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

On May 7, 2001, China National Machinery Import and Export Corporation (CMC) signed 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 contract value was $84 million, and China Eximbank agreed to cover approximately 85% of the contract value, or $70.965 million. The supplier’s credit carried the following terms: 16-year maturity, 3 year grace period, and a 3.5% interest rate. The Government of Bangladesh’s loan identification number for this supplier’s credit is S1120010507a. The Karnaphuli Paper Mills BMRE Project was intended to expand the production capacity of Karnaphuli Paper Mills from 37500 metric tonnes to 85500 metric tonnes per year, as well as improve the output paper quality of the mill. In 2005, China 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, the loan was reportedly converted into a zero-interest loan worth $87 million. According to the Government of Bangladesh’s Economic Relations Division (ERD), none of the committed funding had been disbursed as of June 30, 2018, so we assume that this project never reached the implementation stage.

Additional details

We record the original terms of the supplier’s credit (as of 2001) in this record and not the amended terms.

Number of official sources

2

Number of unofficial sources

7