With regard to the condition that China would supply the contractors for the projects it would fund, Gatchalian said this was normal with '
tied loans.' Other countries impose the same condition, he said.
Offered loans from China bear a 2-percent interest rate for concessional or
tied loans with a maturity period of 20 years, while the preferential buyer's credit loan has an interest rate of 3 percent with the same maturity period.
Indeed, African countries seem to be stuck between a rock and a hard place; unable to access favourable loans from others, and
tied loans from China.
With
tied loans, the implementing agency is required to procure 30 percent of the project contents - equipment, services or facilities - from Japan.
The accusation arises from the IMF's "structural adjustment" programs of the 1980s and 1990s, which
tied loans to strict budget regimes, and might have resulted in cuts to health spending.
The government has also eased regulations on so-called
tied loans, which developing nations can only receive if they make related orders from South Korean companies.
The rate cuts, eyed as part of efforts to ease conditions for such low-interest loans extended as official development assistance (ODA), will include a cut in
tied loans to 0.4% from the current 0.75%, the officials said.
The results of the survey may lead to growing calls among politicians for greater use of
tied loans, in which the Japanese government offers yen loans on condition that projects be undertaken by Japanese firms.
Pettifor also claimed Japan's policy of giving
tied loans -- which call on the debtor country to spend the borrowed money on goods from the creditor country -- was serving poor countries badly.
foreign assistance, at least $22 billion will be spent on "
tied loans" and grants, spent right here in the U.S.
Ralph Recto has warned against '
tied loans' from countries like China where foreigners take over the jobs of Filipinos.
When it comes to concessional
tied loans from China, these have an interest rate of 2 percent with a maturity of 20 years and a grace period of five years.
