Bangladesh will have to pay an increased rate of interest on loans taken from the International Development Association (IDA) of the World Bank starting from the next Fiscal Year.
Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal, has recently informed Bangladesh about this development and requested the government to make necessary preparations.
According to the information, Bangladesh will have to pay 2 percent interest on WB loans in place of existing .75 percent, quite more than double.
Bangladesh will have to pay the new rate as the country will be classified as an ‘IDA gap’ country by the lending agency from 2018.
Due to Bangladesh’s improved economic performance, its GNI per capita exceeded the IDA operational threshold for two consecutive years in FY 17and FY 18, said Fan In a recent letter sent to Finance Minister AMA Muhith.
“In the event that Bangladesh’s GNI per capita exceeds the operational threshold for the 3rd consecutive year, the country will be classified as an ‘IDA gap’ country starting in FY19 and will be subjected to IDA lending on blend terms,” wrote the World Bank Country Director in the letter.
The letter also states that, from the next fiscal year, Bangladesh will have to pay 2 percent interest instead of the existing 0.75 percent while the repayment period will come down to 30 years from 38, with the grace period shrinking to 5 years from 6.
Bangladesh is ready to graduate from its current ‘IDA-only’ status to the ‘gap’ status since its gross national income (GNI) per capita crossed the $ 1,165-mark to $1,190 in the last fiscal year against the IDA operational cutoff of $1,185 and is on course to repeating it this year.
The World Bank also wrote to AMA Muhith, “We look forward to discussing this further with you in the near future to ensure Bangladesh can make strategic use of available WB group resources to meet its development needs.”
Notably, Bangladesh gets the highest amount of loans from the WB among its multilateral and bilateral development partners.
In the last several years, Bangladesh received more than $ 1 billion in loans annually from the WB.