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Foreign debt, interest repayment rise by 25.73pc to $33.5b in FY’24

Published : Tuesday, 30 July, 2024 at 12:00 AM  Count : 231
Mizanur Rahman
The principal amount and interest on the country's foreign debt repayment increased by 25.73 percent to $33.5 billion in fiscal 2023-24 compared to previous year's (FY 23) due to increased global interest rates and higher borrowing.

Interest on foreign debts increased by 44 per cent to $1.35 billion during this period, government papers said. 

In the Medium Term Macroeconomic Policy Statement (MTMPS) report released on Sunday by External Economic Division (ERD), it said interest payments on principal debt will continue to increase gradually in the coming years.

Economists say a large part of foreign debt is being used to repay previous debts. As a result, the financial capacity of the government is ever shrinking. Large part of the new debt that are availed are going to repay previous debt.  

Apart from this, it is not possible to use foreign loan properly in development projects for poor management and this trend of absorbing more debt to repay past loans will increase in future.

Ahsan H Mansur, executive director of Policy Research Institute (PRI) said, "The repayment amount will ever increase annually. But the government has no money, no dollar reserves. … So if you take a loan, you have to repay it. If you repay, the pressure will increase."

The document said foreign interest payments as a percentage of national budget will increase from 0.9 per cent in the fiscal 2021-22 to 2.6 per cent in 2026-27. This highlights the growing impact of foreign debt on the budget.

The rise in global market-based interest rates is causing the rise in foreign debt interest payments The other reason is that in 2026 Bangladesh will become a developing country from LDC status so the concessional or low interest loans will gradually decrease. 

Moreover depreciation of the value of taka contributed to increased interest payment on debt. In terms of taka the repayment liability increased by almost 40 per cent to Tk 37,307 crore in fiscal 2023-24 as per finance ministry figure.

A few decades ago, the government used to borrow about three billion dollars a year, now it is almost $10 billion and a big part of it is being used to repay earlier loans. The country's total foreign debt as of March 2024 was about $68 billion as per ERD figure. 

Meanwhile, loan disbursement from global lenders and bilateral partners rose seven percent to $9.86 billion in 2023-24 compared to the previous fiscal year.

From July 2023 to June 2024, the World Bank gave the largest amount of loan to the tune of  $2.15 billion. The Asian Development Bank (ADB) provided $2.14 billion. Japan provided $ 1.92 billion, Russia $1.5 billion.

Additionally, ADB has pledged $2.94 billion, World Bank $2.61 billion, Japan $2.03 billion and Asian Infrastructure Investment Bank (AIB) $40 million. ERD official said, "Foreign debt repayments have increased above expectations. But getting foreign loans is within our expectations. 

Former lead economist of the World Bank Dhaka office Dr Zahid Hossain said the rate at which money value depreciated in last fiscal year, the repayments increased at a higher rate. But if concessions are properly availed foreign debt repayment may not be a problem.



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