Financing from IPFF-II made cost-efficient for borrowers

Staff Correspondent | Published: 23:14, Jul 05,2020

 
 

The Bangladesh Bank on Sunday relaxed the applicable interest rate provisions for financing under the Investment Promotion and Financing Facility II in an attempt to make the $403.7million fund more attractive.

As per the relaxed provision, borrowers would be able to choose the weighted average rate of interest on deposit (WARID) as the applicable interest rate against loans in local currency from the IPFF II.

Under the newly introduced operation manual, either the yield of the government’s 364-day treasury bill plus one-percentage points or WARID plus one-percentage points would be applicable under the fixed rate method.

Under the variable rate method, either the yield of the government 364-day treasury bill or the WARID would be applicable.

In both cases, the borrower would be charged whichever interest rate is lower.

Earlier, the yield of the government’s 364-day treasury bill plus 1 percentage points was set under the fixed rate method while the yield of the government’s 364-day treasury bill was set under the variable rate method.

The rate of the 364-day treasury bill has now increased to 7-9 per cent whereas the WARID has dropped to 5.37 per cent.

An official of the central bank said that the revised rate would help to minimise the cost of the fund for the borrowers while taking loans from IPFF-II.

The IPFF loans are granted either in dollars or taka or in a combination of both currencies at fixed or variable rates.

However, the newly introduced facility would only applicable for loans in taka.

The IPFF II, worth $403.7 million, was launched for five years in 2017, after completion of the first phase in 2016, to alleviate constraints in infrastructure financing.

Of the total fund set up, the World Bank contributed $356.7 million while the government put in another $60 million.

A total of $13 million was set aside for technical assistance. Under the first phase of the IPFF, a total of 21 infrastructure projects were financed between 2006 and 2016.

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