The government yesterday approved a total of $356 million hard-term loans for Biman Bangladesh Airlines to help the loss making national flag carrier buy two wide-bodied aircraft by March.
A loan committee of the government at a meeting with Finance Minister AMA Muhith gave a go-ahead to the loan of which $290 million will be taken on guarantee from US-based Ex-Im Bank.
Another $66 million will come from Standard Chartered Bank, officials of the finance ministry and Biman said.
“The amount approved is the total cost,” Biman Managing Director and CEO Kevin John Steele told The Daily Star.
The carrier has been asked to prepare a 10-year business plan to become a profitable venture, the finance minister told reporters after the meeting.
“Biman has been a worthless organisation since its inception but it is not solely responsible for its dismal condition; the government also did not provide it with necessary support,” Muhith said.
The interest on Ex-Im Bank loans would be three months' LIBOR (London Interbank Offered Rate) plus 0.35 percent. The loans will have to be repaid in 12 years, officials said.
LIBOR is the rate at what banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates. The LIBOR will be followed as the loans will be given in foreign currency.
However, a finance ministry official said around $28 million will be paid in advance.
The loans from Standard Chartered Bank would carry interest at three months' LIBOR plus 5.5 percent and would be repaid in five years, the official said, adding that other service charges would have to be paid by Biman.
The three months' LIBOR rate was 0.24 percent yesterday. However, the official said the average rate of interest on the total loan would be 2.5 percent.
The Biman MD said, “We have already paid $118 million as pre-delivery payments. The funding has been coordinated by Ex-Im Bank.”
The finance ministry official said the $118 million loans were paid through Sonali Bank (UK) Ltd and it will be adjusted from the $356 million credit.
The Biman MD said the delivery of one of the aircraft will be made in Seattle, USA on February 5 and the plane is expected to arrive in Dhaka on February 7.
Kevin said the other will arrive in the third week of March.
During the last caretaker government's regime, Biman had signed a deal with US aircraft maker Boeing on procuring 10 aircraft by 2019 to become profitable by replacing its age-old fuel-guzzling fleet.
As the government has provided guarantees to aircraft purchases, Biman would have to prepare the business plan in line with a condition of the International Monetary Fund.
Biman with a fleet of seven aircraft has been suffering from a cash crunch for which it has sought around Tk 1,600 crore from the government. However, the finance ministry official said they have primarily agreed to provide Tk 500 crore.