Rising debt service pressures paltry forex reserves

Debt-servicing pressure against large foreign loans taken by Bangladesh builds up as repayment during 11 months to May rose 24.36 per cent, year on year, to US$3.0 billion.
Although the debt repayment has surged, the foreign-aid disbursement has not increased much, official statistics show.
Higher rates of interest payment for many non-concessional medium-to long-term loans (MLTs) and the expiry of grace periods of some big loans pushed up the debt-service liabilities during the July-May period of the outgoing financial year (FY2023-24), Economic Relations Division (ERD) officials said Thursday.
An FE analysis has found that the debt repayment against outstanding foreign loans rises significantly due mainly to a record-high amount of interest payments.
Out of the US$3.07 billion worth of debt servicing, 41 per cent was repaid as interest and the remaining 59 per cent as the principal.
Meanwhile, increase in MLT loans and higher payment trends have already created further pressure on country's struggling foreign-exchange reserves, the analysis reveals.
Till March this year, Bangladesh's public-and private-sector debts from external sources had totaled $99.30 billion, the central bank data showed.

The provisional data of the ERD show that the government repaid $3.07 billion in the Jul-May period, 24.36-percent higher than $2.46-billion repayment made in the corresponding period of FY2023.
During the past 11 months, a total of $1.253 billion had been paid as interest to the foreign lenders, $371 million higher compared to the same period of the last fiscal, the ERD data showed.
In the Jul-May period of FY2023, the government had paid $882.86 million as interest against its outstanding MLT loans.
On the other hand, $1.81 billion was spent in repayment of the principal of the outstanding loans during this past July-May period. In the corresponding period, repayment of the principal amounted to $1.58 billion.
Meanwhile, although foreign-aid commitments increased during July-February this fiscal, disbursement increase was insignificant, according to the ERD statistics.
"The disbursement of grants and loans increased by only $139 million to $7.02 billion during the time compared to the same period last fiscal," said one ERD official.
During Jul-May of FY2023, the development partners had released $6.98 billion worth of loans and grants.
During the same time this fiscal, the development partners made foreign-aid commitments worth $7.93 billion compared to $5.97 billion in the same period last FY2023.
The country's major development partners, including China, India, Russia and the Asian Infrastructure Investment Bank (AIIB), had not made any commitment of foreign aid during the first 11 months of this fiscal.
Among the development partners, Japan disbursed the highest amount of assistance during the July-May period followed by the Asian Development Bank (ADB), the World Bank, Russia and China.
During the 11 months in FY2024, Japan released $1.76 billion, ADB $1.59 billion, the WB $1.41 million, Russia $884.85 million and China $361.71 million, the available ERD statistics showed.
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