Some economists have been saying for a long time that the previous Awami League government took too much debt during their long tenure in the name of development activities. Many of these expensive projects are unnecessary or less effective and are not yielding good results. Because of this, what happened happened. Now the loan has to be paid by borrowing. In the first four months of the current financial year, the amount of foreign debt that has come in, has to be repaid.
According to the latest report of the Economic Relations Department (ERD), in the first four months (July-October) of the current financial year, the foreign debt has been written off at 120 million dollars or 14 thousand 424 million rupees (120 rupees per dollar). And during this time foreign debt has to be paid 143 million 79 million dollars. It had to repay 110 crores of debt in the last financial year. Compared to the same period of the last financial year, the loan repayment has increased by 33 million 63 million dollars. Of this, the actual payment alone increased by $26 million. However, foreign loan commitments have decreased in the current financial year.
According to ERD sources, repayment of several big projects including Padma Rail Link, Metro Rail, Karnaphuli Tunnel has started in the current financial year. As a result, additional pressure has been created to repay the foreign debt. Among the projects, Padma rail link and Karnaphuli tunnel are not getting much return. Maintenance expenditure is more than income. The government has to repay the loans of these projects from its own funds.
In the last financial year, a record 3.35 billion dollars of debt had to be paid in the history of the country. The figure is $680 million more than the debt repaid in the previous fiscal year. In the last financial year 2022-23, 267 crores of debt was disbursed. Mainly because the interest rate has increased, additional pressure has been created to repay the loan. Interest payments alone increased by $41 million in the last financial year.
In the current financial year, the amount of repayment of this debt will reach 4.5 billion dollars.
Meanwhile, in the first four months of the current fiscal year 2024-25, pledges of $254.5 million have been received from development partners. In the same period of the previous financial year it was 362 million 85 million dollars. That is, compared to the fiscal year 2023-24, the commitment has decreased by 90 percent.
ERD officials said that the loan agreement proposals made during the previous government are being reviewed by the current interim government. Due to this, loan agreements with development partners are not being completed. However, after the review, the proposed loan process will begin. Officials hope that the promises will be fulfilled according to the target. Officials also said that after the formation of the interim government, multilateral and various bilateral development partners including the World Bank, Asian Development Bank (ADB) have given preliminary assurances of loans and budget support for various projects in Bangladesh. In this November, loan agreements have been signed for several projects.
When asked about this, the executive director of the private research organization Institute for Inclusive Finance and Development (INM) economist Dr. Mustafa K Mujeri told Ajker Patrika that under the project, the disbursement depends on the progress of the work. Development partners release money based on the amount of work done. Since there was no work for two months due to the agitation, the loan disbursements were also reduced. If the progress of the work increases, the discount will also increase. It is temporary.
Bangladesh has to pay high interest for market-based loans. The Secured Overnight Financing Rate (SOFR) has risen amid the Ukraine-Russia war situation. Currently, the SOFR is over 5 percent, which was below 1 percent before the Russia-Ukraine war situation. Again, the market-based debt of Bangladesh is also continuously increasing.
In this moment of dollar-crisis, foreign debt repayment is creating a big strain on the economy. In response to the question of whether the government will repay the foreign debt with loans, the former chief economist of the World Bank's Dhaka office said. Zahid Hossain said, 'If you pay the debt with the loan, the debt burden will continue to increase. In this case productivity should be ensured in the use of loans. It should be noted that returns are available on time using loans. And foreign currency will be needed to pay foreign debt. Therefore, policies need to be put in place so that there is no hindrance in the inflow of foreign currency.'
