Repayment eats up half of FY25 foreign aid

Bangladesh spent almost half of its FY25 foreign-aid receipts on repaying its external loans, officials said on Monday.

The government secured $8.11 billion in loans and repaid $4.087 billion in this period, the Economic Relations Division (ERD) data showed.

The repayment was the highest in Bangladesh's history.

In the previous FY24, the medium- to long-term loan repayment was recorded at $3.37 billion.

Three years back, Bangladesh's debt servicing cost was half the FY25 figure.

The government repaid $2.02 billion in FY22 and $2.67 billion in FY23 against the outstanding loans, the ERD statistics showed.

The multilateral and bilateral donors, including the World Bank (WB), the Asian Development Bank (ADB), and Japan, disbursed a total of $8.518 billion in aid, including $8.11 billion in loans and $404.56 million in grants, in the last fiscal year.

A senior ERD official said the country's debt burden is rising every year since the last government went for massive external borrowing.

Repayments would increase in the coming years as the grace period of many of the big loans would expire within a couple of years, he added.

According to the ERD, the government repaid $1.5 billion in interest and $2.59 billion in principal against the outstanding medium- to long-term loans in the last fiscal year.

In FY24, Bangladesh repaid $1.35 billion in interest and $2.02 billion in principal.

The country usually takes medium- to long-term concessional loans from different development partners, including WB, ADB, Japan International Cooperation Agency (JICA), Asian Infrastructure Investment Bank (AIIB), China, and Islamic Development Bank (IsDB), for development projects.

In FY25, the development partners provided $8.568 billion in loans and grants, $1.715 billion less than the $10.283 billion given in the previous fiscal year, ERD data showed.

Besides, foreign aid commitments in the last fiscal year were lower than the amount in FY24.

In FY25, development partners made commitments of $8.323 billion in loans and grants, $2.415 billion lower than the FY24 amount, official data showed.

Another ERD official said repayments would jump again in FY27 when the grace period for the Russian $11.38 billion loan given for the Rooppur nuclear power plant would end.

The economy would face a huge debt burden from FY27 as repayments for not only the Russian loans but also several budgetary support credits would start, he said.

When the economy faced a massive blow during the last two years of the ousted Sheikh Hasina government, it borrowed billions of dollars in budgetary support, mostly hard-term, he added.

"The maturity periods for these loans are shorter, and the grace periods are only three to five years. So, the repayment of most of these loans will start in the next fiscal year. This will cause the amount of total repayments to rise every year," he also said.