New loan ends for interest payment
Zarif Mahmud: According to a 2022 World Bank report, Bangladesh borrows more than India, Pakistan and Sri Lanka. According to the report, in the 10 years between 2011 and 2021, India’s foreign debt increased by about 83 percent, Pakistan by 101 percent and Sri Lanka by 119 percent. According to the report of the central bank, the foreign debt of Bangladesh has increased by 213.6 percent.
A situation like ‘Kaier tele kai bhaja’ has happened in the government’s borrowing and repayment of foreign loans. In the first four months (July-October) of the current financial year, about 68 percent of the amount of foreign debt received by the government has to be spent on repayment of principal and interest on foreign debt. That is, if the government has received a foreign loan of Tk 100 crore, of which about Tk 68 crore has been spent on interest and principal repayment.
On the other hand, the financial year 2023-24 will be the year of payment of foreign debt interest. Because according to the foreign debt interest payment projection, it is assumed that the foreign debt interest payment will exceed $1 billion for the first time in the history of the country in the current financial year. Economists say that the country’s economic crisis will increase due to the payment of interest on large foreign loans.
The External Debt of the government is looked after by the Economic Relations Department (ERD). According to the information of this department, during the period of July to October of the current financial year 2023-24, foreign loans received were $ 128.17 crore. Which is $14 thousand 66 crore 87 lakh 70 thousand in local currency. Tk 109.75 per dollar. In contrast, the interest and principal repayments were $110.15 million. About Tk 12,088.96 crores in local currency. That is, after paying the interest and principal, the remaining amount of the loan is Tk 177.92 crore or 32.09 percent. That is, 68 percent of the loan has been spent on interest and principal repayment.
Economists blame market-based interest rate debt for increasing interest and principal repayment pressures.
They say that Bangladesh takes both fixed interest and market-based interest loans from development partners. The grace period of market-based loans is short, repayment period is 3 and 12 years. In contrast, the grace period and repayment period of fixed interest loans are usually 5 and 20 years respectively. Although the fixed interest rate is fixed, Bangladesh has to pay interest at the secured overnight financing rate sofor and the Euro Interbank Offered Rate (Euribor) on the market-based interest rate loan. Sofar was below 1 percent two years ago, but now stands at over 5 percent.
Ahsan H Mansoor, executive director of the Policy Research Institute (PRI), said, “Earlier we used to get loans at fixed interest rates. Now gradually decreasing. As a result, you have to take loans at market interest rates. This will increase the interest payment as well as the principal repayment pressure. Because market interest rates have shorter repayment periods. In this situation, the government has to be careful in taking loans at market-based interest rates. It is better not to take up those projects which will not bring returns. He said short term foreign debt is more than reserves. The pressure to repay foreign debt installments will continue to increase from next year. If the supply of dollars does not increase, the situation can take a very bad turn.
Loan commitments have increased by 776.85 percent: From July to October of the current fiscal year 2023-24, foreign loan and grant commitments for development projects have received $362 crore 85 lakh 10 thousand. Of this, the loan commitment is $338.53 million and the donation commitment is $24.32 million. Although loan and grant commitments have been received under the project, no commitment has been received for food products from the development partners. During the same period of the financial year 2022-23, the loan and grant commitments for the development project from the development partners were $41.38 crore. Of this, the loan commitment is $302 million and the grant commitment is $113.61 million. That is, between July-October of the current fiscal year, foreign loan commitments have increased by 776.85 percent.
An official of the concerned wing of ERD, on the condition of anonymity, told the Times that the increase in foreign loan commitments is good. However, the amount pledged will not be available for loan. Development partners tend to overestimate the commitment time. Our foreign debt target for the current financial year is 6 billion dollars. That’s the standard. Hope the target will be met.
Loan disbursements reduced by 17.47 percent: Disbursements from development partners decreased by 17.47 percent in the first four months of the current financial year. So far in the current fiscal year, foreign loans and grants have received $162.62 crore. During the same period of the last financial year 2022-23, loans and grants were received at $197.06 crore. In other words, during the fiscal year, the tax deduction has decreased by $34.44 million.
$6.54 crore have been received in the current financial year. In the first four months of the outgoing fiscal year, donations were $9.28 million and $10,000. That is, the amount of grant money has decreased by $2.74 crore.
During the July to October period of the current fiscal year 2023-24, loan disbursements have decreased by $31.7 million. In the four months of the outgoing financial year, the loan amount was $187.78 crore. During the same period of the current financial year, $156.08 million have been received.
Interest and principal repayments up 35 percent: Interest and principal repayments on loans increased in the July-October period. According to ERD data, $110.15 million have to be paid in interest and principal in these four months. About Tk 12,088.96 crores in local currency. Tk 109.75 per dollar. In the same period of the outgoing 2022-23 fiscal year, it was $72.43 crore. Tk 6,906.23 crores in local currency.
According to the information, the interest paid in these four months is $46.74 crore. During the same period of the last financial year, the interest paid was $18.77 crore. That is, the interest payment increased by $27.97 crore or almost two and a half times. The actual payment in the first four months of the current fiscal year is $634.80 million. In the same period of the outgoing financial year, the actual payment was $53.66 crore. That is, the payment has increased by $9.75 crore.
Foreign debt of $100 billion: According to the data of Bangladesh Bank, the amount of foreign debt till September of the current financial year has stood at $100 billion. Of this, the foreign debt of the government and government institutions is $79 billion. The remaining $21 billion belongs to the private sector of the country.
Bangladesh borrows more than India and Pakistan: According to a 2022 World Bank report, Bangladesh borrows more than India, Pakistan and Sri Lanka. According to the report, in the 10 years between 2011 and 2021, India’s foreign debt increased by about 83 percent, Pakistan by 101 percent and Sri Lanka by 119 percent. According to the report of the central bank, the foreign debt of Bangladesh has increased by 213.6 percent.
Repayment of loans from commercial banks to the central bank: According to Bangladesh Bank sources, the government has taken a loan of Tk 25,709 crores from commercial banks till September of the current financial year. On the contrary, the Central Bank has repaid the debt of Tk 29,487 crores.
The loan taken by the government from Bangladesh Bank at the end of June this year was Tk 1 lakh 57 thousand 640 crore. And at the end of September, it decreased to Tk 1 lakh 28 thousand 152 crores. That is, during this period, the government has paid Tk 29,487 crores to Bangladesh Bank. On the other hand, at the end of June, the debt status of the government in commercial banks was Tk 2 lakh 36 thousand 138 crores. After that on September 25, it increased to Tk 2 lakh 61 thousand 847 crores. In other words, government debt from commercial banks has increased by Tk 25,709 crores.
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