Debt payments strain budget allocation
Staff Reporter :
After passing the grace periods for some major mega projects, Bangladesh is facing increased pressure on its budgetary allocation to payback the external debt comprising principal and interest amounts.
According to the estimation by the Ministry of Finance in the current financial year of 2023-24 Bangladesh has to pay USD 3.28 billion in interests and principal.
Earlier, the amount of foreign debt payment was USD 2.68 billion in the previous fiscal year FY23.
The payment of foreign loans will keep rising in the coming years which will exceed USD 4 billion dollars in next fiscal year. The amount will increase to USD 5.15 billion in the fiscal of 2029-30. Later, the payment of the loan will decrease said the finance ministry estimation.
A finance ministry report recently revealed that the total foreign loans for public sector of Bangladesh stand at USD 70.76 billion dollars in January 2024.
Of this, USD 62 billion dollars have been taken for development projects, which have increased by two and a half times in ten years.
It will peak as high as USD 85.24 billion in the coming years. However, the loan will decrease to USD 72.91 dollars in the fiscal year of 2029-30 after the payments made down these years, the report said.
Bangladesh’s external debts, including public sector debts and private sector debts, reached $98.93 billion at the end of June last year, surging from $45.23 billion in June 2017 and $23.5 billion in June 2009, according to Bangladesh Bank data.
As a result, loan payment in the six months of FY24 has increased by 49 per cent. The Ministry of Finance sources also said, USD 1.57 billion in interest and principal amount have been paid to the development partners in the six month of the current fiscal year.
The amount was USD 1.05 billion dollars during the corresponding period of last fiscal year.
Tackling the rising external debt payments, government is currently facing multiple challenges as the country’s forex reserves are depleting consistently. At the same time it depleted wallet of the forex weakened the local currency, further increasing the government’s foreign debt service obligations due to adjusting exchange rates.
According to the latest data from the central bank, county’s forex reserves as per IMF calculation method fell to $19 billion at the end of the day on Thursday.
Regarding the uptick in external debt burden, Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), said the debt burden will further balloon on the inclusion of Bangladesh’s annual fees and shares of investments as a member of international organisations.
Dr Ahsan H Mansur also suggested taking caution to implement projects with competitive tender on bilateral agreement as the payment of loan including interest becoming the second highest expenditure for the coming budget.
