The government is going to sign a
$770 million tied loan deal with China,
which will require selection of two Chinese firms to set up a fertiliser factory and lay out telecom network.
This will leave no scope for Bangladesh to get the best price offers or look for technology options.
Such selection of contractors is required under the new lending policy of China.
After discussing the issue at several high-level meetings, the government has agreed in principle to the Chinese conditions,
as it has no alternative source of funding for these two projects, said sources at Economic Relations Division (ERD).
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, added the ERD sources.
ERD documents say natural gas will be available for Shahjalal factory in future, but Petrobangla's forecast does not show any surplus gas supply in the coming years. An acute gas crisis has compelled the government to cut gas supply to the existing fertiliser factories.
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 $1billion credit from India under the recently signed deal but it is lower than that of suppliers' credits offered by China in the past. The rate of interest on Indian credit is 1.75 percent and commitment charge is 0.5 percent.
$770m Chinese loan tied with conditions
Did the Illiterate Bangladeshi get how the Loan works?