Annual debt servicing swells
Friday, 14 August 2009
FHM Humayan Kabir
The country's annual foreign debt servicing has swelled over the last one decade and that almost levelled the amount of net inflow in fiscal 2008-09.
Finance ministry officials said Bangladesh received only $1.73 billion worth of loan and grants in 2008-09 while paid a record $828.51 million on account of debt servicing leaving the net inflow at US$898.38 million in that year.
The repayment against the foreign loan is $60.04 million higher in 2008-09 over that of 2007-08.
The government paid $768.47 million for debt servicing in the FY2008, when it received $2.06 billion worth of grants and loans from different multi-lateral and bilateral donors, Economic Relations Division (ERD) officials said.
The debt servicing has started bloating since FY1999 when the country paid $538.9 million on account of principal and interest against the outstanding loans, official data showed.
The amount was $443.9 million in fiscal 1997-98.
The ERD officials said out of the $828.51 million debt payment in last fiscal 2009, the government repaid $639.24 million as principal and $189.27 million as interest.
"Increasing receipt of foreign loans, starting of repayment of big loans due to expiry of grace period and un-favourable exchange rate are the major reasons for higher debt payment," a senior ERD official told the FE.
Large trade deficit, widening gap between savings and investment, slow growth of revenues and higher growth of public expenditure have also contributed to the soaring amount of debt servicing, the official added.
After servicing the debt in the last FY2009, the country's total outstanding loan stood at $19.44 billion, ERD official said.
Former finance adviser Mirza Azizul Islam said the net aid inflow decreased mainly due to government's failure in implementing the development projects in time.
"The best way to boost the foreign aid flow is to ensure project implementation efficiently," he told the FE.
Mr. Aziz said: "We are the victim of success. As the country's macro economy has been performing well since 2000, the donors have started raising the amount of loan instead of the grant, which has increased the level of repayment."
If the net aid flow decreases and debt servicing increases the balance of payment and the budget will be affected to some extent, he opined.
He said the government should concentrate in implementing the current development projects in a bid to get more foreign aid. The country has more than $7.0 billion in the aid pipeline, the former finance adviser said.
The country's annual foreign debt servicing has swelled over the last one decade and that almost levelled the amount of net inflow in fiscal 2008-09.
Finance ministry officials said Bangladesh received only $1.73 billion worth of loan and grants in 2008-09 while paid a record $828.51 million on account of debt servicing leaving the net inflow at US$898.38 million in that year.
The repayment against the foreign loan is $60.04 million higher in 2008-09 over that of 2007-08.
The government paid $768.47 million for debt servicing in the FY2008, when it received $2.06 billion worth of grants and loans from different multi-lateral and bilateral donors, Economic Relations Division (ERD) officials said.
The debt servicing has started bloating since FY1999 when the country paid $538.9 million on account of principal and interest against the outstanding loans, official data showed.
The amount was $443.9 million in fiscal 1997-98.
The ERD officials said out of the $828.51 million debt payment in last fiscal 2009, the government repaid $639.24 million as principal and $189.27 million as interest.
"Increasing receipt of foreign loans, starting of repayment of big loans due to expiry of grace period and un-favourable exchange rate are the major reasons for higher debt payment," a senior ERD official told the FE.
Large trade deficit, widening gap between savings and investment, slow growth of revenues and higher growth of public expenditure have also contributed to the soaring amount of debt servicing, the official added.
After servicing the debt in the last FY2009, the country's total outstanding loan stood at $19.44 billion, ERD official said.
Former finance adviser Mirza Azizul Islam said the net aid inflow decreased mainly due to government's failure in implementing the development projects in time.
"The best way to boost the foreign aid flow is to ensure project implementation efficiently," he told the FE.
Mr. Aziz said: "We are the victim of success. As the country's macro economy has been performing well since 2000, the donors have started raising the amount of loan instead of the grant, which has increased the level of repayment."
If the net aid flow decreases and debt servicing increases the balance of payment and the budget will be affected to some extent, he opined.
He said the government should concentrate in implementing the current development projects in a bid to get more foreign aid. The country has more than $7.0 billion in the aid pipeline, the former finance adviser said.