Sunday, 23 June, 2024, Reg No- 06
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Bangladeshs debt servicing for foreign loan soars

Published : Tuesday, 23 April, 2024 at 12:00 AM  Count : 216

Bangladeshs foreign debt servicing surged by 49 percent, driven by a spiralling interest payment that crossed the $1 billion mark for the first time. This increase is due to the countrys rising borrowing from high-interest sources.

In the July-March period of the fiscal year 2023-24, the government paid $1.05 billion, which is 117 percent higher year on year, up from $485 million during the same period a year ago. This data was released by the Economic Relations Division (ERD) on Sunday.
During the same period, the repayment of the principal amount of foreign loans rose by 22 percent year on year to $1.5 billion.

Overall, debt servicing soared by 49 percent to $2.57 billion in the July-March period of FY24, compared to the same period a year ago.

The pressure on loan servicing is rising with the governments increased borrowing to finance large infrastructure projects. These projects include the Dhaka Metro Rail, Matarbari Coal Power Plant, and Rooppur Nuclear Power Plant, funded by bilateral and multilateral sources.

As of December 2023, the external debt of the Bangladesh government stood at $79.6 billion. This figure was approximately over 13.7 percent of the nations Gross Domestic Product in the fiscal year 2022-23.

The government has borrowed a good amount of money from multilateral agencies in recent years. This was done to help the economy navigate the crisis caused by the coronavirus pandemic and the global economic turmoil following the Russia-Ukraine war.

Officials have stated that loans taken from foreign sources now have a shorter grace period. Additionally, interest rates are now tied to the global reference rate -- the Secured Overnight Financing Rate (SOFR). This rate replaced the London Interbank Offered Rate (Libor) last year. The SOFR rate has seen an increase in recent periods,.

Official data revealed that Bangladesh paid $935 million in interest payments in FY23, nearly double the $491 million paid a year ago.

The latest data from the ERD showed that the overall commitment from foreign lenders grew by 135 percent year on year to $7.2 billion in the July-March period of FY24. However, disbursement only increased by 5 percent year on year to $5.6 billion in the nine months leading up to the end of March 24.

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