India spells ‘easy’ terms for $1 bn loan to Bangladesh

DHAKA - Bangladesh says the terms set for the $1 billion loan offered by India during Prime Minister Sheikh Hasina’s New Delhi visit in January are “as easy as those of the Asian Development Bank (ADB)”.

India has offered the loan at 1.75 percent interest rate. Last week, it spelt the terms in a draft agreement sent here for the credit for which the time limit for repayment is 20 years, including a grace period.

Analysts said this should set to rest speculation in political and trade circles that New Delhi was “tying down” Bangladesh with higher interest rate loan with stipulation that Dhaka must utilise it to buy Indian goods and services.

The $1 billion loan is the highest loan India has offered any country.

The Daily Star newspaper Thursday quoted a finance ministry official as saying the terms and conditions for the credit were “as easy as that of the Asian Development Bank”.

Interest rate of ADB’s Ordinary Capital Resources (OCR) stands at London Inter-Bank Offer Rate (LIBOR) plus 0.6 percent and loan repayment period is 25 years including grace period.

The finance ministry sources said the draft agreement mentions that the loan would be given for transport, communication and river dredging projects.

The ministries concerned have already started preparing projects for utilising the loans. If there is any need for procurements for the projects, the draft agreement provides that those must be purchased from India.

The Economic Relations Division (ERD) has sought opinions of the ministries on the draft agreement. Next week, a meeting on the draft will be held with the ministries. If the government has no objection to the draft, Dhaka will convey New Delhi its consent to the agreement.

Indian Prime Minister Manmohan Singh had announced in the joint communiqu the credit of $1 billion for a range of projects including those for railway infrastructure, supply of locomotives and passenger coaches, rehabilitation of Syedpur railway workshop, procurement of buses and river dredging.

The joint communiqu issued at the end of Hasina’s visit to India also contained commitments concerning transit facilities, power import from India and various projects on regional cooperation.

The prime minister’s financial affairs adviser Mashiur Rahman has been given the responsibility of implementation of the commitments.

Mashiur Rahman held meetings with representatives of different ministries and departments concerned Wednesday, and will also hold meetings Thursday to discuss the progress in this regard.