Bangladesh's foreign debt payments rise 25% to $3.2b in 9 months
Principal repayments saw a 32.6% rise in the first nine months of the current fiscal year
Highlights
- Repayments rise, but commitments-disbursements from dev partners decline
- Govt receives $3b in foreign aid commitments, down from $7.24b last year
- Fund disbursements drop by 14.6% to $4.8b, down from $5.63b last year
In the first nine months of the current fiscal year (FY25), Bangladesh repaid $3.212 billion in principal and interest to development partners, marking a 24.9% increase from the $2.571 billion paid during the same period last fiscal year, according to the latest Economic Relations Division (ERD) report.
The report published today (30 April) details a 32.6% rise in principal repayments, with $2.011 billion paid in July-March of FY25, up from $1.516 billion in the same period of FY24. Interest payments also rose by 13.8% to $1.2 billion, compared to $1.05 billion in the same period last fiscal year.
According to ERD officials, the debt repayment pressure is growing as the grace periods for large loans and budget support, mostly taken for various mega projects under the previous government, are ending. Additionally, high market-based interest rates have contributed to the rising burden.
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Total repayments of FY24 amounted to $3.37 billion.
Mustafa K Mujeri, executive director at the Institute for Inclusive Finance and Development, said Bangladesh has taken on several large loans in recent years, many of which came with tough conditions – short repayment periods and high interest rates.
The grace periods on a number of these loans have already ended, which has led to a rise in repayment obligations, he said.
Mujeri added that within the next one to two years, the grace period for several loans taken for Russia-backed nuclear power projects will also expire, which is expected to cause a significant jump in debt repayments.
Repayment jumps, but commitment and disbursement fall
According to ERD data, although foreign debt repayments jumped, commitments from development partners have decreased, as well as the disbursement of funds.
Between July and March, commitments from development partners fell by 58.5%, with the government receiving $3 billion in commitments during this period, compared to $7.24 billion at the same time last year.
Similarly, disbursements from development partners dropped by 14.6%, with $4.808 billion in foreign loans and grants disbursed, down from $5.631 billion during the same period last fiscal year.
Mujeri said, "Instability continues to persist in Bangladesh. Without a stable government, more foreign aid commitments from development partners cannot be expected. Although the interim government is proceeding cautiously in taking foreign loans, this has led to a decrease in foreign loan commitments."
Also, the impact of political instability has led to a reduction in development activities, which in turn has affected the implementation of development projects. As a result, disbursements have decreased, he added.
ERD officials said the interim government has decided to reduce foreign loans in the medium-term debt strategy. However, some projects on capacity building, social protection, and infrastructure may still secure foreign loans by the fiscal year's end. Discussions on budget support from the World Bank and ADB are ongoing, with expectations of increased commitments by year-end.
Sources from the Implementation, Monitoring, and Evaluation Division said the pace of foreign-funded project implementation slowed after the government change in August last year, with contractors leaving and project directors changing. Political instability has also stalled development activities, leading to reduced foreign loan disbursements.
Top commitments received from Japan, WB, ADB
According to ERD data, in March, a loan agreement worth $582 million was signed with Japan. With the previous $252 million, Japan's total commitment reached $834.12 million by March, the second-highest commitment this fiscal year.
From July to March, the World Bank committed $944.5 million, followed by the ADB with $700 million. The Asian Infrastructure Investment Bank committed $160 million.
During the July-March period, the ADB disbursed the most, $1.226 billion. The World Bank followed with $1.067 billion. Japan disbursed $892.26 million, Russia $670.28 million, China $320.74 million, and India $136.55 million.
