Foreign loan interest payment up 176pc

Saleh Ahmed Hussain: The government’s expenditure on interest payments on foreign loans has increased significantly. In the first quarter of the current financial year, compared to the same period of the previous financial year, the government’s expenditure on this sector has increased by 176 percent. Between last July and September, a total of $378.4 million had to be paid for foreign loan interest. In the same period of the last financial year, the amount of which was $13.7 million.
This information was obtained from the Economic Relations Department (ERD) report of the Ministry of Finance. When asked to know the reason for the sudden increase in the cost of interest payment, a related official of ERD told Daily Industry on condition of anonymity that there are at least three reasons behind the increase in the cost of interest payment. One of them is the increase in interest rates on foreign loans. For example – currently some loans are charged additional interest with the Secured Overnight Financing Rate (SOFR). The Sofr rate is now around 5 percent. Along with this, the interest rate of some loans has gone up to 7 percent. Another reason is to pay interest on many short-term loans, such as budget assistance. The grace period in such loans is relatively short. Apart from this, the amount of foreign borrowing has increased. Some of which have to be paid now.
He thinks that the cost of paying interest may increase further in the future.
An analysis of the ERD report shows that the actual repayment of foreign debt has increased by 26 percent in the first three months of the current fiscal year 2023-24 compared to the same period of the previous fiscal year. A total of $49.2 million has been paid for this. In the same period of the fiscal year 2022-23 which amount was $388.5 million. That is, the actual payment has increased by about 100 million dollars compared to the same period of the last financial year.
A total of over $870 million in interest-principal payments was made in the first three months of the current fiscal year. In the same period of the previous financial year which was $52.5 million. In terms of money, it can be seen that in the last quarter, about $9,534 million have been paid for the interest-principal of the loan. In the same quarter of the last financial year, its amount was about $4,987 million.
Even though the government’s expenditure on debt repayment has increased, the development partners have not released the promised money at that rate. According to the ERD data, the cash discount decreased by 5 percent in the last quarter compared to the same quarter of the previous fiscal year. A total of $128 million has been discounted at this time. In the same quarter of the last financial year, which amounted to $135 million. That is, the discount has decreased by $7 million.
Development partners increased loan commitments by 611 percent in the last quarter, despite a reduction in monetary concessions. Loan assistance commitments of $40.54 million have been received during this period, which is as high as $288 million in the same quarter of the previous fiscal year.