Country's foreign debt rose by $3.39b in 2024, outstanding now $103.64b

After receiving long-term loan tranches from the International Monetary Fund, the World Bank, and various bilateral and multilateral development partners, the country's foreign debt increased by $3.39 billion in 2024.

According to a report by the central bank, at the end of December 2024, the outstanding public foreign debt stood at $103.64 billion, of which at least $84 billion is long-term debt. 

Additionally, private foreign debt stands at $19.42 billion. However, over the three months from September to December, the outstanding foreign debt decreased by $736 million.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, told The Business Standard, "Over the past year, we received budget support funds from the World Bank, including about $500 million in December alone. We also received long-term loans from the IMF and the Asian Development Bank (ADB), which increased debt in the public sector."

Criticising the former Awami League government for taking foreign loans for many unnecessary projects, the economist said, "Projects like the Rupsha Power Plant were taken up without ensuring raw material supply. Similarly, the Karnaphuli Tunnel was constructed without properly assessing how much productivity it would add to the economy. 

"These have become burdens for us. When undertaking projects with foreign loans, the return rate from the project must exceed the loan's interest rate – something the previous government did not consider."

An analysis of central bank data shows that public sector debt rose by nearly $5 billion in 2024. In contrast, private sector debt decreased by $1.5 billion.

When asked why private sector foreign debt is decreasing, Zahid Hussain explained, "Short-term debt in the private sector has decreased more. One reason is the instability in the dollar market in 2024. Additionally, after the change in government in August, there was a lack of confidence among businesspeople, which is a major reason for the decline in loan uptake."

"In 2024, the private sector repaid more loans than it acquired. Confidence has not fully returned yet, although compared to last August, the lack of trust has lessened somewhat. Still, the reasons for the decline in private sector debt are not positive," the economist added.

According to the central bank, in 2024 the private sector received $1.76 billion in medium- and long-term loans. In contrast, they had to make payments totaling $2.25 billion, including principal, interest, and commissions.

Commenting that demand for foreign loans in the private sector hasn't dropped much, Zahid Hussain added, "Supply has decreased due to reasons like weaknesses in the banking sector, lower country ratings by international agencies, and delays in foreign payments. As a result, even if there is demand in the private sector, they are not always able to secure enough loans."

A policymaker at the central bank stated that a large portion of the foreign loans are long-term, which reduces repayment pressure. These loans also generally carry lower interest rates. However, the burden of exchange rate fluctuations must be borne. "If the former Awami League government had properly utilised these loans, we wouldn't be facing such severe challenges now," the official said.

Pointing out that even many developed countries take foreign debt, the official added, "Compared to many other countries, our foreign debt-to-GDP ratio is not very high. What matters is how we utilise the loans we take from abroad."

Zahid Hussain noted that with the increase in foreign debt in 2024, repayment pressure will also rise in the future. However, he remarked that the loans from the World Bank and IMF are being used for economic reforms, so they are not bad loans. "Even though repayment pressure may increase in the future, if foreign loans are utilised properly, repayment won't be a problem."