Country begins fiscal year with rising loan payback

Hefty debt servicing weighs on the country's already-depleting foreign-exchange reserves as Bangladesh began the fiscal year with rising loan payback, sources say.
The government repaid a record-high amount of US$253.09 million in a month to the lenders in July, officials said Friday, to start a payback process in the new fiscal year (FY) 2023-24 against foreign borrowings.
"This is the largest amount of debt servicing by Bangladesh in the first month of the year. In the past years, the government never needed to repay more than $200 million worth of debts in the first month," a senior Economic Relations Division (ERD) official told the FE.
He feels that the foreign-debt servicing against medium- to long-term loans (MLT) may cross $3.0- billion mark at the end of this fiscal as Bangladesh borrowed the highest sum of external credits over the last one decade.
In another development on the debt front, the government missed a handsome sum of foreign-aid from the development partners in the first month the current fiscal -- at a time when the country is in great need of foreign currencies to buttress the waning reserves in dollar.
And, in a further squeeze, the disbursement of foreign assistance from the pipeline also was comparatively lower this past July.
The development partners disbursed $405.79 million worth of loan in July this fiscal -- 17-percent lower than $488.04 million received in July FY2023, the official data showed.
According to ERD data, the development partners made a commitment of $5.39 million in loan in July. This time in the last fiscal, FY2023, the commitment of foreign assistance was $1.53 million.
Also this July, Bangladesh didn't obtain any grants from the overseas development partners. Foreign development partners, including the World Bank, the Asian Development Bank, Japan, AIIB, Islamic Development Bank (IsDB), and Russia, provide loans and grants to facilitate Bangladesh's development.
According to the ERD, the country spent $253.09 million in servicing interest and loans in a single month this July, $74.07 million higher than the debt servicing in the same month in FY2023.
In July FY2023, the government repaid $179.02 million against outstanding MLT loans, the official data showed.
Out of the $253-million repayments, the government spent a record-high $106.56 million in interest payment in a single month while $146.53 million in principal of the total outstanding liabilities for July.
Another ERD official said the government had borrowed a huge amount in budget support which mostly constitutes shorter-period loans, along with concessional project aid, over the last 5-6 years which now mature for repayment.
"The amount of debt repayments will be rising in the coming months, too," he adds.
When asked, a ministry of finance official said they had kept aside higher funds in the national budget this FY2024 for repaying the interest on and the principal of the outstanding loans to overseas lenders as well as for the local lenders.
In the last FY2023, the government repaid a total of $2.67 billion against its outstanding MLT loans to the external lenders.
In the previous fiscal, Bangladesh served $2.017 billion worth of debts against its outstanding loans to overseas development partners.
Meanwhile, the country's forex reserves depleted to around $23.56 billon of late, which can pay import bills for four months. Import tightening contracts market supply and further fuels inflation amid price rises in cascading effect.

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