Chinese dev financing increases in Bangladesh

Chinese funding gradually increasing in Bangladesh

Mahfuz Emran: In the past decade, China’s debt flow has been gradually increasing in the country’s development projects. Important public projects like Padma Bridge Rail Link, Karnaphuli Tunnel, Dasherkandi Sewage Treatment Plant have been implemented with Chinese funding. Several other major projects are underway.
According to the Economic Relations Department (ERD), where the country had given only $270 million in loans since independence till 2012, it has given $6.6 billion in the last 12 years. At this time the pledged loan is $10.29 billion. China has risen to fifth place among lending development partners. So far, Bangladesh has taken the largest loan from the World Bank, which is 31 percent of the total loan. It is followed by ADB with 23 percent and 17 percent of total loans from Japan. This is followed by Russia taking 10 percent and China taking 9 percent of the total debt.
Chinese debt gradually increasing
Both China’s pledged debt and debt relief have increased over the past decade. China’s loan commitments in 2013 were $35.98 billion. Discounted $7.7 million. The 2014 pledge was $50 million, with $47.27 million in debt relief.
Basically, since 2014, the flow and discounting of Chinese loans has been increasing. In 2015, China waived $12.12 billion despite not promising any loans. 2016 pledged debt is $19.5 billion, discount is $11.57 billion. In 2017, the country promised a loan of $124.47 billion. That year, the discount was $6.38 million.
Pledged loans in 2018 were about $362.45 billion, the highest ever. In that year, the discount is $97.84 million or about $1 billion. In 2019, the promised loan was $7.25 billion, but the discount was $51.50 billion. In 2020, China pledged $242.74 billion in loans and discounted $69.54 billion. (See Page-2)

In 2021, the country released $88.79 billion even though there was no commitment. In 2022, the pledged debt is $112.69 billion, the discount is $98.95 billion. In 2023, the discount is $113.27 billion against the pledged debt of $27.62 billion.
China has promised a total loan of $10.29 billion to Bangladesh so far. Discounted $6.54 billion. $10 million in concessions only grants.
Possible Agreement-Compromise during Prime Minister’s visit to China
Prime Minister Sheikh Hasina is visiting China on July 8. The foreign minister Hasan Mahmudsaid that there will be several breakthrough commercial agreements in that visit..
After the courtesy meeting with the Minister of the International Department of the Communist Party of China, Liu Jianshao, the Foreign Minister told reporters that he hopes that the two countries will sign a number of agreements and memorandums of understanding during the Prime Minister’s visit to China, which can be a milestone in the relationship between the two countries.
It is known that the special aspect of this visit will be China’s loan of more than 5,400 million yuan equivalent to $7 billion for Bangladesh. Out of this, the country will lend Bangladesh an equivalent amount of $500 million under trade-assistance and $200 million under budget support in local currency. Besides, the final decision of the Dhaka-Yuan transaction may be based on the way in which the transaction in Taka-Rupee has been decided with India. A memorandum of understanding is being signed between the two countries in this regard.
What stakeholders saying about Chinese debt
Secretary of the Department of Economic Relations (ERD) in the context of seeking $7 billion of Chinese funding. Shahriar Quader Siddiqui told, “The exact figure is not fixed yet, all the reports are preliminary or conceptual.” A coordination meeting will be held at the Prime Minister’s Office before the Prime Minister’s visit to China. The issues will be finalized after discussion in the meeting. Nothing is final or definite before this. The facts are true, but not final, that Chinese loans are being discussed for the metro rail and four lanes.
In response to the question whether Metrorail and broken-Kuakata railway are on the agenda, the secretary said, “All the incidents are true.” These are on the agenda. Besides, many other things are being discussed. But nothing is finalized yet. We are not finalists. It will be final only when the agreement is signed in China. It will not be appropriate to say anything before that.
Executive director of the Policy Research Institute (PRI) and distinguished economist Dr. Ahsan H. Mansoor said, “Let us not be defaulters.” China should take loans for projects that will have better returns quickly. Because China will not give a big grace period.
There is a rush to pay interest and principal. Danger is coming, everyone must be careful. Karnaphuli Tunnel and Padma Rail Link project to pay interest and principal. It is better not to take the project in which the return is low.
He also said, ‘There are projects that have been going on for 10 to 12 years but the work is not even half done. So how will this project benefit? Reverse interest and principal repayment will come. We have to take every decision carefully.’
Bulk of Chinese debt come in last 6 years
According to data from the Economic Relations Department (ERD) of the Ministry of Finance, 95 percent of China’s loans to Bangladesh since independence have come in the last 12 years. 85 percent came in the last six years. The country’s debt relief has doubled in 2022-23 compared to 2019-20. That is, since the launch of China’s Belt and Road Initiative or BRI (One Region, One Road) in 2013, large-scale lending began.
It is known that 27 projects were finalized during the visit of Chinese President Xi Jinping to Bangladesh in October 2016. The country promised to invest about $20 billion in these projects. Of which $10 billion loan agreement has been made. $3 billion loan deal pending. With the speed of implementation of big projects, usually the discount also increases.
According to ERD data, Bangladesh’s total debt to multilateral and bilateral development partners was $62.31 billion as of June 30 last year. Of this, China’s share is $5.37 billion, which is 8.62 percent of the total debt. China’s position in Bangladesh’s debt position is fourth. The Chinese government usually provides two types of loans, one is the Preferential Buyers Credit (PBC) in US dollars and the other is the Government Concessional Loan (GCL) in China’s own currency.
All projects that may seek Chinese investment
Among the priority projects are purchase of four sea-going vessels for Bangladesh Shipping Corporation (BSC), overall management and restoration of Teesta River, establishment of economic zone at Anwara in Chittagong, conversion of railway line from Akhaura to Sylhet section from meter gauge to dual gauge, establishment of digital connectivity and water for municipalities. supply project. $502 million have been requested from China for 11 projects. However, none of them have started yet. However, related sources said that India also wants to invest in the overall management and restoration project of the Teesta River.
Six ongoing projects with Chinese loans
The six ongoing projects with Chinese loans are Single Point Mooring or SPM in Chittagong, Dhaka-Ashulia Elevated Expressway, Development of Power Transmission Lines under PGCB, Development of Power Distribution System under DPDC, National Information Technology Network Expansion and RajshahiWasa Surface Water Supply Project.
The pipeline constructed for the supply of oil through the ocean floor at Maheshkhali in Cox’s Bazar is now awaiting inauguration. This is known as single point mooring or SPM project.
Earlier in July last year, South Asia’s largest single sewage treatment plant was commissioned at Dasherkandi near Aftabnagar in the capital. China has so far built eight friendship bridges in Bangladesh with grant money other than loans.