Soaring foreign-debt servicing further sinks forex reserves

Foreign-debt service by Bangladesh against loan buildups begins to soar, rising to US$1.56 billion in last six months, which is further squeezing the country's emaciated foreign-exchange reserves, official statistics show.

The repayment in the first half (H1) of this fiscal year to foreign lenders accounts for over half-a-billion- dollar increase, $514.38 million, from the mark in the corresponding period of last fiscal, officials said Tuesday.

They said the repayment jumped due mainly to a record-high amount of interest payments against the outstanding total loans.

Such a high rise in debt service against medium-to long-term (MLT) loans already exerts further pressure on the foreign-exchange reserves, analysts say. The reserves were hovering over $20 billion in IMF arithmetic interpolated into a $4.7-billion loan package.

During the July-December period of last financial year (FY2022-23), the government repaid $1.05 billion to the foreign lenders, Economic Relations Division (ERD) data showed Tuesday.

According to the ERD, the government had spent a record-high amount of $641.66 million in interest payment on the outstanding foreign (MLT) loans during the first half (H1) of the FY2023-24. The amount was 133-percent higher than that in the same period last fiscal.

In the same period in FY2023, the government paid only $275.12 million as interest.

Besides, the government served $926.18 million worth of funds as the principal of outstanding loans, $148 million higher than $778.34 million in H1FY2023.

Meanwhile, foreign-aid disbursements and commitments both rose during the H1 of the current FY2024, the ERD statistics showed.

Although government's austerity and tight monetary policy amid global and local economic crises had hit the foreign-assistance inflow hard till November this fiscal, the external borrowings got boosted a bit to US$4.06 billion in December, they said.

During July-Dec of FY2023, the development partners had released $3.78 billion worth of loans and grants, the officials said.

At the same time, the overseas development partners made $6.99 billion worth of aid commitment in H1 this fiscal compared to only $1.76 billion in the same period last FY2023.

The country's major development partners, including China, India and Russia, had not made any aid commitment during the July-Dec period this fiscal.

Among the development partners, the Asian Development Bank (ADB) disbursed the highest amount of assistance during the period followed by the World Bank, Japan, Russia and China.

In the H1, the ADB released $1.11 billion, the WB $892.23 million, Japan $812 million, Russia $544.10 million and China $361.71 million, ERD statistics showed.

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