Under the agreement, Bangladesh will 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 new LoC.

Bangladesh on Wednesday signed a $4.5-billion loan deal with India for developing its infrastructure, health and education.

The agreement was signed here in the presence of Finance Minister Arun Jaitley and his Bangladesh counterpart, A.M.A. Muhith, by Bangladeshi Economic Relations Division Secretary Kazi Shofiqul Azam and Managing Director of the Export-Import Bank of India David Rasquinha.

Projects identified

Mr. Jaitley said 17 development projects had been identified under the deal. Of the total amount, about $500 million will be used for setting up new economic zones for Indian and other investors, said officials of the Finance Ministry and the Bangladesh Economic Zones Authority.

Bangladesh will use the funds for 17 priority infrastructure projects, which include electricity, railways, roads, shipping and ports.

As with previous line of credit (LoC) agreements, Bangladesh will pay an interest rate of 1% a year. It will have 20 years to pay back the loans, with a grace period of five years.

Mr. Jaitley said Bangladesh had developed significantly on the socio-economic front in the past seven years. “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.”

Mr. Muhith said Bangladesh and India have “excellent relations at the moment.” “They stood by us during our Independence struggle. We hope they will continue to do so in the future.”

PTI adds:

The $ 4.5 bn deal was announced during Prime Minister Sheikh Hasina’s visit to India in April. Mr. Jaitley’s trip to Bangladesh was used to finalise the agreement.

Under the agreement, Bangladesh will have to purchase 65% to 75% of the services, goods or works from the Indian market with the money to be provided under the new 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, the Bangladesh government has been able to use only $576 million.

Some projects under the first LoC of $862 million faced delay in implementation while the physical works of the 14 projects under the second LoC of $2 billion were yet to start.