Our neighbour Bangladesh has been trying to survive the economic pressure and burden of foreign debt. The financial doldrums seem to continue even though India has in the past provided billions of dollars in aid in the name of development. If similar conditions continue, would India be able to retrieve the money it has lent to Bangladesh?
India-Bangladesh Economic Relations
India-Bangladesh relations are not limited to diplomacy; economic cooperation has been the backbone of this relationship. Over the past decade, India has provided Bangladesh with large-scale loans for infrastructure, railways, roads, energy, and defense sectors. This assistance was provided through lines of credit (LOC) intended to accelerate Bangladesh’s development projects and strengthen regional connectivity.
How Much Loan Has India Given So Far
Overall, India has lent close to US $8 billion, including LOCs granted in various phases. Since 2010, India has provided these funds for projects such as railway modernization, port development, road projects, and power transmission. To further strengthen the country’s defense, a special credit line has also been extended under defense cooperation to help Bangladesh meet its military needs.
Current Economic Status of Bangladesh, Possibility of a Bailout
In recent years, Bangladesh has faced declining foreign exchange reserves, import pressures, and global economic instability. International inflation and the strengthening of the dollar have compounded its difficulties. Consequently, it is natural to question whether Bangladesh will be able to repay India’s debt on time.
How Can the Debt Be Recovered?
India considers the loans as strategic investments. Beyond that, the first route to recovery would be a fixed repayment schedule, under which Bangladesh is required to repay the amount in installments. The second route is income through projects for which the loan was granted. The third important aspect is diplomatic, where the payment deadline can be extended if necessary.
