One of the things economists in the country had pointed out in years past was that the government should be cautious in racking up loans for all sorts of projects. The opening up of billions of dollars in foreign loans ushered in by foreign countries did come with a catch. In case of the soft loans that multilateral development donor agencies and banks like the Asian Development Bank or the World Bank granted, repayment periods were spaced out over a long time. The interest amounts payable were also much milder. Sadly, for a multitude of reasons, after the bungling with the Padma Bridge financing, the country's policymakers turned to commercial loans which had become available.
Again, the cautionary message from economists about overshooting implementation period, conducting proper feasibility studies about which projects made sense - much of this advice were not heeded. So today, the country which is in the midst of its own recession, partly due to the global recession is having to service multi-billion dollar external debts, both in terms of principal amounts and interest accrued.
Indeed, this heavy debt servicing began from the last fiscal (FY2022) with amount totalling to US$2.07 billion. Already the amount has crossed $2.67 billion as of FY2023. If one looks at the monthly figures, the country repaid $179.032 million in July 2022, which has now increased to $253.09 million in July 2023. These figures are not going to be decreasing, rather, estimates point to the fact that Bangladesh may well have to pay beyond the $3.0 billion as debt servicing for medium to long-term loans taken so far. Such news could not have come at a worse time. The economy is already reeling with an ever-depleting foreign exchange reserve, one that started its downhill trajectory at about the same time when foreign debt-servicing came on line.
According to a report published in this newspaper, "the government repaid a record-high amount of US$253.09 million in a month to the lenders in July, officials said Friday, to start a payback process in the new fiscal year (FY) 2023-24 against foreign borrowings." This represents the single largest amount of debt the country has serviced in the first month of the current fiscal, the last highest amount had not exceeded more than $200 million in the beginning of any fiscal. As per government figures, this amount is going to rise in the coming months and this will be how things will have to be managed from now on.
Things have gotten to the stage where the government has been forced to borrow heavily simply to service the shorter period loans and also some of the concession project loans which have matured. Obviously, things have not gone according to plan. The assumption that the country would continue to grow at a steady 6+ per cent per annum and remittance would remain strong was perhaps somewhat naïve to begin with. External shocks were not taken into account. While no one could have predicted a prolonged war in Europe, the continued lapse in project completion of several mega-projects over the years should have been looked into, but was not. It is time to stop taking up any more infrastructure projects with foreign loans and expedite the completion of those in the pipeline. There is no point increasing the debt burden, especially at a time when imports are being squeezed due to the dollar crunch. The economy is slowing down as production gets hit. Debt servicing cannot be put off but adding more external debt for financing infrastructure projects at this stage would be suicidal.