Home Bangladesh Interest payments on foreign loans doubled in seven months
Bangladesh - February 28, 2024

Interest payments on foreign loans doubled in seven months

Mahfuz Emran : A major part of the country’s development activities is financed through foreign loans. While low-interest loans used to be high, over the past decade the amount of high-interest loans with tougher terms has increased. As a result, interest payments on foreign loans are increasing by leaps and bounds. In the first seven months of the current financial year 2023-24, interest payments on foreign loans have more than doubled compared to the same period of the previous financial year. This information has emerged in the latest updated monthly report of the Economic Relations Department (ERD).
Analyzing the data of the report, it can be seen that in the first seven months of the fiscal year 2022-23, the amount of interest paid against foreign loans was $365.8 million. In the same period of the current fiscal year 2023-24, the amount of that interest payment has increased to $76.40 crore. At the same time the actual repayment amount has also increased. In the first seven months of the last financial year, the actual repayment amount was $91.89 million. In the same period of the current financial year, its amount has increased to $1096.30 million. In the first seven months of the current financial year, the interest and principal of the foreign debt has to be paid $185 crore 67 lakh 70 thousand, which is Tk 20 thousand 418 crore 93 lakh. In the same period of the last fiscal year, its amount was $1284.80 million, Tk 12,436.27 million.
Experts say the government has increased the amount of hard loans in recent years. The grace period of all those loans is coming to an end. As a result, both principal and interest have to be repaid now, due to which foreign debt repayments are increasing. Center for Policy Dialogue (CPD) Honorary Fellow Dr. Debapriya Bhattacharya recently told, ‘We said in 2022 that Bangladesh’s foreign debt situation is heading towards a dangerous situation. We also said that after 2024, there will be a major pressure on external debt repayments, which will have a much more adverse impact on reserves. But the policy makers of the government did not give importance to our statement and they explained with various arguments that Bangladesh will not have any problem with foreign debt. But real money is now in trouble and imports have to be contracted to meet the pressure of debt repayment. Those policy makers are responsible for this situation. Now they should be held accountable.
He also said that the stability of Bangladesh’s foreign debt situation (debt sustainability) needs to be reassessed now and based on that assessment, borrowing limits should be set in the coming days. Repayment of foreign debt may become a thorn in the neck if the existing system continues.
Meanwhile, food aid was once an important sector in Bangladesh’s foreign aid. Such assistance is mainly given to economically very fragile countries. Bangladesh has not been getting any loans or grants for food aid for the past few years as it has made progress in various economic indicators. And due to progress in economic indicators, the amount of interest on foreign loans is increasing, which is increasing the pressure on the government’s budget management.
An analysis of ERD’s report shows that in the first seven months of the fiscal year, there has been a slight increase in loan waivers compared to the same period of the previous fiscal year, but there has been a decline in grants. Those concerned say this is normal. Because with economic progress in any country, the flow of donations tends to decrease. The same is happening in Bangladesh.
In the first seven months of the last financial year, the amount of foreign donations that came to the country was $1868.60 million, which has decreased to $17.43 million this time. On the other hand, the amount of loans discounted in the last seven months of the fiscal year was $404.76 crore. This time it has increased to $421.36 crore.
Meanwhile, new loan and grant commitments have almost quadrupled in the current financial year. At the same time, donation pledges also increased. In the first seven months of the fiscal year, new foreign loan commitments for various projects amounted to $6.74 billion.

In the same period of the last financial year, its amount was $153.43 crore. On the other hand, this time the pledge of donation came equal to $43.21 crore, which was equal to $23.14 crore in the same period of the last financial year.

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