India, China, Russia made no new loan commitments during interim govt’s term

India, China and Russia have made no new loan commitments to Bangladesh during the past one and a half years under the interim government. However, the three countries have continued disbursing funds against previously agreed loans.

Over this period, the three nations together disbursed more than US$2 billion (200 crores). In contrast, Bangladesh did not secure any fresh loan commitments for new projects from them.

Bilateral loan agreements are generally influenced by the economic and political relations between the two countries concerned.

Over the past 18 months, Bangladesh’s relations with India have experienced strains. There were also debates and criticism surrounding the Rooppur Nuclear Power Plant (RNPP) project involving Russia. Apart from this, no new initiatives were taken to undertake projects financed by China. As a result, no new loan commitments were received from these three countries.

On 5 August 2024, the Awami League government led by Sheikh Hasina fell following a mass uprising. Sheikh Hasina subsequently left for India, and an interim government headed by Muhammad Yunus assumed office.

Speaking to Prothom Alo about this, Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said, “Bilateral relations between the current interim government and India had deteriorated from the outset, affecting foreign loan commitments.”

He added that the government was not inclined to sign major new project loan agreements with India, China, Russia or other countries and agencies, particularly in light of criticism surrounding certain foreign-funded projects undertaken by the previous administration.

According to him, the situation may differ under a new political government, which could review bilateral relations and potentially accelerate the pace of loan commitments.

A senior official at the Economic Relations Division (ERD) said no major new foreign-funded projects had been undertaken over the past 18 months. No discussions had begun with India regarding a new Line of Credit (LoC), and the situation was similar with China, whose financed projects have faced criticism over quality and cost. There has also been no fresh initiative with Russia either.

According to ERD sources, during the interim government’s tenure under professor Muhammad Yunus, India, China and Russia together disbursed approximately US$2.17 billion.

India has been providing loans under three Lines of Credit agreed in 2010, 2016 and 2017, totalling a commitment of US$7.36 billion. However, the amount of disbursement lagged behind commitments.

Since the interim government assumed office, the pace of disbursement has slowed further. Over the past 18 months, India disbursed US$290 million under various LoC projects.

ERD sources further said that up to June 2024, total disbursement had reached US$1.78 billion. With an additional US$290 million disbursed up to December, the cumulative figure stands at approximately US$2.07 billion.

Under the three LoCs, 36 projects have been undertaken in sectors including road and rail connectivity, energy, and infrastructure development. Of these, 15 have been completed, eight are ongoing, and the remainder are in process. No new loan commitments were made by India during the past 18 months.

Several Chinese-funded projects remain ongoing, with disbursements continuing under existing agreements. During the interim government’s tenure, China’s Exim Bank disbursed approximately US$635 million.

Russia is financing one major ongoing project, the Rooppur Nuclear Power Plant. The total project cost stands at US$13 billion, of which Russia is providing US$11.98 billion in loans.

During the interim period, Russia disbursed around US$1.25 billion for the Rooppur project.

Although India, China and Russia have not extended new bilateral loan commitments, major development partners such as the World Bank, the Asian Development Bank and Japan have maintained their commitments.

In the first six months of the current fiscal year (July–December), Bangladesh received new commitments amounting to US$1.99 billion from these donors and agencies.