Indian loan disbursements to Bangladesh have been significantly lower than expectations, as India released only around $80.14 million between July and January of FY25 under its Line of Credit (LOC) scheme, indicating a sharp decline compared to previous years.
There have also been no new loan commitments from India during this period.
The Economic Relations Division (ERD) of Bangladesh attributes this slow disbursement to delays in project implementation, particularly after regime changes in Bangladesh in August 2024.
Several India-funded projects were halted, notably the Ashuganj-Akhura four-lane road project, which was delayed for four months when Indian contractors withdrew their workers.
Other projects have also experienced similar delays, further slowing the pace of loan disbursement.
Currently, eight projects in the transport and infrastructure sectors are still active under Indian loan schemes. The $80.14 million disbursed over the past seven months represents just one-quarter of the total disbursement in the previous fiscal year, raising concerns over the overall progress of these initiatives.
Experts have pointed out that ongoing discussions between Bangladesh and India are focused on identifying which projects will continue and which will be put on hold. They stress that priority should be given to projects critical to Bangladesh’s economy. Besides, the relaxation of procurement conditions will also be key to moving forward.
As of January, India had disbursed $1.88 billion under the LOC. Additionally, India had committed $7.36 billion in loans to Bangladesh in 2010, 2016, and 2017. Despite these commitments, disbursements have not met expectations.
In recent years, India has typically disbursed over $300 million annually, with $311.4 million disbursed in the 2023-24 fiscal year. However, disbursements were much lower during the COVID-19 pandemic, totaling $141 million in 2020-21 and $140.8 million in the previous year.
To date, 36 projects have been initiated under the LOC agreements, with 15 completed and 8 ongoing. The remaining 13 projects are in various stages of planning. Bangladesh and India have agreed to reassess the current list of projects.
A review meeting held in Dhaka in early March this year led to a consensus on reevaluating ongoing projects. A joint committee will now be formed to analyse delays, identify problems, and propose solutions. If necessary, the committee may recommend removing certain projects from the list.
Mustafa K Mujeri, a former chief economist of the Bangladesh Bank, “It is normal to have the current India-Bangladesh relationship affect the two countries’ trade ties. The trade ties will not become normal, unless the diplomatic ties between the two countries ease. If the political ties between two countries are not good, then the economic relationships between them cannot be strong either.”
“Indian loan disbursement in Bangladesh dipped despite previous loan commitments. If the problems are not resolved through discussions on the projects concerned, then they will negatively affect both the countries,” added Mujeri, who is also the director general of Bangladesh Institute of Development Studies (BIDS).
Courtesy: Daily Sun.
Bd-pratidin English/Tanvir Raihan
