B`desh govt strongly defends USD 1 bn loan deal with India

Last Updated: Sunday, August 8, 2010 - 22:30

Dhaka: The ruling Awami League-led
government in Bangladesh today strongly defended the whopping
USD 1 billion loan deal with India, dismissing the opposition
BNP`s charges as a "disgusting attempt to spread falsehood."

Foreign Minister Dipu Moni blasted BNP leader MK Anwar
MP for his "misleading statement" on the USD 1 billion loan
deal with India during the visit of Finance Minister Pranab
Mukherjee. The loan amount is the largest line of credit
received by Bangladesh from a foreign country.

"This is nothing but a disgusting attempt to spread
falsehood," she told a press briefing a day after the two
countries signed the deal on soft Indian credit for
communication and other infrastructures in Bangladesh with 1.
75 per cent interest, the rate BNP alleged seven times higher
than that from any multinational bank or donor agency.
She added: "such parochial attitude is not politics
the opposition made such remarks to make an issue of theirs
since they don`t have any."

Moni particularly criticised Anwar, who made the
allegation on BNP`s behalf ahead of Finance Minister Pranab
Mukherjee`s Dhaka visit to witness the signing of the
agreement, saying the bureaucrat-turned-politician himself
knew well about the falsehood as he had served in Economic
Relations Department which dealt with such foreign deals.

The Foreign Minister`s comments came a day after
Finance Minister Abul Maal Abdul Muhith refuted the BNP
allegation over the interest rate saying "this is so utterly

BNP called the USD 1 billion deal with India
contrary to the national interest as "the government is
getting the loan from the Indian bank with an interest rate
seven times higher than that from any multinational bank or
donor agency".

But Muhith said the interest could only be lower
than the 1.75 per cent in cases of concessional credits very
often offered by the donors or lending agencies while during
their past 1991-1996 regime BNP had borrowed loans of similar
type with as high as 5 per cent interest.

"Different development partners, including World
Bank, charge the same amount of commitment fees," he said.

The Foreign Minister today supplemented Muhith
saying the own interest rate of Exim Bank, through which the
credit was channelled, was 4 per cent while Bangladesh got it
at 1.75 per cent interest rate as the Indian government was
subsidising the rest of the amount.

"This could be called as concessional loan," she

Regarding Anwar`s allegation about serving Indian
interest, Moni said the loan would be used to upgrade
Bangladesh’s railway and road infrastructures and port
facilities "and they (BNP) said it would only benefit India."

"Whenever you are in power you try to appease India
while you are in opposition you try to instigate anti-Indian
sentiments for parochial politics," she said.

Several eminent economists including former
president of Bangladesh Economic Association president Qazi
Kholiquzzaman Ahmed said that the credit would greatly help
Bangladesh improve its infrastructure while "politically
biased comments on economic issues could mislead the people".

The Economic Relations Division (ERD) of Bangladesh
singed the USD 1 billion Line of Credit agreement with CMD,
EXIM Bank of India to implement a range of projects mainly
for communication infrastructure development.

The Daily Star in an analysis said while the BNP has
alleged that 1.75 per cent interest for the USD 1 billion loan
from India is very high, "facts about loans taken by different
previous governments show that the rate is not high."

"The main opposition party also found it disgraceful
that the government was signing the loan deal with Indian Exim
Bank instead of the Indian government.

In practice, most of the bilateral loans are
typically signed with national bank of the lending country,"
it read.

It said like any other developing nation, Bangladesh
has taken different types of loans and grants from different
countries and multilateral donors--sometimes on hard
conditions and sometimes soft while whenever Bangladesh has
taken any hard or tied loan from a donor, the interest rate
has ranged between 2 per cent and 5 per cent and "the loan
from India is a commercial or tied loan with a 20-year
repayment period."

"When the BNP was in power in the early nineties, it
had signed a USD 109 million dollar Supplier`s Credit deal
with China to fund the Barapukuria coal mine project that
sought 5 per cent interest rate and 17 years repayment
period," the report said.

ERD officials said while BNP said such loans can be
obtained from "any multinational bank" but the fact was that
soft loan is very hard to find as the donors impose conditions
against them and have their last say about granting it.


First Published: Sunday, August 8, 2010 - 22:30

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