Interest payments on foreign loans increased by 3 times in 3 months

Interest payments on foreign loans continue to rise. Interest payments on foreign loans have almost tripled in a span of three months. In the first quarter (July-September) of last fiscal year 2022-23, the amount of foreign debt repayment was only 13 crore 7 million dollars. In the same period of the current financial year, it has increased to 378 million dollars. That is almost three times.
According to the sources of the Economic Relations Department (ERD), due to the end of the grace period of some big loans including mega projects like Padma Bridge Rail Link and Bangabandhu Tunnel, the overall pressure on foreign debt repayment has increased.
According to sources, at the beginning of the financial year, the finance department had estimated that the amount of foreign loan repayment in the current financial year may increase to about 73 percent.
According to the ERD forecast, the current fiscal year 2023-24, for the first time in the history of the country, the actual repayment of external debt may exceed $ 2 billion. In the last financial year 2022-23, the original foreign debt was repaid to the tune of $173 crore.
According to the projection, the actual repayment will be around $2.9 billion in the next fiscal year and will increase to $3.31 billion in the following fiscal year.
It is known that in 2027, the actual repayment of Bangladesh’s largest loan taken for the Rooppur nuclear power project will begin. Besides, the grace period of some other loans will also end. Then the repayment amount will increase.
According to sources, in the current fiscal year, interest payments of $119 million will be made for development project loans and budget assistance loans. Interest payments will increase to $131 million and $141 million in the next fiscal year 2024-25 and 2025-26 respectively. Earlier, in the financial year 2021-22, 49.6 million dollars were spent on loan interest payments. As of June 16 of the ended 2022-23 financial year, the foreign debt interest payment account was 944 million dollars.
It should be noted that in comparison to 2021-22 fiscal year, the exemption for repayment of foreign debt has decreased in the last financial year. In the financial year 2021-22, the foreign debt write-off was $1,000 crore, which decreased to $926 million in the financial year 2022-23.
According to a related source, the sustainability of the loans after the end of the grace period depends on Bangladesh’s ability to reap the benefits of these large-scale projects and increase local productivity. For example, experts say, if Bangladesh cannot reduce its dependence on energy imports after the Rooppur nuclear power plant is commissioned, the debt repayment burden will increase significantly. Similarly, the success of the Bangabandhu Tunnel depends on the establishment of proposed economic zones in the vicinity of the tunnel and its ability to attract foreign investment. At the same time, the ability to repay the debt will depend on the economic success of other mega projects.