Bangladesh to repay $2b foreign debt

Bangladesh is set to repay the development partners more than $2 billion of foreign debt in the current fiscal year as the grace period of some loans is already over.

The country has repaid the development partners $2 billion of foreign debts to in the financial year 2021-22 of which $1.5 billion was the principal amount and $491 million the interest, according to the data of the Economic Relations Division (ERD).

The government also set a target to repay more than $2 billion to the development partners in the current fiscal year, said the ERD’s report titled ‘Flow of External Resources 2021-22’.

The repayment of foreign debts, including principal and interests, will increase as disbursement of funds from the development partners increases in every fiscal year, a senior official of the ERD told The Business Post.

Bangladesh will face the maximum pressure in repaying debts by $2.5 billion each year FY-2026-27, FY2027-28 and FY and 2028-29, he added.

Besides, the government has set a target to get $12.3 billion in foreign assistance from the development partners in the current fiscal year while the partners committed to providing $6 billion.

Meanwhile, the government received over $10 billion in foreign aid in the last fiscal year. External loan disbursement amounted to $7 billion in FY20 and $7.44 billion in FY21.

According to the report, Bangladesh has been repaying principal and interest amounting to $1 billion or more since FY13. The amount reached $1.9 billion in FY21.

Till July-December in FY23, Bangladesh repaid $1.05 billion to different development partners.

Former lead economist of World Bank Dhaka Office Zahid Hussain told The Business Post that the ERD’s foreign loan repayment calculation only features the government borrowing from multilateral development partners. “The repayment debt is already exceeded $2 billion, he said, adding that it would become $3-4 billion after FY 27 as repayment of some mega projects repayment of some big projects like Rooppur Nuclear Power Plant, Metro Rail and Karnaphuli Tunnel will begin.

The government should prepare for repaying the debt servicing of the projects, he said, adding that if the government does not take preparation to repay debts, then it will face pressure.

He suggested speeding up the foreign loan disbursements as repayment amounts are jumping up.

In the 51 years since independence till June 2022, the government borrowed more than $94 billion loans from various development partners. Of them, more than $50 billion is in the pipeline, the ERD report said.

Bangladesh takes more than $18 billion or 19.46 per cent of loans for the power sector and 16 billion or 17.1 per cent for the communication sectors from development partners since independence, the report added.

The commitment of the development partners is $153 billion in loans since independence, it added.