Foreign credit flow on declining trend

20 pc reduced in 5-month

Golam Mostafa Jibon: Foreign currency reserve has been come to a decline trend due to fall of foreign credit flows centering the ongoing Russia-Ukraine war.
Experts said, breaking all the previous records, Bangladesh received more than $10 billion (1,000 crore) foreign loans in the last fiscal year (FY) 2021-22, which was 26 percent more than the previous year. The huge low-interest loan has contributed to the recovery of the economy, which has been strained by the Russia-Ukraine war after two-and-a-half years of the coronavirus pandemic.But that tide is no more.
Now the foreign currency reserve has been declineddue to fall of foreign credit flows. In the first five months (July-November) of the current financial year 2022-23, Bangladesh has received $246.25 crore (2.46 billion) dollars in loan assistance from various donor countries and organizations.
This figure is 20.30 percent less than the same period of last financial year 2021-22. About $308.95 crore ($3.09 billion) dollars came in these five months of last year.
Due to the shock of the war, the economy of Bangladesh, like many other countries in the world, is under a lot of stress. Along with the main indicators of the economy, reserves are also falling; it has come down to 34 billion dollars. What is most needed now to deal with this pressure is low-interest foreign debt-assistance. But instead of being like that, the opposite is decreasing.
The Economic Relations Department (ERD) of the Ministry of Finance released the updated data on external credit flow recently, showing that, the 2022-23 financial year started with a jump in external credit flow in continuation of the previous financial year.
In the first month of July, foreign debt-assistance of about $490 million came in, which was 48.50 percent more than last July. But the second month comes in August and stumbles. Lenders wrote off $37.63 million in debt that month, which was about 23 percent less than the previous month in July.
The next two months September and October, however, increased slightly. About 48.49 million dollars came in September. Besides, at last in October,about 62.14 million dollars of foreign debt had come. In last November, it fell to 49 million dollars. In total, as of five months (July-November), 20.30 percent foreign loans have come to the country less than the same period of last year.
Atiur Rahman, the former governor of Bangladesh Bank, said, “Our reserves are under pressure. To handle this pressure, loans from various donor agencies including World Bank, ADB, JICA are needed. Steps should be taken to bring the loans, which are in the pipeline of these organizations quickly. The good news is that, the IMF has agreed to lend us. The World Bank, ADB and others have also given assurances. The sooner these loans are available, the better. The government will be able to deal with the crisis easily. I believe, from 2023, the government will show courage and turn around. The economy will also return to the previous state.”
Ahsan H Mansoor, another economic researcher, said, “Bangladesh’s economy, like many countries in the world, is under a lot of pressure due to globalization. To cope with this pressure, more and more foreign loans at low interest rates were very much needed at the moment. But the reverse was decreased. The government has to speed up the pressure. Many countries like Bangladesh need help from donors to cope with the shock of war. That’s why, the loan is coming a little less this time. But if we get the first installment of the IMF loan in February, then our crisis will be over. The trend of reserve reduction will no longer exist.”
Explaining the reasons for the decrease in foreign debt in this financial year, Ahsan H Mansoor, the Executive Director of the Policy Research Institute (PRI), who has been serving in an important position in the IMF for a long time, said, “In order to compensate the damage caused by the corona epidemic that has been going on for more than two years, in the last financial year, more than expected loan-assistance was received from various donor countries and organizations including the World Bank and ADB. But now no more loans are available. Donor organizations have to take loans to various countries in the unstable world situation. That is why, foreign debt is decreasing. I think, this time the loan will be a little less than last time.”
According to ERD data, out of the $246.25 million in loan assistance received from donors during the July-November period, $235.69 million was project assistance. The donation received is 10.56 million dollars. During the same period of last year, project assistance was $301.33 million. About $7.62 million of grant also came.
Data analysis shows that, Bangladesh received 795,75,60,00 (7.96 billion) dollars of loan assistance from development partners in the fiscal year 2020-21. Before that, 738 crore (7.38 billion) dollars came in the fiscal year 2019-20.
Bangladesh’s foreign debt continues to increase from the fiscal year 2017-18. In the same year, the monetary concession increased from 3 billion to 637 million dollars. Then in the financial year 2018-19, about 654 million dollars came.
Japan gave most
In July-November of fiscal year 2022-23, Japan has given the most money amount at 74,27,60,000 dollars. As it is seen, 30.16 percent of the total foreign loan in these five months has been given by Japan International Cooperation Agency (JICA), the biggest development partner of Bangladesh.
Besides, 468.7 million dollars received from China. Asian Development Bank (ADB) gave 247 million dollars. The World Bank has released 425.4 million dollars. India gave 14.91 crore dollars. Apart from this, about 20 million dollars have been received from Russia. Asian Infrastructure Investment Bank (AIIB) gave 1,54,10,000 dollars.
Promises have bottomed out:
Data from the ERD shows that, donor loan-assistance pledges have bottomed out in the July-November period. Donors pledged $393.36 million in loan assistance in the five months of the 2021-22 fiscal year. In July-November of this year, only 46,13,10,000 dollars have been promised. As it appears, in the first five months of the last financial year, 8.5 times more commitments were received than in the same period of this year.
Interest payments increased:
The government has paid 88,4,60,000 dollars for the principal and interest of the loan taken earlier during July-November. During the same period of last year, 86,82,50,000 dollars were paid in interest-principal. As such, the government has to spend 1.40 percent more money for interest-principal payment than the same period of last year in these five months.