World Bank loan will cost more for Bangladesh from next fiscal year

Bangladesh will have to pay higher interest rates for taking out loans from the World Bank’s International Development Association (IDA), as Bangladesh will be classified as an “IDA gap” country by the World Bank. loan agency from next year. The World Bank’s Country Director for Bangladesh, Bhutan and Nepal, Qimiao Fan, recently briefed Bangladesh on this development and called on the government to make the necessary preparations. In a recent letter to Minister of Finance AMA Muhith, Fan said that due to improving Bangladesh’s economic performance, its GNI per capita exceeded IDA’s operational threshold for two consecutive years during fiscal years. 17 and 18. “In the event that Bangladesh’s GNI per capita exceeds the threshold for the 3rd consecutive year, the country will be classified as an ‘IDA deficit’ country from FY19 and will be subject to loans from the ‘IDA on mixed terms,’ wrote the World Bank country director in the letter. According to the letter, Bangladesh from the next fiscal year will have to pay 2% interest instead of the existing 0.75%, while the repayment period will increase to 30 years instead of 38, with the grace period increasing to 5 years. years from 6. Bangladesh is ready to move from its current status of “IDA only” to “gap” status as its gross national income (GNI) per capita has crossed the $ 1,165 mark to $ 1,190 last fiscal year against IDA’s operational threshold of $ 1,185 and is sure to repeat it this year. To continue obtaining loans from IDA, the concessionary arm of the World Bank Group, which provides loans and grants to the world’s poorest developing countries, Bangladesh’s GNI per capita must be less than 1,165. dollars. In 2015, Bangladesh moved to the lower middle income bracket with a per capita income of $ 1,190, according to World Bank criteria. Per capita income has since increased. The “IDA only” threshold in 2015 was over USD 1,200 and therefore Bangladesh was still eligible for loans at concessional interest rates. While Bangladesh could manage to stay above the threshold of $ 1,165 for two consecutive years, credit becomes expensive: the interest rate on World Bank loans will drop from 1.25% to 2.62% in USD, while it will be 2% in SDR (Special Drawing Rights) from 0.75%. Accordingly, Bangladesh can choose to request a credit rating for IBRD loans at any time. If it is assessed as solvent, it would be classified as a mixed IDA / IBRD country. Once classified as a “gap” or “mix”, Bangladesh will be subject to IDA loans on “mixed” terms. If classified as creditworthy for the IBRD, then Bangladesh would have access to IBRD resources and a wider menu of financial products from the World Bank Group. The bank further said that Bangladesh’s eventual transition to “gap” and potential “mix” status is recognition that the country has taken an important development milestone. Other South Asian countries have followed similar transition paths, such as India and Sri Lanka, which are IDA graduates, and Pakistan, which is a mixed IDA country. The Bank also wrote to AMA Muhith: “We look forward to discussing this further with you in the near future to ensure that Bangladesh can strategically use the available resources of the World Bank Group to meet its needs. development. According to the Bangladesh Bureau of Statistics, per capita income was $ 1,465 in fiscal year 2015-16 and $ 1,602 in the previous fiscal year. By the World Bank’s own estimate, however, it was $ 1,330 and $ 1,480, respectively. The service charge on IDA loans is 0.75%. In addition, there is an opening commission of 0.25% and a commitment commission of 0.25%. The repayment period is 38 years, including a grace period of six years. Although the interest rate on World Bank loans is increasing, it is still much lower than on other commercial loans Bangladesh obtains the highest amount of World Bank loans among its multilateral and bilateral development partners In recent years, Bangladesh has received over $ 1 billion in loans per year from the World Bank.

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