[Suspended] CMC provides $71 million supplier’s credit for Karnaphuli Paper Mills Modernization Project

Project narrative

On May 7, 2001, China National Machinery Import and Export Corporation (CMC) signed a supplier's credit agreement with the Government of Bangladesh for the Balancing, Modernisation, Rehabilitation and Expansion (BMRE) of the Karnaphuli Paper Mills in Chittagong. CMC, in turn, secured the funds for the supplier’s credit from an export seller’s credit from China Eximbank. The total value of the underlying commercial contract was $84 million, and China Eximbank agreed to finance approximately 85% of the commercial contract value, or $70.965 million. The supplier’s credit carried the following borrowing terms: a 16-year maturity, a 3 year grace period, and a 3.5% interest rate. The purpose of the Karnaphuli Paper Mills BMRE Project was to expand the production capacity of Karnaphuli Paper Mills from 37500 metric tons to 85500 metric tons per year, and to improve the paper quality output of the mill. In 2005, the Chinese Government reportedly agreed to convert the supplier's credit into a concessional loan. However, after the BNP-Jamaat alliance government assumed office, they ‘shelved’ the project without explanation. The idea of the project resumed again in 2014, and the loan was reportedly converted into a zero-interest loan worth $87 million. However, according to the Government of Bangladesh’s Economic Relations Division (ERD), none of the committed funding had disbursed as of June 30, 2021. Nor had the borrower made any repayments as of June 30, 2021. As such, AidData assumes that the project never reached the implementation stage.