Bangladesh has signed a deal with the World Bank for the first-ever loan on 2.5 percent interest while the rate was 0.75 percent until now. The country will have to spend more on interest on World Bank loans as its financial capabilities have increased. It is a lower-middle income country now and expected to get the UN’s developing nation status by 2024.
The $240 million financing agreement with the higher interest rate was signed in Dhaka on Thursday for the Sustainable and Marine Fisheries Project.
The World Bank is charging 0.75 percent for service, 1.25 percent interest, and 0.5 percent commitment charge for the credit – 2.5 percent in total.
In 16 coastal districts, the project will set up community co-management associations with fishing communities, enabling them to adopt supplementary and alternative livelihoods, according to a World Bank press release.
While empowering fishing communities, especially women through skills development and nutrition awareness, the project will also establish 100 model fishing villages.
Officials said at the signing ceremony that the fisheries sector accounted for around 4 percent of Bangladeshs economy in the last decade and is the countrys second largest export earning sector after garments.
Besides increasing the interest rate on the credit for the project, the World Bank has cut the time for repayment.
Bangladesh had earlier taken loans with 38-year terms, including five years of grace periods, from the global lender.
It will have to repay the new credit in 30 years.
The agreement was signed at the Economic Relations Division by Secretary Kazi Shofiqul Azam on behalf of the government and Zahid Hussain, World Bank Acting Country Director for Bangladesh.
Asked about the increased interest rate, ERD Additional Secretary Mahmuda Begum, who deals with World Bank affairs, said, “The World Bank does not give loans with lowest rate to the countries that are on the same list with Bangladesh.”
Bangladesh will have to pay 2.5 percent interest on the World Bank credits which have been under negotiation after the ongoing 2018-19 fiscal year started, according to Mahmuda.
The World Banks Zahid said the interest on the new loans would be actually 2 percent as Bangladesh would not need to pay commitment charge.
Prime Minister Sheikh Hasina had earlier said there would be no problem in getting World Bank loans with a little bit higher interest rate. “We will be able pay this,” she had said.