Billion dollar loan
The billion dollar loan provided by India's Exim Bank is a façade of a loan, and under the present terms and conditions of the loan, it will not be substantially beneficial for Bangladesh.
The key condition of the loan is that 85% of all expenses made through the loan money will have to be bought from India. What this means is that, 85% of the billion dollar, i.e. 850 million dollars will go back to India. Bangladesh, therefore, will have only 150 million dollars to spare.
One might argue, at least, we are getting goods worth 850 million dollars from India. However, this is not a grant, but a loan, which means, essentially, we are spending our own money to buy goods from India worth 850 million dollars. This will go on to imbalance our balance on current accounts in the national accounting.
Furthermore, the 1.75% interest rate on this loan means that we will not even enjoy the entire 150 million dollars of the loan. We will have to pay out an additional 17.5 million dollars to India.
Repayment of a billion dollar loan will severely deplete our foreign reserves. Bangladesh could've spent the billion dollars internally to develop its infrastructure, which would have positive effects on the local economy, instead of spending 850 million dollars in India.
In essence, this loan means that Bangladesh will be spending a total of 867.5 million dollars in India, which can be considered as a very expensive gift.
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