Loan from China Exim Bank

Terms, higher interest cloud MoU prospect

China proposes 15pc advance repayment of the credit. So far, no such provision has been introduced in any foreign credit line

Bangladesh is unlikely to sign a memorandum of understanding (MoU) for a loan from the Exim Bank of China, due to apprehensions over certain conditions and a higher rate of interest, sources at the finance ministry told The Independent.
China Exim Bank has sent a draft MoU to the Economic Relations Division (ERD), which is to be signed during the visit of Chinese Premier Li Keqiang to Bangladesh, in October.
According to a senior official of the finance ministry, China proposed that Bangladesh has to make 15 per cent advance repayment of the total credit as part of the agreement. So far, such a provision has never been introduced in any foreign credit line.
The ERD has already informed China Exim Bank about the repayment provision saying that the existing rules in Bangladesh regarding foreign assistance does not support it.
However, the Chinese side is yet to send any feedback to the government, sources said.
The finance ministry said if Bangladesh agrees to the Chinese proposal, the grant element of the Chinese loan would come down to 11 per cent which is not concessional loan as per the calculation of International Monetary Fund.
The existing grant element in the going projects funded by China is 22 to 25 per cent. So, in this consideration, it is difficult for the government to accept this credit as per the Chinese proposal.
China is expected to raise investments in South Asian countries to US$ 30 billion, in the next five years, and provide US$ 20 billion of concessional loans to these countries, as announced by president Xi, during his visit to South Asia in September 2014.
Sources also said, in the meantime, a lot of proposals from different Chinese companies have been placed, to provide support in different mega projects costing over billions of dollars.
The draft MoU said the main purpose of the cooperation mechanism is to enhance long term win-win relationship between the parties, as well as fully realise the social and economic benefits of the projects financed by China Exim Bank.
The cooperation mechanism has been developed to optimise identification and inspection process of the projects to be supported by the Exim Bank, promote cooperation on national and industrial planning, establish a stable and efficient communication platform, and strengthen dialogues and trainings between the parties.
The ERD shall submit, on a regular basis, to the Chinese Exim Bank, a list of priority projects that are intended to be financed by it, within the next 2 to 3 years, the MoU said. The projects in the project list have to be technically and financially feasible, and should be able to promote social and economic development of Bangladesh in the long term. Projects in the areas of energy, transportation and telecommunication will be considered on priority basis.

The projects in the list will be divided into two categories: first category projects will mean the projects are to be started within one year after submission of the project list, second category projects mean the projects are to be started within two to three years.
First category projects will be relatively mature, which means that the feasibility report, environmental impact analysis report, commercial contract, and other relevant evaluation documents, have been completed and obtained, or could be completed and obtained within three months after submission of the projects list.
ERD shall submit or update the project list to the Exim Bank no later than July 31 of each year. It is not encouraged to adjust projects in the project list, except for situations where new projects need to be added or the listed projects are no longer qualified for implementation.
ERD can apply to China Exim Bank for pre-project technical assistance for sectors or projects focused by the government of Bangladesh. If necessary, China Exim will engage Chinese industry experts or consulting firms to assist the government of Bangladesh in national or industrial planning and project consulting.

Loan from China Exim Bank

Terms, higher interest cloud MoU prospect

China proposes 15pc advance repayment of the credit. So far, no such provision has been introduced in any foreign credit line

Bangladesh is unlikely to sign a memorandum of understanding (MoU) for a loan from the Exim Bank of China, due to apprehensions over certain conditions and a higher rate of interest, sources at the finance ministry told The Independent. China Exim Bank has sent a draft MoU to the Economic Relations Division (ERD), which is to be signed during the visit of Chinese Premier Li Keqiang to Bangladesh, in October. According to a senior official of the finance ministry, China proposed that Bangladesh has to make 15 per cent advance repayment of the total credit as part of the agreement. So far, such a provision has never been introduced in any foreign credit line. The ERD has already informed China Exim Bank about the repayment provision saying that the existing rules in Bangladesh regarding foreign assistance does not support it. However, the Chinese side is yet to send any feedback to the government, sources said. The finance ministry said if Bangladesh agrees to the Chinese proposal, the grant element of the Chinese loan would come down to 11 per cent which is not concessional loan as per the calculation of International Monetary Fund. The existing grant element in the going projects funded by China is 22 to 25 per cent. So, in this consideration, it is difficult for the government to accept this credit as per the Chinese proposal. China is expected to raise investments in South Asian countries to US$ 30 billion, in the next five years, and provide US$ 20 billion of concessional loans to these countries, as announced by president Xi, during his visit to South Asia in September 2014. Sources also said, in the meantime, a lot of proposals from different Chinese companies have been placed, to provide support in different mega projects costing over billions of dollars. The draft MoU said the main purpose of the cooperation mechanism is to enhance long term win-win relationship between the parties, as well as fully realise the social and economic benefits of the projects financed by China Exim Bank. The cooperation mechanism has been developed to optimise identification and inspection process of the projects to be supported by the Exim Bank, promote cooperation on national and industrial planning, establish a stable and efficient communication platform, and strengthen dialogues and trainings between the parties. The ERD shall submit, on a regular basis, to the Chinese Exim Bank, a list of priority projects that are intended to be financed by it, within the next 2 to 3 years, the MoU said. The projects in the project list have to be technically and financially feasible, and should be able to promote social and economic development of Bangladesh in the long term. Projects in the areas of energy, transportation and telecommunication will be considered on priority basis. The projects in the list will be divided into two categories: first category projects will mean the projects are to be started within one year after submission of the project list, second category projects mean the projects are to be started within two to three years. First category projects will be relatively mature, which means that the feasibility report, environmental impact analysis report, commercial contract, and other relevant evaluation documents, have been completed and obtained, or could be completed and obtained within three months after submission of the projects list. ERD shall submit or update the project list to the Exim Bank no later than July 31 of each year. It is not encouraged to adjust projects in the project list, except for situations where new projects need to be added or the listed projects are no longer qualified for implementation. ERD can apply to China Exim Bank for pre-project technical assistance for sectors or projects focused by the government of Bangladesh. If necessary, China Exim will engage Chinese industry experts or consulting firms to assist the government of Bangladesh in national or industrial planning and project consulting.