The Bangladesh Air Force (BAF) is not able to pay the instalments of one aircraft and two helicopters bought on loan from Russia due to international sanctions.
Two instalments of the loan worth Tk 515 crore have already been stuck. The BAF has returned the money to the Finance Division after failing to pay the instalments, according to a letter sent to the finance ministry from the BAF.
According to the letter, Bangladesh signed a $1 billion state credit loan (G2G) agreement with the Russian Federation to buy two helicopters and an aircraft for the air force.
So far, nine instalments of this loan have been paid. But the BAF could not pay the two instalments of the current financial year 2022-23 after the international community imposed sanctions on different Russian banks due to the Russia-Ukraine war.
According to the sources, Tk 514.99 crore was allocated as essential expenditure in the budget for FY23 to pay the 10th and 11th instalments of the loan. But due to the sanction on Vnesheconom Bank, a Russian bank through which Bangladesh repays the loan, the instalments could not be paid.
As a result, the allocation will remain unspent in the current financial year. However, it will have to be paid in the future subject to new instructions from Russia regarding payment of instalments or normalisation of the current situation in Russia.
Meanwhile, the purchase of all types of aircraft has been stopped as part of the government's austerity measures to tackle the ongoing inflation. In this situation, out of the Tk 1290 crore allocated in the revised budget for the current financial year to the aviation sector, only Tk 611.90 crore has been paid as essential expenditure for buying two aircraft. The remaining allocation of Tk 678.09 crore has been returned to the Finance Division.
In the letter sent to the finance ministry, the BAF requested to take necessary measures to increase the budget ceiling in the fiscal year 2023-24, so that the 10th and 11th instalments of the state credit loan can be paid after receiving new instructions from Russia regarding the issue.
Meanwhile, $318 million was approved to repay the instalments of the Russian loan, taken to build the Rooppur Nuclear Power Plant in Pabna, in Chinese currency yuan. But the payment got stuck at the eleventh hour due to the new US sanction imposed on the Russian company building the power plant.
The Russian contractor building the Rooppur power plant is a subsidiary of Rosatom, the Russian nuclear power-producing company. Rosatom is one of the companies on which the US Treasury Department imposed new sanctions on April 12.
The US and Europe have imposed various sanctions on Russia since the beginning of the war in Ukraine in 2022. The main purpose of these sanctions was to narrow the path of economic transactions in Russia. Russia's trade with Bangladesh has been repeatedly hampered due to the US sanctions.
As a result, Bangladesh in consultation with Russia decided to repay the loans in Chinese yuan as an alternative method. Now uncertainty has been created over the alternative method also.
However, many economists believe that Bangladesh will suffer in the end if the debt is repaid in yuan.
