The pressure to pay interest on foreign debt is increasing. Both principal and interest cost more money than before. On the other hand, the development partners have reduced the concession of promised loans. However, they have increased the promise of new loans.
According to the data of Economic Relations Department (ERD) of the Ministry of Finance, in the four months from July to October of the current financial year, the cost of foreign debt interest payment has increased by 52 percent compared to the same period of the previous financial year. In the last four months, a total of 110 crore 14 lakh dollars has been paid for this, which was 72 crore 43 lakh dollars in the same period of the previous financial year. That is, in the four months of the current financial year, the cost of interest and principal repayment of foreign loans increased by 37 million 72 million dollars.
Prof. Mostafizur Rahman, honorary fellow of the private research organization Center for Policy Dialogue (CPD), told Samakal that in this situation, one should be very careful in taking new loans. Look for low interest loans. Project implementation should be done on time. Because delay in implementation increases costs. Benefits are not available at the rate of value addition to the economy from various stages.
However, he thinks, taking into account the export income and remittance flow, the overall foreign debt repayment situation has not yet reached an alarming level. Interest rates on foreign debt have risen since the country’s promotion to lower-middle-income status in 2015. Apart from this, additional interest is levied on the Secured Overnight Financing Rate (SOFR), one of the benchmarks for determining global interest rates. Sofor rate is like 5 percent. Some loans combined with SOFAR and lenders’ interest rates can exceed 7 percent. Interest has to be paid on many short-term loans like budget assistance. The grace period in such loans is relatively short. Interest rates are high. Due to these reasons Sudasal has to pay more interest in recent months.
According to the ERD report, the cost of foreign debt interest payments increased by 149 percent in the first four months of the current fiscal year. A total of 46 million 74 million dollars had to be paid for interest. In the same period of the last financial year, the amount of which was 18 million 77 million dollars.
On the other hand, the actual repayment of foreign loans has increased by 18.17 percent. A total of 634 million dollars has been paid between July and October. In the same period of the last financial year, the amount of which was 53 crore 65 lakh 50 thousand dollars. That is, compared to the same period of the last financial year, the actual payment has increased by 9 crore 75 dollars.
Interest payments, in Bangladeshi currency terms, have increased by 75 percent in the last four months compared to the same period of the previous fiscal year. 12 thousand 87 crores of loan interest has to be paid in the last four months. In the same period of the last financial year, this amount was only 6 thousand 906 crores. In other words, 5 thousand 181 crore rupees have to be paid in the first four months of the current financial year compared to the same period of the last financial year.
The development partners did not release the promised money at that rate even though a large sum was spent on the repayment of the loan. According to ERD data, disbursements have decreased by 17.45 percent in the last four months compared to the same period last fiscal year. A total of 162 million 62 million dollars has been deducted at this time. In the same period of the last financial year which amount was like 197 million dollars. That is, in the four months of the current fiscal year, compared to the same period of the previous fiscal year, the development partners reduced the discount by 34 million 38 million dollars. In addition to loans, grant exemptions also decreased during this period.
However, new loan commitments have increased in the last four months, despite the reduction in disbursements. About $3.63 billion in loans have been pledged by development partners, up from $41.38 billion in the same period last fiscal year. That is, new loan commitments increased by a record 777 percent. Aid commitments both in terms of loans and grants increased compared to the same period last year.