Bangladesh political turmoil could risk $4-5 billion of credit, grants disbursed by India

India hopes to convince Bangladesh’s new government to honour sovereign guarantees [View in browser]( [See all newsletters]( 17 August 2024 Bangladesh political turmoil could risk $4-5 billion of credit, grants disbursed by India [Activists of the Anti-Discriminatory Student Movement gather at the University of Dhaka’s Teacher Student Center (TSC), demanding capital punishment for Bangladeshi former Prime Minister Sheikh Hasina for the deaths of students during anti-quota protests, in Dhaka] India is worried about the fate of an estimated $4-5 billion of credit and grants that have been already disbursed to [Bangladesh]( for various development projects. It is not certain whether the government that has taken over [after the fall of ousted Prime Minister Sheikh Hasina’s regime]( will take ownership and honour the sovereign guarantees, sources have said. - Also read: [India wants improvement in trade with Bangladesh, says Commerce Secretary]( “New Delhi will try its best to ensure that the interim government now in place in Bangladesh and the subsequent government that takes over after the proposed elections will not reject the development projects funded by India that are underway. An estimated $4-5 billion have already been disbursed as credit and grants. The Lines of Credit (LOC) are backed by a sovereign guarantee and in case these are rejected, India may be forced to write them off which will be a heavy economic blow,” a source tracking the matter told businessline. Lines of credit Over the last eight years, India extended three LOCs to Bangladesh worth $8 billion and additional grant assistance for several infrastructure projects, according to a Ministry of External Affairs note. The sectors include roads, railways, irrigation, shipping and ports. “The problem is that many of these projects and LOCs were criticised by opposition parties and some others in Bangladesh on grounds of alleged corruption,” the source said. - Also read: [India lacks capacity to seize ‘Bangladesh opportunity’ for ready-made garments, say experts]( India’s continued sheltering of Hasina, who fled to India on August 5 after anti-government agitators targeted her residence, has made the situation trickier. “None of the European countries where Hasina reportedly sought asylum have given a positive response yet. In case the new government in Bangladesh wants to try her on murder charges and asks India for her extradition, the situation could get more uncomfortable,” the source said. Bangladesh witnessed massive student protests against Hasina the past month leading to her ouster. It was followed by more political and communal violence in the country but the situation started stabilising after the interim government headed by Nobel laureate Muhammad Yunus assumed charge. Uncertainty over India-Bangladesh ties, however, continues. It is not just credit and grants given for development projects that have come under shadow but payments due to Indian oil companies that supplied oil to Bangladesh may also be at risk. “Bangladesh has been struggling to pay its foreign suppliers of oil, including India, because of its foreign exchange crisis. Indian suppliers are now left high and dry as they do not know when they will get the due payments,” the source said. Interestingly, Bangladesh had asked India for $2 billion earlier this year to also help pay the oil dues, but the deal never got finalised, the source added. “If India had agreed to the $2 billion loan then the amount at risk would have been even greater,” the source said. You Might Also Like [NBFCs see gold loan growth despite RBI crackdown]( [Money & Banking]( [NBFCs see gold loan growth despite RBI crackdown]( [Much cheer in Valley over J&K assembly poll announcement]( [National]( [Much cheer in Valley over J&K assembly poll announcement]( [SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak Bank: The key monitorable for banking stocks from here]( [Portfolio]( [SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak Bank: The key monitorable for banking stocks from here]( [Mukesh Ambani may spell out roadmap for retail, RJio listing timelines at AGM]( [Companies]( [Mukesh Ambani may spell out roadmap for retail, RJio listing timelines at AGM]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](