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A Bangladesh-China meeting takes place tomorrow (Thursday) for resolving a stalemate over the terms binding preferential buyer's credit (PBC) as Dhaka seeks the newly offered Yuan-based loans for development funding on softer conditions, officials said.
Beijing has offered Yuan (RMB)-denominated loan instead of USD-based ones to Dhaka for bankrolling development works here, they said Tuesday.
Following the offer, Dhaka has sought relaxation for the PBC loan with an extension of the loan maturity to at least 30 years instead of current 20 years, grace period for 10 years instead of current 5 years and the interest rate cut down to 1.0 per cent from the ongoing 2.0-percent rate, Ministry of Finance (MoF) officials said.
"We have requested China for relaxing the existing terms on PBC, specifically seeking lower interest rates and extended repayment periods," said an Economic Relations Division (ERD) official.
"We will have a virtual meeting with Chinese counterpart Thursday. It will be a review meeting on the economic cooperation. We will seek relaxation of the conditions for borrowing the Chinese PBC in its own currency, RMB, or in USD," he told the FE.
China usually provides two types of loans to Bangladesh: preferential buyer's credit in US dollar and government concessional loan (GCL) in its own currency.
In late 2023, China's lending-agency Exim Bank proposed the PBC loans in RMB, arguing that it purchases USD at high market prices and then offers to Bangladesh at low interest that causes financial loss at their end.
Bangladesh, however, is willing to accept PBC loans in RMB instead of US dollar upon relaxation of the terms and conditions of possible lending.
Another ERD official says since China has offered the RMB-based loan, Dhaka requested them to relax the terms and conditions, lower the interest rate and extend the repayment period.
"Without these terms and conditions, Bangladesh will face a loss for the currency conversion if borrows the PBC from China under existing terms. So, we need extended maturity at least for 30 years instead of current 20 years, the grace period for 10 years and the interest rate at 1.0 per cent," he adds.
They hope a settlement at the Thursday meeting on the newly offered terms and conditions for the PBC loan from China.
He says the China-Bangladesh government meeting will also review the ongoing and prospective development projects funded by Beijing.
The stalemate on the way to implementing the ongoing projects and coming projects is likely to be resolved at the discussion, the ERD official adds.
Meanwhile, China has not provided any loan over the last two years although Bangladesh is seeking the aid from Beijing to support its several development works.
The last loan was signed between Bangladesh and the China Exim Bank for a project to construct a surface-water-treatment plant in Rajshahi.
The financing agreement, worth U$276.25 million, was signed in May 2023. The PBC loan carries an interest rate of 2.0 per cent and is repayable over 20 years, including a 5-year grace period.
China during July-April this fiscal year (FY) 2024-25 provided $320.74 million worth of assistance to Bangladesh government.
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