Media report in a national daily on Sunday said that different development partners of Bangladesh — from the World Bank (WB), Asian Development Bank (ADB) to Japan International Cooperation Agency (JICA) — have started mulling revisions to the terms of loans given to the country. The WB has already started discussions with the Economic Relations Division (ERD) in this regard. The ADB is also set to change the terms of the loans and reduce the amount of flexible debts. According to calculations, flexible loans for Bangladesh will come down once it graduates from LDC.
Against this backdrop, economists have laid emphasis on getting flexible loans for projects that will reap quick economic benefits. But due to the lack of preparation Bangladesh has been unable to get such loans for a number of projects. A flexible loan permits the increase or decrease of the amount borrowed, and also to vary the repayments. They said loans that are now available on easy terms will not last forever. Thus, the Low-cost foreign loans are going to be a thing of the past for Bangladesh as it enters the realm of increased per capita national income and growing economic development.
Before July 2015, as a low-income country, Bangladesh would get loans from the WB at 0.75 percent interest. The loans would have to be repaid in 36 years, with a grace period of six years. Currently, the ADB is giving loans at a 2 percent interest rate. These loans need to be repaid in 25 years and come with a five-year grace period. The country could also borrow from JICA at the lowest interest rate of 0.1 percent, with a 40-year repayment period and 10 years concession. Despite rising interest rates on Japanese debt, the rate is still below 1 percent. The repayment period, however, has decreased by 10 years, meaning the loans have to be repaid within 30 years.
Experts, however, warned that if Bangladesh can’t create good projects and raise flexible loans, then it will miss out on sustainable debt financing. In this context, they mentioned that once the economy of Sri Lanka was pretty robust. They are much more developed than us in terms of different social indices and infrastructures. But their current problem is that they have invested a huge amount of credit money in several large projects which are not really profitable. Now, one of the important questions is, have we taken up good projects?
We want the government must be careful about both the preparation of the projects and its efficient implementation before the loan agreement.
