Foreign loan disbursements fall 7.4% YoY
Foreign aid commitments increased by about 7.23% in FY23
The year-on-year disbursements of foreign loans from development partners have decreased by 7.4% in the 2022-23 fiscal year but commitments of loans increased by about 7.23%.
According to data from the Economic Relations Division (ERD) of the finance ministry, In the recently concluded FY23, the foreign loan disbursement has dropped to $9.267 billion from a record $10 billion disbursed in the previous 2021-22 fiscal year.
And commitments of foreign aid increased to $8.798 billion in FY23, up from $8.20 billion in the previous fiscal year, ERD data shows.
ERD officials said the disbursement did not see a rise due to the slow implementation of the ongoing development projects by the government. Many projects were stalled due to costly construction materials, high dollar rates and complexities in import letter of credit (LC) openings. The utilisation of foreign loan allocation in Annual Development Programmes (ADP) was slightly less in Fy 23 compared to the previous fiscal year.
In addition, the development partners released more funds for budget support and vaccine purchase in the 2012-22 financial year. But for the 2022-23 fiscal year, the government had no loan assistance for vaccination, they said.
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Japan disbursed the highest amount of loans in FY23, about $2.04 billion. Besides, the World Bank disbursed $1.93 billion and the Asian Development Bank $1.56 billion.
Loan commitments rise
Despite slightly lower disbursements, commitments of foreign loans increased in the last financial year.
ERD officials said the highest amount of loan commitment among development partners in the last fiscal year came from the World Bank with a total of $3.60 billion for nine projects, including budget support of $500 million.
Bangladesh has never received so much loan commitment from the World Bank in any fiscal year before.
And a commitment of $1.88 billion was received from the Asian Development Bank and $1.51 billion from Japan.
Foreign debt repayment
The government's foreign loan repayments saw a 32.4% rise in FY 23 compared to the previous fiscal year.
Meanwhile, the increase in interest rates in the international market has increased the pressure on the government to repay its foreign debt. This resulted in a 32.4% increase in external debt repayments in FY 2022-23 as compared to the previous FY.
According to ERD, the government paid $2.67 billion ($935.66 million interest and $1.73 billion principal) to various development partners in FY23.
In the 2021-22 fiscal year, the government paid $2.017 billion ($1.52 billion principal and $491 interest).
ERD officials said the Secured Overnight Financing Rate (SOFR) rose to over 5% due to the Russia-Ukraine war. Because of this, Bangladesh now has to pay more than 5% interest for market-based loans. Before the war, this rate was less than 1%.
