Loan talks with dev partners for vital projects only

The government has planned to negotiate with the development partners to get funds for the important projects only, as it has taken a cautious stance in taking external loans, officials said on Wednesday.
"We have taken a cautious approach in taking foreign loans. We have already indentified the important projects for taking external loans," said a senior official of the Economic Relations Division (ERD).
"We have some pending loan negotiations with different development partners, including the World Bank (WB), the Asian Development Bank (ADB), Japan, and the Asian Infrastructure Investment Bank (AIIB)."
"But we are not going for final negotiations at this moment randomly. We are assessing merit of the projects, to be implemented using the foreign aid," he told the FE.
Another ERD official said they were not going to negotiate with China for some loans, as their terms and conditions were harder than other loans from different multilateral lenders.
"A meeting with China on proposed loans for some projects has been cancelled. Now we are not interested to hold the meeting immediately," he added.
Bangladesh government has already taken a cautious stance in importing goods and spending for development projects in a bid to save the country's foreign exchange (forex) reserve.
The central bank has already imposed restriction on opening letter of credit (LC) for import. The Ministry of Finance has categorised the ongoing projects in three groups - based on their priority - for providing public funds for their implementation.
The forex reserve has dropped to around US$39 billion, which is equal in value to the country's import payment for some five months. In February, the reserve was $46 billion, the central bank data showed.
Despite a proposal of the International Monetary Fund (IMF) to provide some $4.5 billion loan to Bangladesh, the finance minister recently said Bangladesh would not take the loan at this moment.
A joint secretary at the ERD said they were going slowly with some project aid negotiations with the development partners.
"In the next two-three months, we will go slowly for foreign loan confirmation with the development partners, as the global scenario is volatile at this moment."
"However, we will welcome budgetary supports, grants and some other concessional loans - only for the important projects," he added.
Centre for Policy Dialogue (CPD) Distinguished Fellow Dr Debapriya Bhattacharya appreciated the government's cautious stance in foreign borrowing.
He said the government should refrain from taking loans for the high-valued infrastructure development projects and should borrow only for the social sector projects, like those of education and health sectors.
"As the LDC graduation will diminish Bangladesh's concessional loan facilities, the government should be cautious in borrowing in the coming days."
Dr Debapriya urged the government to revise the cost of some ongoing projects, which are over-estimated.
He also suggested the ERD to make a repayment schedule of the foreign loans for getting a clear picture.
Bangladesh's total public sector foreign debt as the medium- to long-term (MLT) loans stood at some $67 billion until May of the last fiscal year (FY), 2021-22, the ERD data showed.
Along with higher import payment, loan repayment for the public sector debt had also been rising year-on-year.
In the first 11 months of FY 2022, the government repaid $1.88 billion against its outstanding loans.
The loan repayment might cross the $2.5-billion mark in FY 2024, as the debt servicing for some big loans would start then.
The ERD officials said the loan repayment might double after 2027, when repayment of the Russian loans for the Rooppur power plant project would begin.

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