Rising foreign debt doubles Bangladesh's interest payments: Reports
27 Mar 24 2 min read
Insights
- Expenditure on interest payments for foreign loans increased by 100 per cent in initial eight months of current fiscal year.
- Increase in interest payments attributed to several factors.
- Budget support from the development partners aimed at aiding recovery from impacts of COVID-19 and Russia-Ukraine war contributed to rise in interest costs.
This significant increase from the previous fiscal year’s $403 million reflects the country’s growing burden of foreign loans.
The surge in interest payments is attributed to several factors. Firstly, as major infrastructure projects such as the Dhaka Metrorail, Matarbari Coal-fired power plant, and Rooppur Nuclear Power Plant near completion, increased fund allocations become necessary.
Additionally, substantial budget support from development partners over the past three years aimed at aiding Bangladesh’s recovery from the dual impacts of the COVID-19 pandemic and the Russia-Ukraine war has contributed to the rise in interest costs.
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Moreover, escalating interest rates on market-based loans further strained the government’s finances. Despite the challenges, Bangladesh has witnessed a remarkable surge in foreign loan pledges, soaring by over 318 per cent to $7.20 billion, compared to $1.78 billion in the corresponding period of the previous fiscal year.
This surge has been accompanied by a 2.48 per cent increase in foreign loan disbursements, reaching approximately $5 billion.
However, with increased commitments and disbursements, the government’s debt repayment obligations have also escalated. Debt repayment rose by 42.55 per cent to $2.03 billion from the same period in the previous fiscal year.
The government has diligently repaid $1.22 billion in principal on various loans during the period, highlighting its commitment to fiscal responsibility despite the challenges posed by rising interest payments and foreign debt.
Fibre2Fashion News Desk (DR)
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