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Bangladesh - 3 weeks ago

Bangladesh used only $1.5b Indian debt

Asifiqbal Thakoor, Delhi : India announced to provide loans in 2010 for various development projects in Bangladesh. During Prime Minister Sheikh Hasina’s visit to India in January that year, the country approved $1 billion line of credit (LoC). In June 2015, Indian Prime Minister Narendra Modi’s visit to Dhaka came with the announcement of another $2 billion loan. And in April 2017, during Sheikh Hasina’s visit, India announced another $4.5 billion loan. Although Bangladesh has used little of these loans.
A portion of the first LoC was granted as a grant, reducing the debt to $862 million. The agreement was signed on August 7, 2010. The second and third LoC agreements were signed on March 9, 2016 and October 4, 2017 respectively. Under the three agreements, Bangladesh is expected to receive a total loan of $7.362 billion. Of this, only one decimal $48.92 billion has been discounted till last June. It is only 20.23 percent of the total debt.
India has repeatedly urged for quick loan waiver in LoC projects. However, various projects of the second and third LoC have not progressed much due to various complications. And several projects of the first LoC are still pending. As a result, implementation of India’s loan scheme and loan waiver has been delayed. As of last June, five decimal $87.28 billion or 79.77 percent of the loan was withheld. However, as of June, the loan of $182.29 million of the first LOC has to be repaid.
Meanwhile, in the six months from last July to December, another $162 million of India’s debt was written off. Adding that, India’s debt has been reduced by $1.6512 billion or 22.43 percent in 13.5 years. And the rest is $5.7108 billion or 77.57 percent.
According to the Economic Relations Department (ERD), about $747.6 million has been released under the first LoC till last June. At that time, $114.4 million remained, which is 13.27 percent of the total debt. Under the second LoC, $336.8 million have been released till last June. And the remaining was one decimal $66.32 billion, which is 83.17 percent of the second LOC. Similarly, $404.8 million have been released under the third LoC till June. At that time the balance was $4.0952 billion, which is 91 percent of the third LOC.
Talking to the organizations implementing the project, it is known that there are various conditions in the Indian loan project. Among these, the main problem is that 75 percent (65 percent by sector) of construction materials have to be imported from India. Apart from this, complications are created in the Indian loan scheme at the implementation stage as well. Many times, the main contractor in India gives subcontracts, who are not skilled in field level work. Project implementation is delayed for them too. Besides, only Indian contractors can participate in Indian loan projects. It shows that Indian contractors often bid more than the estimate. Due to these complications, implementing agencies are not interested in implementing Indian loan projects.
According to sources, 15 projects were taken up under the first LoC. Of these, 11 have been fully implemented and one project has been declared partially completed. The remaining three projects have been running for nearly a decade, all of which are railways. But their implementation speed is very slow. One of these projects is nearing completion. However, no one is sure when the remaining two projects will be completed.
15 projects were taken up under the second LoC but later three were dropped. Of the rest, two have been completed. The remaining 10 projects are in various stages of implementation. And two bus-truck purchase projects under the third LoC have been completed. Another 15 projects are in various stages of implementation. However, four of these projects have been proposed to be removed from the LoC.
According to the sources of ERD, Bangladesh is thinking of not taking a bunch of loans or LoC from India again due to slow pace of loan waiver from LoC. On the other hand, Exim Bank of India also wants to give loans to various government agencies individually from now on. Besides, talks are going on with Exim Bank to relax the terms of the contract. For example, now only Indian contractors can participate in tenders for LoC-supported projects. As a result, they have to give work order at the fixed rate. In this regard, discussions are going on so that joint venture contracting companies of Bangladesh and India can also participate in the tender.
75 per cent (conditionally 65 per cent in some cases) of goods or services must be procured from India for any LoC project. Negotiations are also underway to relax this condition. Because it is not always possible to import construction materials such as rods, cement, sand etc. from India.
Incidentally, India has given loans to Bangladesh at one percent interest. The grace period for this 15-year loan is five years.

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