China seeks to convert part of soft loans into commercial credit for Bangladesh

[bluesky]

China seeks to convert part of soft loans into commercial credit for Bangladesh
Zafar Ahmed, Staff Correspondent, bdnews24.com
Published: 2017-06-13 22:57:52.0 BdST Updated: 2017-06-13 22:57:52.0 BdST

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China has asked Bangladesh to convert part of the credit it promised during its president’s Dhaka visit to commercial loans.

Converting soft loans into commercial credit means Bangladesh will have to pay higher interest for the fund.

Bangladesh signed $25 billion deals with China for nearly two and a half dozen projects during President Xi Jinping’s visit to Dhaka in October last year.

Li Guangjun, economic and commercial counsellor at the Chinese Embassy in Dhaka, made the proposal during a recent meeting of the Joint Economic Council, according to a senior official at the Economic Relations Division or ERD.

However, the ERD official said in the face of resistance against such proposal, China showed the sign of softening its stance.

China said it was not promised that all the projects signed between the two sides during the president’s visit would be implemented on the G2G (government to government) basis. So, China proposed to give some of the loans on a commercial basis.

But usually, when the agreements are signed at the state level, especially in the presence of two heads of government, the loans are treated as soft loans.

The Chinese diplomat in Dhaka believed that Bangladesh could contribute to the project implementation fund along with China.

The Chinese official also said they would send ERD a detailed list outlining how much of the $25 billion for 34 projects would be treated as soft loans, how much as commercial credit and how much to be contributed by the Bangladesh government.

“Any fund promised for G2G agreement implementation is considered a soft loan,” Shah Mohammad Aminul Haq, additional secretary of ERD, who led the delegation to the meeting, told bdnews24.com.

“I categorically told the Chinese delegation that we are not ready for any commercial loan. Since the agreements are signed on a G2G basis, the loan should be treated as the soft loan.”

“After we made our position clear, they apparently softened their position,” Haq added.

For the preferential buyers’ credit, the interest rate is slightly higher than 4 percent while the interest is only 2 percent for concessional government loans

 

[jetray]

I think BD should not do it. It makes no sense to pay higher commercial interest. Better push back or scout for a better loan else where. It is called soft loan for a reason that developing country does not end up get bogged by interest payments and interest rate offered is less than market rate.

 

[gayMo]

Bangladesh would do well to grow together with India. There is mire satisfaction in cooperating and growing together since India is also in low state of development than to prostrate before money bags and sell your sovereignty

 

[damiendehorn]

Bangladesh would do well to grow together with India. There is mire satisfaction in cooperating and growing together since India is also in low state of development than to prostrate before money bags and sell your sovereignty

Thanks but....No thanks. India cant afford to provide soft loan of $24bn.

 

[unbiasedopinion]

Thanks but....No thanks. India cant afford to provide soft loan of $24bn.

You would not be able to repay even 10% of it if converted into commercial loans. That would drain your economy.

 

[TopCat]

You would not be able to repay even 10% of it if converted into commercial loans. That would drain your economy.

How do you know? Plenty of country including India sells bonds far above the commercial loan rate for infrastructure and still doing fine.
BD never sold bond in international market.

 

[idune]

Why indians try to dictate what Bangladesh should or should not do with China? Thats why no one like indians and recognized as enemy.

Bigger question is what did ruling awami league and Hasina do that China had to change the term? Obviously, China offered the soft loan with certain expectations but Hasina and ruling awami league ruined that.

 

[bluesky]

Bigger question is what did ruling awami league and Hasina do that China had to change the term? Obviously, China offered the soft loan with certain expectations but Hasina and ruling awami league ruined that.

Now, can you explain to us which Jamaati told you this?

 

[unbiasedopinion]

How do you know? Plenty of country including India sells bonds far above the commercial loan rate for infrastructure and still doing fine.
BD never sold bond in international market.

Well, you have our own free will. It was just one point from me. You can go for conversion of full $24 billion to commercial. You guys are rich.

 

[bluesky]

You would not be able to repay even 10% of it if converted into commercial loans. That would drain your economy.

BD is negotiating with the Chinese to change its approach of converting a part to commercial loan instead of G2G, where the rate of interest is only 2%, the commercial rate of interest being 4%.

What is your basis of thinking that BD cannot pay back as little as 10% of the credit? BD economy is vibrant and is not a sitting duck. Its economy is producing billions of dollars of goods with demand in the international market.

 

[Banglar Bir]

China has trillions of US $ in surplus to spend and one of the top Gold stockpiles in this planet. Counting mere pennies is of insignificant value,even if the Chinese write off the entire US$ 25 Billion or twice that amount, it still wont ruffle even a single Chinese feather.
Awami Leagues + India, has still a lot to learn from the wise Chinese policies.

 

[帅的一匹]

So many knightly Indians in this thread try to help BD out with bare hands. It's a matter between China and BD, why you become so ardent?

Lip service and instigation as always from Barahtis inferior complexity.

 

[lastone]

When low interest loans are given , their is normally a undertaking that a major portion of the orders will go to the lender nation.
What was the understanding in this case ?
If chinese are getting most of the orders , than the loan cannot be at high interest .
Ofcourse CPEC is the only exception i know of.

 

[Banglar Bir]

When low interest loans are given , their is normally a undertaking that a major portion of the orders will go to the lender nation.
What was the understanding in this case ?
If chinese are getting most of the orders , than the loan cannot be at high interest .
Ofcourse CPEC is the only exception i know of.

"wanglaokan, post: 9571886, member: 136307"]So many knightly Indians in this thread try to help BD out with bare hands. It's a matter between China and BD, why you become so ardent?
Lip service and instigation as always from Barahtis inferior complexity.

 

[TopCat]

When low interest loans are given , their is normally a undertaking that a major portion of the orders will go to the lender nation.
What was the understanding in this case ?
If chinese are getting most of the orders , than the loan cannot be at high interest .
Ofcourse CPEC is the only exception i know of.

All the orders will be on limited tender basis (where only selected chinese companies can bid) or G-to-G basis.
All contractors are preselected by the Chinese government.
We like this modality, win win for both the party with no red tape involved.