Issue Brief on “India-Bangladesh Loan Deal”

On October 4, 2017, Bangladesh and India signed a line of credit (LoC) agreement worth $4.5 billion. The deal had already been announced several months before in April, when Prime Minister Sheikh Hasina Wajid was visiting India.

This is the third such loan deal between the two countries in the recent past, and is expected to finance development projects in infrastructure and social sectors in Bangladesh, with a total of seventeen major projects in electricity, railroads, roads, shipping and ports announced as beneficiaries of the loan. As with the previous two deals signed in 2010 and 2016, this new agreement also commits Bangladesh to pay an interest rate of 1 percent every year, and gives it 20 years to repay the loan to India.[1] For both countries, these agreements and subsequent economic collaborations demonstrate increased interaction and partnership, and indicate India’s growing clout in the region and interest in its immediate neighbor. The signing of the new deal was thus also an opportunity for the Finance Ministers from both countries to make statements expressing mutual support and friendship.[2]

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