In what may be a big boost to the development initiatives of Bangladesh, it signed a whopping USD 4.5 billion third line of credit (LoC) agreement with India. The agreement will set the tone for its infrastructure and social sector development.
The agreement was signed on Wednesday, after two weeks of talks between the two sides, in the presence of Finance Minister Jaitley and his Bangladeshi counterpart AMA Muhith.
“Bangladesh has developed significantly on the socioeconomic front in the past seven years,” Jaitley said following the signing of the deal, adding, “We have stood by Bangladesh’s attempts to develop and we will do so in the future. This significant agreement is a continuation of that effort”.
Thanking India, Muhith said, “Bangladesh and India have excellent relations at the moment. “They stood by us during our independence. We hope they will continue to do so in the future,” Muhith said.
The USD 4.5bn LoC was announced during Prime Minister Sheikh Hasina’s visit to India in April.
Economic Relations Division Secretary Kazi Shofiqul Azam signed the deal on behalf of Bangladesh, while Managing Director of the Export-Import Bank of India (Exim) David Rasquinha signed for India.
The new Indian line of credit, worth USD 4.5 billion, will be used to fund 17 major projects in Bangladesh, which include electricity, railroads, roads, shipping and ports.
As with previous LoC agreements, Bangladesh will pay an interest rate of 1 per cent a year. It will have 20 years to pay back the loans, with a grace period of five years.
Under the agreement, Bangladesh would have to purchase 65 to 75 per cent of the services, goods or works from the Indian market with the money to be provided under the third LoC following the precedence of the previous two nearly identical agreements.
Bangladesh has two other LoCs open with India: the first one was signed in 2010, and the second one in 2016. These LOCs are collectively worth Tk3.06 billion, but till last year, Bangladesh government has been able to use only USD 576 million.
(With inputs from PTI)