Bangladesh set to pay $4b debt in 3 years

Even though the country’s economy is in a downturn due to the ongoing global crisis, Bangladesh will have to make large outstanding repayment instalments to Russia, China and India in the next two-three years.

According to Economic Relations Division (ERD) sources, by FY2024-25, Bangladesh will have to pay around $4 billion, including interests, to these countries, which have provided loans as development partners for constructing major infrastructures as part of different development projects.

So far, Bangladesh has signed loan agreements with these three countries for over $3.5 billion in the last few years. The country will have to pay the loan back with interest — 2.2 per cent each — in the next 10-15 years.

But the volume of loan repayment instalments may double within the next three years, due to the smaller repayment period, volatile foreign exchange rate and other related reasons.

The World Bank, Asian Development Bank, Japan and others countries and donor agencies provide loans against a repayment period of 30-40 years. While the interest rates in both cases are the same, the loan repayment period for Russia China and India is half.

Taking to The Business Post, State Minister for Planning Shamsul Alam said, “It won’t be difficult for us to repay the loans to India, China and Russia. We have enough foreign currency in our reserve.”

“The government has taken loans from development partners considering the country’s overall situation. Our economy is still stable and strong,” he added.

With the project assistance coming from these three countries, the government is carrying out several projects, including the Rooppur Nuclear Power Plant (RNPP), the Bangabandhu Sheikh Mujibur Rahman Tunnel under the Karnaphuli River in Chattogram and the Dasherkandi Sewage Treatment Plant in Dhaka.

The loan repayment process of most of these projects is set to begin after the grace periods end in the next two-three years.

According to ERD sources, Bangladesh has so far paid back a foreign debt of $2.01 billion, including capital and interest, in FY2022-23. The volume of foreign debt is likely to exceed $4 billion in FY2024-25.

Meanwhile, Bangladesh will also have to bear a 2 per cent service charge for the London Interbank Offer Rate (LIBOR). Usually, the LIBOR is 2.5-3 per cent.

The construction of RNPP, one of the fast-track mega projects, started in 2019 and is scheduled to end in 2023. The project cost is around $13 billion and Russia is funding the majority of the expenditure by providing $11.38 billion. Bangladesh already repays outstanding loans to Russia on a half-yearly basis.

China has given a loan of $1.95 billion to build the Karnaphuli tunnel. The project’s construction is at the last stage and Bangladesh will start making the repayment instalments from this fiscal year.