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Bangladesh's foreign debt repayment surges

| Updated: March 24, 2022 20:03:53


Bangladesh's foreign debt repayment surges

The intensity of foreign debt servicing has swelled substantially, with 13.56 per cent higher payments in the first eight months of the current fiscal year (FY 2021-22) than that of the same period last FY, officials said on Wednesday.

The country repaid US$1.34 billion in principal and interest against its outstanding medium- to long-term (MLT) external loans during the July-February period of this FY as compared to $1.18 billion in the same period of the previous FY, Economic Relations Division (ERD) data showed.

"The extent of foreign debt servicing will rise in the coming days as the grace period of many big loans will expire. Within the next 2-3 years, a big chunk of repayment will have to be made," said a senior ERD official.

He added that the amount would increase substantially after 4 years when repayment of the $12 billion Russian loan taken against the Rooppur Nuclear Power Plant (RNPP) would start.

According to the ERD, the government repaid US$1.91 billion against foreign debts in the last FY.

In FY2020, Bangladesh paid $1.73 billion against its MLTs, followed by $1.59 billion in FY2019 and $1.41 billion in FY2018, the ERD data showed.

Another ERD official said that the net aid inflow would be contracted in the coming days as repayment for most of the large loans, especially of the megaprojects, will start within the next 2-5 years.

"When the year-on-year disbursements of the big foreign loans against some mega projects like the RNPP project would decline or end, the net external loan will get under further pressure," he told the FE, requesting anonymity.

He said the debt servicing started to swell from FY2017 when the government repaid $1.12 billion against the outstanding loans, and the debt servicing gradually rose in the following years at incremental rates. Meanwhile, the development partners disbursed $5.89 billion worth of foreign loans during July-February period of the current FY, ERD data showed.

The amount was 58 per cent higher than $3.73 billion disbursed during the corresponding period of last FY.

Of the total, Bangladesh received $5.74 billion worth of loans and $156.59 million in grants during the July-February period of this FY.

The ERD official said the aid disbursement swelled due to an impressive fund release by the second largest multilateral development partner-the Asian Development Bank (ADB) -- during the first eight months.

The Manila-based lender alone disbursed $1.85 billion, single largest portfolio in a year, he added.

Besides, Japan released an impressive amount of $1.27 billion in assistance during the July-February period of the current FY. Bangladesh's largest multilateral lender-the World Bank-had disbursed $711 million worth of MLTs during the same period, ERD data showed.

Meanwhile, the external development partners made a commitment for $4.84 billion worth of loans and grants during the first eight months of FY2022, $882 million more than that of the same period of FY2021.

Out of the $4.84 billion commitment, the development partners confirmed $4.69 billion worth of loans and $150.66 million in grants for the July-February period.

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