The World Bank officials have suggested Bangladesh to look for new opportunity of lending to finance the country’s development projects.
A WB team from its Washington headquarters at a meeting in Dhaka last week suggested the government officials explore the new lending option. Lead Financial Officer Jose F Molina and Senior Financial Officer Farah Imrana Hussain led the team.
Since the soft loan from International Development Association (IDA), the WB’s concessional window, will be decreasing gradually following Bangladesh’s gradation to the lower middle income country (LMIC), the country will have to enter into the harder funding window, a senior Economic Relations Division (ERD) official said.
If Bangladesh gets IDA credit guarantee on a certain amount of fund from the WB, he said, it could mobilize funds four times higher than that of the amount from the global financial markets. For example, if Bangladesh receives guarantee on US$100 million IDA credit from the WB, it could borrow $400 million from any of the international commercial banks or financial markets, the official added.
The WB team also apprised Bangladesh of its further lending options in addition to the ongoing concessional loans as the country’s economy has developed, officials said.The team members in the meeting said Bangladesh as a ‘gap country’ among the WB members could also borrow from the WB’s harder window — International Bank for Reconstruction and Development (IBRD).
They said as Bangladesh is still getting concessional IDA credit, its better option will be the “credit guarantee” scheme.According to the WB, it will charge 0.25 per cent as front-end fee, o.25 per cent as standby fee and 0.50 to 1.00 per cent as guarantee fee for a certain amount of funds.
When the WB will give guarantee on any loan, the Bangladesh government can easily get fund at lower interest rate from the global market, the ERD official said.For this option, the government will have to pay interest rates and other fees to be charged by the lender, and the WB’s guarantee fee, he added.
However, Bangladesh is no more an IDA-only country on the borrower list of the WB. Now it has been placed as a “gap country” under which it will not get loans from IDA.Within a short time, the country will be enlisted as the “blend country”. As a blend country, Bangladesh will have to borrow as per harder terms and conditions.
The Washington-based lender has made its lending costlier to Bangladesh since the last fiscal year (FY) 2018-19 after a long time concessional support as it has enhanced interest rate and made the terms and conditions harder following the country’s graduation.
It has also proposed Bangladesh enter into the WB’s costliest lending arm IBRD (International Bank for Reconstruction and Development) to borrow money if necessary, officials said.Currently, the WB’s loan repayment period has been reduced to 30 years and the grace period to five years from 40 years and 10 years respectively earlier.
Until FY2017-18, Bangladesh received soft loans from the IDA as an “IDA-only” country.Officials said the WB has now classified Bangladesh as the “gap country” from the last FY2019 and lending funds on “blend terms”.
“Blend” terms mean the borrowing country will get loans on both concessional and harder terms. It means Bangladesh will be getting loans from IDA at 0.75 per cent interest rate as well as interest rates will be varying from 2.0 to 2.62 per cent per annum.
Among the South Asian countries, India and Sri Lanka have already been classified as “graduate countries” and Pakistan as the “blend country” of receiving WB funds.