Road.
A total of $1226.92 million for the construction of the Barisal-Bhola bridge also sought.
Besides, it also seeks $1668 million for the development of the Pigeon Port infrastructure (first phase) and Rural roads cost $800 million to build high-tech bridges.

According to the ERD, in addition to the two percent interest rate on Chinese loans, there will be a 20 percent commitment charge and a 20 percent management charge. The longer it takes to get rid of debt, the higher the commitment and management charge. The entire loan will have to be repaid in 20 years with a grace period of five years. In addition, some parts of the loan will be commercial. The interest rate of this loan will be four percent and will have to be repaid in 15 years.