India’s Loan Disbursement to Bangladesh Slows Sharply; Committee to Assess Stalled Projects

Loan disbursement from India to Bangladesh has slowed dramatically, with only $81 million released under the Indian Line of Credit (LoC) between July and January. Moreover, no fresh loan commitments have been made, raising concerns about the progress of key infrastructure projects.

In response, Bangladesh’s Economic Relations Division (ERD) has initiated a reassessment of India-funded projects, with plans to form a committee to investigate delays and bottlenecks.

Following Bangladesh’s political transition in August last year, several India-funded projects came to a standstill. One of the most affected is the Ashuganj-Akhaura four-lane highway, where the Indian contractor and workers left the site, bringing work to a four-month halt.

ERD officials cite similar disruptions in multiple projects where Indian contractors have either suspended or slowed down operations, directly impacting fund disbursement under the LoC. Currently, eight transport and infrastructure projects remain under construction with Indian loans.

India had been disbursing an average of over $300 million annually for the past three fiscal years. The disbursement breakdown is as follows:

• $311.4 million in FY 2023-24
• $337 million in FY 2022-23
• $329.3 million in FY 2021-22

Under the three Indian LoCs, 36 infrastructure projects were initially approved, covering road and rail connectivity, energy, and construction. So far, 15 projects have been completed, eight are ongoing, and 13 remain in the planning or contractor recruitment phase.

During the LoC review meeting in Dhaka on March 5-6, both sides agreed to reassess projects facing delays. A dedicated committee will now examine the causes behind stalled works and explore solutions to expedite progress.