According to the Economic Relations Department’s (ERD) update report, during the nine months of the fiscal year, July-March, Bangladesh paid $105.4 million to development partners as interest only.
Interest payments on foreign debt crossed $1 billion for the first time. Reliance on market-based loans has increased the cost of interest payments. Due to currency devaluation and rise in sofar interest rates, such loans have become more expensive.
According to the Economic Relations Department (ERD) updated report, Bangladesh has paid $105.4 million to development partners in interest only during the nine months of the fiscal year, July-March. During the same period last financial year, interest payments to development partners were $48.59 million. As a result, the interest payment increased by 117 percent.
Earlier, the interest payment was $80.59 million last February. And for the entire financial year it was 92.7 million dollars.
ERD officials said interest rates have risen due to the Russia-Ukraine war and the appreciation of the dollar.
They said the Secured Overnight Financing Rate (SOFOR) has increased in the wake of the Ukraine-Russia war. At present the Sofar interest rate is more than 5 percent. That was less than 1 percent before this war.
On the other hand, Bangladesh’s market-based debt is steadily increasing. Because of this, Bangladesh now has to pay more money in terms of interest.
About 75 percent of Bangladesh’s loans from the Asian Development Bank (ADB) are market-based loans. It also borrows from the Asian Infrastructure Investment Bank (AIIB) at market-based interest rates. Bangladesh also takes market-based loans on a small scale from the World Bank.
Meanwhile, due to the increase in interest payments, foreign debt repayments increased to $257 million in the nine months of the fiscal year (July-March). It was 173 million dollars in the same period of last financial year.
Out of this, the actual repayment of various loans is 151 crores.
According to ERD’s projections, Bangladesh’s foreign debt repayments, including principal and interest, have increased to $3.56 billion in the current fiscal year.
Executive Director of the Institute for Inclusive Finance and Development. Mustafa K Mujeri
“Our foreign debt is increasing. But the amount of cheap debt is decreasing. Market-based loans and bilateral loans are also increasing. These loans have high interest rates and short repayment periods. Again, because the grace period of borrowing for many of our mega projects has ended. Real repayment pressures have also increased, and will continue to increase in the future.”
“In this situation, we have to be careful in repaying the loans to our development partners. Although we have not defaulted yet, there is still a need to increase export income and expatriate income along with picking good projects,” he added.
According to ERD data, Bangladesh has received $7.24 billion in commitments from development partners in the first nine months of the current fiscal year, which is 43 percent higher than the same period last fiscal year.
The officials of ERD said that the preparation for the loan process was good. This is because since the beginning of the financial year, it has been possible to enter into loan agreements with development partners for many projects.
They said that in the previous fiscal year, due to lack of preparation, it was not possible to make loan agreements for many projects at the beginning.
The ERD official also said that in the current financial year, the target is to collect pledges of $10.194 billion from various development agencies so far.
According to ERD data, the highest number of commitments received in the first 9 months of the current financial year came from ADB. A commitment of $2.62 billion has been received from this organization. In addition, commitments of $2.03 billion from Japan and $1.41 billion from the World Bank have been received.
Meanwhile, in the first 9 months of the current financial year, foreign remittances have reached 5.63 billion dollars. Exemption was $5.36 billion in the same period of the previous fiscal year.
ADB has given the biggest disbursement during this period. The company has written off $1.40 billion. Japan contributed $1.358 billion, World Bank contributed $967 million, Russia contributed $807.50 million and China contributed $361.71 million.
