The interest rate on a 470.78 million loan to the Payra Port Authority from the foreign exchange reserve will remain unchanged at 2 percent despite rising interest rates across the market.
The Bangladesh Bank (BB) yesterday took the decision in its 438th board meeting chaired by Governor Ahsan H Mansur.
Central bank spokesperson Husne Ara Shikha confirmed with The Daily Star about the decision to keep the interest rate unchanged.
While the central bank’s Forex Reserve and Treasury Management Department proposed revising the interest rate to align with market trends, the government’s opposition to such a change led to the decision to maintain the existing rate, according to a senior central bank official requesting anonymity.
In 2021, the central bank approved a 470.78 million loan from its foreign currency reserve to state-owned Sonali Bank, which was then lent to the Payra Port Authority under a government guarantee.
The interest rate was set at 2 percent, with the Bangladesh Bank receiving 1 percent and Sonali Bank 1 percent.
The central bank provided the funds in line with the instruction of the previous Awami League government to settle a bill with Belgium-based Jundunul NV, the contractor for the capital and maintenance dredging of the Ramnabad Channel at Payra port.
In 2021, the previous government formed the Bangladesh Infrastructure Development Fund (BIDF) to finance development projects using the foreign exchange reserve.
So far, the Payra port project is the sole beneficiary of the fund.
The central bank official said that the loan has a 10-year tenure, with the port authority responsible for paying interest for the first three years and then both the interest and principal.
Currently, the BB is receiving interest payments on the loan.
Industry insiders said that funding development projects using the forex reserve was a “very bad decision” by the previous government.