Pressure mounts on debt repayment from Russia, China, India
Bangladesh is reportedly facing mounting pressure on foreign debt payments as it will have to make payments of US$ 3.28 billion during the current fiscal year (2023-24).
According to a newspaper report on Sunday, the country paid a foreign debt of US$ 2.74 billion, including principal and interest, in the outgoing fiscal 2022-23.
The report further said even if Bangladesh does not take any new loan, the country will have to pay the existing loan with principal and interest till 2062, taking around 39 years.
Reportedly, the pressure has further intensified with the start of loan repayments for the Rooppur Nuclear Power Plant. Additionally, there are repayment pressures for loans taken from China and India.
Officials from the Economic Relations Division (ERD) stated that the loan installment for the Rooppur power plant cannot be paid since Russian banks were banned from the SWIFT system. As a result, the amount is being held in a specialised account of Bangladesh Bank.
An amount totaling US$ 330 million has been kept in that account over the last year, and this amount is being shown as paid. The pressure of Russian loans has further complicated the situation.
This pressure is expected to increase in the coming days as the repayment of loans for the Karnaphuli tunnel project and Padma bridge rail link project will begin from this year.
Policy Research Institute executive director Ahsan H Mansur has said the pressure of repayment has just started. Besides, he said projects on Padma Bridge rail links have been undertaken at the cost of Tk 620 billion, which was financed by China.
Considering that no more than 4-5 trains will operate from the capital per day, it raises questions about how many years it will take to raise this money.
It is to be noted that the World Bank, Asian Development Bank, Japan, China, India and other development partners promised loans to Bangladesh last year was the lowest in five fiscals.
It was promised US$ 8.8 billion loan in the last year, which is US$ 1.37 billion less than the previous year.
According to ERD, the country had never witnessed such a significant drop in foreign assistance and commitment before.
Bangladesh has not faced such a situation in a long time. It seems like a sudden shock.
Declining global demand for RMG at the forefront, combined with negative remittance growth, volatility of local currency, fall of forex reserve, increased trade deficit, and inflation, has shaken the country’s economic confidence.
