Loans from Investment Promotion and Financing Facility made cheaper

The Bangladesh Bank, on Sunday, lowered the applicable interest rate for financing from the Investment Promotion and Financing Facility II (IPFF II) to make the $403.7 million fund more attractive.

As per the relaxed provision, borrowers will be able to choose a weighted average rate of interest on deposits (Warid) as an 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 point or Warid plus one percentage point will 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 will be applicable.

In both cases, borrowers will be charged the lower interest rate.

Earlier, the yield of the government's 364-day treasury bill plus one percentage point was imposed under the fixed rate method while the yield of the government's 364-day treasury bill was imposed under the variable rate method.

At present, the rate of 364-day treasury bill has increased to seven to nine percent whereas the Warid has dropped to 5.37 percent.

An official of the central bank said the revised rate will be helpful for the borrowers to minimise the cost of their fund while taking loans from the IPFF-II.

IPFF loans are granted either in USD, in BDT or in a combination of both of them at fixed or variable rates.

However, the newly-introduced facility will only be applicable for loans in BDT.

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

Of the fund, the World Bank contributed $356.7 million and the government contributed another $60 million.

A total $13 million was set aside for technical assistance.

Under the first phase of the IPFF, 21 infrastructure projects were financed between 2006-2016.