Photo: Collected
In the last nine months of the current fiscal year, interest and principal repayments on foreign debt have cost 67 percent more in local currency compared to the same period of the previous fiscal year, representing a 48 percent increase in dollar terms.
As the value of the dollar has risen, there is increased pressure on the payment of foreign debt. The depreciation of the local currency means that more money is needed to pay the same amount of interest and principal, exacerbating the financial burden.
However, the government is making efforts to increase the supply of dollars to finance the additional spending. This includes intensifying efforts to secure budget support from development partners and increasing project loans. There is a possibility of receiving $50 crore from the World Bank by next June.
According to the latest data from the Economic Relations Department (ERD), interest and principal repayments of foreign loans up to March of the current fiscal year amounted to $2.5715 crore. During this period, development partners disbursed $5.63 crore, making the repayment amount for the first nine months of the fiscal year 46 percent of the loans disbursed.
In the last financial year 2022-23, the foreign loan disbursement was 536.30 crore dollars. At that time the amount of interest and principal repayment was 173 crore dollars, which is 32.26 percent of the disbursed amount. In the last 9 months, the amount of interest payment alone was 105.49 crore dollars, which was 48.59 crore dollars in the same period of the last financial year. Actual principal disbursements in the last 9 months were 152 crore dollars, which was around 124 crore dollars in the same period last fiscal.
According to the data of ERD, Tk 28,281 crore had to be paid for interest and principal on foreign loans in the last 9 months. In the same period of last financial year which was Tk 16,965 crore and 66.7 percent had to be paid more in local currency. In a span of one year, the value of the taka has depreciated by 25 percent. Repayment pressure will increase due to further devaluing of money.
In this regard, Dr Zahid Hussain, former chief economist of the World Bank’s Dhaka office, told The Daily Messenger that project support does not have much impact on foreign debt reserves. It is spent on project purchases. In addition, this process requires a long time. The government needs cash dollars now. As such, the government is trying to get budget support.
Meanwhile, the government is trying to increase the supply of cash dollars to pay off loans taken at various times and increase foreign exchange reserves. Prime Minister Sheikh Hasina has repeatedly instructed in several meetings to complete the implementation work on time to increase the disbursement of foreign loan projects. A high-level committee headed by the Principal Secretary of the Prime Minister's Office is working to speed up the implementation of foreign loan schemes.
According to ERD sources, there is $50 billion in the pipeline awaiting project assistance for disbursement. Apart from this, the government is trying to get budget support from various organisations including the multilateral development partner World Bank, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB) and bilateral development partner France Aid.
An official of the World Bank wing of ERD, who did not wish to be named, told The Daily Messenger that the government has sought a total of $50 crore in budget support from the World Bank. Of this, $25 crore is from the Climate Change Fund and the same amount is regular assistance from IDA.
Finance Minister Abul Hassan Mahmood Ali made this proposal in a meeting with the director of the organisation's South Asia affairs at the recently held World Bank conference in Washington. Even before that, letters were being exchanged between the two parties. The official said that getting this amount of money is certain and the government is optimistic about getting this money by next June.
Besides, $65 crore have been requested from ADB. Apart from this, $70 crore have been requested from AIIB and France aid agencies. Apart from this, discussions are going on about a large amount of budget support from China. In total, it is expected to fetch around $200 crore.
Messenger/Disha
