Desk report: Bangladesh will no longer eligible for concessional loan from the World Bank as it has started lending at 2.0 per cent rate, reports the financial express. The Washington lender has made the higher rate effective from last month instead of 0.75 per cent, officials said on Monday. Besides rate, the bank’s other lending terms will be harder than the existing conditions, they said.
The bank has informed finance minister AMA Muhith through a letter on Sunday last about its new lending policy to be effective from July 1, 2018.
“We received the letter from the bank early this week. We will no more get loan at 0.75 per cent rate. Now, the bank will charge 2.0 per cent,” secretary of the Economic Relations Division (ERD) Kazi Shofiqul Azam told the FE. He said since Bangladesh has graduated as the “Gap country” from the concessional loan “IDA-only” status due to its higher per capita income threshold, the global lender will charge higher rate from now.
Currently, Bangladesh has been receiving soft loans from the bank’s concessional lending arm-International Development Association (IDA).
A senior finance ministry official said that the bank had classified Bangladesh as the “Gap country” from July 01, this year but would lend funds in “blend” terms.
Blend term means the borrowing country will get loans at both concessional and harder terms.
This means Bangladesh will be getting loans from IDA at 0.75 per cent interest and the proposed rates varies from 2.0 to 6.0 per cent a year. The official said the global lender has proposed making its loan harder as Bangladesh’s GNI (Gross National Income) per capita income crosses the IDA’s threshold for three consecutive years.
According to the bank, if a country’s GNI per capita crosses operational threshold for three consecutive years, the borrower will be treated as the “Gap country” for securing bank funds.
Bangladesh’s GNI per capita in the last three years was US$ 1,190, $ 1,330 and $ 1,430, which are higher than the bank’s threshold.
Meanwhile, Bangladesh graduated as the lower-middle income country status, with its per capita GNI crossing the $1,046 in FY2016.
Mr Azam said while Bangladesh is still an IDA country, the nation has to repay the loans at 2.0 per cent rate due to its graduation from this financial year (FY) 2018-19.
As an IDA only country, Bangladesh has been getting loans paying 0.75 per cent service charges until the last fiscal year, which ended in June 30, he added.