The visit of the Chinese President Xi Jinping is expected to boost economic activity and development in the country, economists have said, adding that the government should remain cautious about the terms and conditions, particularly the rate of interest, of the loans to be taken from China.
Talking to The Independent about the Chinese loan that is proposed to be signed during the 22-hour-long official visit of Chinese president Xi Jinping to Dhaka, former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed said China is capable of providing a large amount as a loan as it has huge foreign exchange reserves. If Bangladesh receives funds from China after feasibility studies are conducted about the projects wherein they would be invested, it would be fruitful, as there is a scarcity of funding in infrastructure, he noted.
However, Ahmed also pointed out that the conditions of the financing agreement were an important factor. If the loan is concessional, then it would be helpful for Bangladesh, he observed.
He also said Bangladesh would prefer Chinese investments rather than loans. The former adviser to the caretaker government, too, suggested that the government should be cautious about the terms and condition of the Chinese loan. Usually, there is no tendering system in the Chinese-funded projects. This is one of the major issues associated with the utilisation of Chinese funds, he observed.
Mirza Aziz said that any condition on buyer’s or supplier’s credit would not be very much helpful for Bangladesh. While speaking at a roundtable discussion on Monday, Centre for Policy Dialogue (CPD) executive director Prof. Mustafizur Rahman said, “We should negotiate with China smartly so as to attract more foreign direct investment from it.” He noted that China’s financial commitment to Bangladesh was very high.
According to sources in the Economic Relations Division (ERD), the rate of interest will be 2 per cent and the repayment period will be 20 years, with a grace period of five years. Bangladesh will also have to pay a 0.25 per cent commitment fee and a 0.25 per cent management fee.