Bangladesh’s foreign loan interest payments triple in Jul-Sep

TBS Infographics

The impact of the taka's devaluation on Bangladesh's foreign loan payments has become evident in the latest data as the government paid a staggering Tk4,147 crore or over $378 million, in interest alone, during the July-September quarter of the current fiscal year. 

This figure represents a significant increase, surpassing the previous year's payments by more than threefold.

According to data from the Economic Relations Division (ERD), released yesterday, the government paid Tk1,297 crore, approximately $137 million, in interest during the same quarter just a year ago.

However, there is positive news to be found as well. Foreign loan commitments have witnessed a remarkable surge, increasing more than sevenfold to $2.88 billion in the quarter, compared to a mere $405 million in the same period of the preceding year.

ERD officials said principal repayment of some large loans, including the Bangabandhu Sheikh Mujibur Rahman Tunnel, has begun with the expiry of their grace period.

In addition, the amount of government's market-based loans also increased. Floating interest rates also rose in these market-based loans. Two years ago, the Secured Overnight Financing Rate (SOFR) interest rate on market-based loans was less than 1%, but it is now 5% higher. Compared to the first quarter of the previous fiscal year, only interest payments in the first quarter of the current year surged by 176%. As a result, the pressure on foreign debt repayment has increased.

The payment of foreign loans, including interest and principal, has increased by 65.5% in terms of US dollars.

According to the ERD officials, the government took less debt for development projects in the previous fiscal year, focusing on budget support, considering the economic situation. However, this time, the government has taken a strategy to take loans for planned projects. In the current fiscal year, the target is to get $8.977 billion in loan commitments, of which one-third was possible to get in the first quarter. As a result, the commitments rose by 610.5% in the July-September period of the current fiscal year.

Bangladesh received the most commitments from Japan in the first quarter. The country received a commitment of $1.5 billion from Japan in the period. There was no loan agreement with Japan at the same time a year ago. In previous years, loan agreements with Japan were mainly made at the end of the fiscal year. However, the government was able to sign loan agreements with Japan at the beginning of the fiscal year this time.

The situation is similar with the Asian Development Bank (ADB). There was no loan agreement with the ADB in the first quarter of the previous fiscal year. However, the government signed loan agreements amounting to $790 million with the agency by September this year.

In addition to Japan and the ADB, the government received commitments of $300 million from the World Bank in the first quarter of FY24. In addition, the government received commitments of $212 million from European countries.

Meanwhile, although the commitments of development partners have increased, the disbursement of foreign loans has not increased due to the lack of capacity to implement development projects. In fact, the disbursement of foreign loans has decreased by 5% compared to the same period last year. In the first quarter of the current fiscal year, development partners disbursed $1.28 billion, which was $1.35 billion in the same period last year.

Japan disbursed the highest amount among development partners in the first quarter. It disbursed $427.8 million in the first quarter. In addition, the ADB disbursed $225.6 million, the World Bank disbursed $218.89 million, and Russia disbursed $210.92 million