India’s loan disbursement comes to a halt

In the first three months of the 2024-25 fiscal, the Indian Exim Bank disbursed only USD 45.2 million, which is roughly Tk 5.4 billion.

The work of development projects was almost stalled during the student-people's mass uprising in July-August.

Contractors and workers of a project financed by India returned to their country due to security concerns. Moreover, work on several projects was also suspended.

The Sheikh Hasina's government had a strong relationship with India. After deposition from power, Sheikh Hasina herself traveled to India. The Indian Exim Bank has extended Lines of Credit (LoCs) to fund various projects in Bangladesh. Many believe these factors have affected the pace of loan disbursements.

In recent years, India had been disbursing about USD 300 to USD 350 million annually, but in the first three months of this fiscal year, only $45.2 million has been released.

Zahid Hussain, former lead economist of the World Bank’s Dhaka office, told Prothom Alo that not only Indian-funded projects but also other development projects experienced delays during the first quarter of this fiscal.

He also said that it is not clear whether the change in Bangladesh's government has created distance between the two countries. It cannot be assumed that the changed circumstance has affected Indian-funded projects.

Zahid Hussain noted that India has not canceled any projects, nor has the Bangladesh government stated that it will not pursue these projects.

He said that it will take some more time for the situation to stabilise.

Sources said after the change in government in August, several Indian-funded projects came to a halt. One of these was the road expansion project between Ashuganj and Akhaura, which was being carried out under the second LoC.

Indian contractor Afcons Infrastructure Ltd. was appointed for the project in 2018. However, after 5 August, the company's staff left the project due to security concerns. Following a meeting with local district administration last week, the company has agreed to resume work. The project has been stalled for nearly four months.

In August 2010, Bangladesh signed its first loan agreement with India, which is known as the first Line of Credit (LoC). The amount of this LoC was USD 1 billion. Subsequently, in 2016 and 2017, two more loan agreements were signed, amounting to USD 2 billion and USD 4.50 billion, respectively. In total, India committed to providing Bangladesh with USD 7.36 billion through these three LoCs.

According to sources of the Economic Relations Division (ERD), funds have not been fully disbursed as per the commitments made over the past two decades. As of last September, only a total of USD 1.84 billion has been released, with USD 770 million from the first LoC, USD 520 million from the second LoC, and USD 550 million from the third LoC.

Around USD 370 million of the first LoC has been repaid. These loans are being provided by India's Exim Bank.

Under the three LoCs, 40 projects including roads, railways, energy, and infrastructure development have been undertaken. Of these, 15 projects have been completed, 8 are ongoing, and the remaining projects are either in the process of selecting consultants and contractors or preparing proposals.

In the last three years alone, India has disbursed more than USD 300 million annually. According to ERD sources, in the 2023-24 fiscal year, India's Exim Bank disbursed USD 311.4 million. In the previous two fiscal years, USD 337 million and USD 329.3 million were disbursed, respectively.

During the first two years of the COVID-19 pandemic, disbursements were relatively low. In the 2020-21 fiscal year, India provided USD 141.1 million, slightly higher than the 140.8 million in the previous year.

ERD officials said a high-level meeting between the representatives of both countries will be held soon to discuss the quick disbursement of funds.