Foreign debt increases by Tk 3,500cr in a day

Taka devalued by 7.27 pc

Zarif Mahmud: Due to the devaluation of the taka against the dollar, the foreign debt has increased by more than Tk 3,500 crore in a single day. Compared to December 2022, foreign debt increased by $4.2 billion last March. Before the devaluation of the taka last Thursday, the value of the dollar was Tk 46,200 crores as the price of the dollar was Tk 110. Debt has increased to Tk 49,560 crores as of Tk 118 from Thursday.
Due to the devaluation of taka, the debt has increased by Tk 3,360 crores during the discussion period. Along with this, the interest rate in the international market increases and the additional money has to be paid about Tk 200 crores. If you add the interest amount, the total amount is more than Tk 3500 crore.
According to sources, the entrepreneur conducts business activities by taking loans in foreign currency and converting it into local currency. Local currency has to be converted into foreign currency while repaying the loan.
At that time, foreign currency has to be bought at the prevailing dollar price in the market. Due to this, if the price of the dollar increases, the foreign debt increases in terms of taka. Among these, if the interest rate increases in the international market, the loan amount also increases. Because at the time of repayment of the loan, the prevailing exchange rate and interest rate are the conditions for repayment of the loan. If there is more short-term debt among them, the risk of debt increases more. Short-term loans are high in the private sector in Bangladesh. Due to this, the debt repayment pressure is also high. In this, the country’s foreign exchange reserves are on the downward trend. At the same time, the price of the dollar is increasing. At present the net reserve is $18.48 billion. In August 2021, it rose to the highest gross reserve of $46.08 billion.
According to the Central Banker report, the total foreign debt in December 2022 was $96.52 billion. At that time the price of dollar was Tk 103. The loan amount was Tk 9 lakh 94 thousand 156 crores. Last December, the amount of debt increased to $10,640 million. At that time the price of dollar was Tk 110. In this, the loan amount stands at Tk 11 lakh 7 thousand crores. Debt increased by $4.12 billion during the period under discussion. Last March, it further increased the debt status to $10,720 million. As a result, the debt increased by $4.2 billion from January to March 2023. The highest price of the dollar was Tk 110 from last December till Wednesday. According to this, the debt has increased by Tk 46,200 crores. From Thursday, the price of the dollar increased to Tk 118. In the space of one day, the debt increased to Tk 49,560 crores. Due to the increase in dollar value, the loan amount has increased by Tk 3,360 crore.
Meanwhile, the interest rate of loans in the international market has also increased. Before Corona, the average interest rate for six-month Treasury bills in dollars at the London Interbank Offer Rate (Libor) was 1.5 to 2 percent. With this, 2.5 to 3 percent was added to the loan interest. According to this, the interest rate was 4 to 5 percent. Currently the Libor rate has increased to 5.71 percent in dollars and the US secured overnight finance rate (SOFOR) has risen to 5.38 percent. If you add 2.5 percent to this, the interest rate stands at 8.21 percent in dollars. Adding three percent makes the interest rate even higher. As a result, the loan interest rate is increasing. Due to this, the debt situation is increasing. Apart from this, due to the extension of the loan repayment period, additional interest has to be paid as well as penalty interest. In case of failure to pay the installments of the loan in the international arena, high interest along with penalty interest has to be paid against it.
Last year, interest payments on short-term loans were $93 million. Tk 10,130 crores as dollar price wasTk 110. $113 million to be paid this year. Of this, $500 million has already been paid. Another $63 million to be paid. As of now, the price of the dollar is Tk 110 as Tk 6,930 crore. Tk 7,434 crores as Tk118. Tk 504 crores to be paid more.
Since the time of Corona, due to the business slowdown, the repayment period of loan installments has been extended in stages. As a result, the amount of debt has also increased. Despite the increase in loan repayments, the debt status has now increased again, although it decreased slightly in March last year.
In December 2022, the external debt of the public sector was $ 72.21 billion. Last March it increased to $79.81 billion. $7.6 billion increased. As the dollar price is Tk 110, the loan amount is Tk 83,600 crore. As of Tk 118, its amount has increased to Tk 89,680 crore. Due to the devaluation of the taka, the debt in this sector is increasing by Tk 6,080 crores.
Most of the public sector debt is long-term. Due to which they have a long repayment period. The level of risk is low. But short-term loans are more in private sector. These are to be repaid within 3 to 6 months. Interest rate is also high. That is why the risk is high in them. Most of these loans are deferred. At the same time paying more.
The external debt position of the private sector as of December 2022 was $24.31 billion. Last March it decreased to $20.95 billion. Debt decreased by $336 million during the period under discussion. As the dollar price is Tk 110, the debt has decreased to Tk 36,960 crore. Tk 118 has decreased to Tk 39,648 crores. Due to the devaluation of the taka, the level of debt reduction has increased by Tk 2,688 crores.
Among the loans of the private sector, the loan of the import sector is the largest. In this, trade credit and foreign LC liabilities are increasing. Which is causing pressure on the country’s foreign exchange reserves.
Debt in other sectors was $11.42 billion in December 2022. Last March it further increased to $11.78 billion. Debt increased by $36 million. As the dollar price is Tk 110, the debt has increased to Tk 3,960 crore. Green back rate of Tk 118 increased to Tk 4,249 crore. Debt increased by Tk 288 crore due to devaluation oftaka.