Payment of interest against foreign loans has grown faster than the principal amount, posing challenges for debt servicing amid the ongoing dollar shortages.
The overall payment for the foreign debt grew 66 per cent to Tk 28,281.45 crore in the first nine months鈥擩uly鈥揗arch period鈥攐f FY24 from Tk 16,965.66 crore during the same period of FY23.
The surge in the overall debt payment is mainly driven by the interest payment, according to the monthly update by the Economic Relations Division.
The interest payment grew 143.5 per cent to Tk 11,601.83 crore in the first nine month of the current FY24 from Tk 4,763.50 crore during the same period of FY23.聽聽
In contrast, the payment for principal amount grew 36 per cent to Tk 16,679.62 crore in the first nine months of FY24 from Tk 12,202.16 crore during the same period of FY 23.
The ERD update for the first eight month of the current FY24 or the July鈥揊ebruary period showed that the interest payment had grown by 126 per cent and the principal amount by 35 per cent over the same period of FY23.
Economists blamed borrowing spree over the past several years for the high growth in payment of foreign loans.
The government鈥檚 outstanding foreign debt stood at $62.4 billion in FY23, marking a more than threefold increase in 14 years for the implementation of mega projects such as the Roopur Nuclear Power Plant, the Padma Bridge Rail Link Project, the Karnaphuli River Underneath Tunnel, the Metro Rail Line Project, the LNG Terminal in Maheshkhali, and Payra Sea Port.
Many projects are yet to complete, while economic returns from the completed ones are not satisfactory, said former World Bank Dhaka office chief economist Zahid Hussain.
The surge in interest payment has also been complicated due to devaluation of local currency against dollars by around 30 per cent in FY23 and the persisting dollar shortage from the same FY23.聽聽
To tackle the crisis, the government has already borrowed $1.1 billion under $4.7 billion loan programme from the International Monetary Fund.
Former Bangladesh Bank governor Salehudduin Ahmed said that pressure on debt repayment would continue to increase until economic returns from the loan-driven-projects become satisfactory.
Besides, the government needed to be more calculative in taking foreign loans, he added.
In March, the ERD in another projection to the finance ministry said that the high growth of debt repayment for foreign loans would continue in the coming financial year, beginning on July 1.
ERD projections as part of the new budget have revealed that the foreign loan repayment will grow 53 per cent to around Tk 57,800 crore in FY25 against Tk 37,775 crore in the outgoing FY24.
Compared with FY25, the rise in foreign loan repayment between FY23 and FY24 was around 38 per cent.
The ERD attributed the borrowing spree over the past several years for the high growth in repayment.
