Bangladesh's foreign debt repayments surge by 30%

The sluggish execution of development projects has stalled the disbursement of foreign loans in Bangladesh.

By the end of February, as in previous months, the government paid more in interest and principal than it had borrowed.

Between July and February of the 2024-25 fiscal year, foreign funding for development projects declined by more than 17 percent, reflecting a slowdown in external support.

At the same time, repayments on existing loans surged by nearly 30 percent.

In an effort to curb the budget deficit, the government has begun reducing the number of approved projects, scrutinising allocations, and tightening disbursements, reports bdnew24.com.

This has led to a decline in overall project costs, which, in turn, has contributed to a drop in foreign financing, officials from the Economic Relations Department (ERD) said.

The latest report on Bangladesh's external debt, released by the ERD on Monday, shows that disbursements for project loans and grants amounted to $4.13 billion over the past eight months.

This represents a decrease of $4.99 billion, or 17.27 percent, compared with the same period in the previous fiscal year.

At the same time, while new foreign borrowing has slowed, repayments on outstanding debt have climbed to $2.63 billion, marking a 30 percent increase.

Of the total repaid, $1.69 billion went toward principal payments, while $944 million was paid in interest.

In the first eight months of the previous fiscal year, external debt repayments stood at $2.03 billion.

Despite continued interest from development partners in extending loans, the number of new agreements has remained low.

The total value of loan agreements signed between July and February stood at $2.35 billion.

Meanwhile, $9.16 billion remains in the pipeline.

This marks a sharp contrast with the same period in the previous fiscal year, when new loan commitments amounted to $7.2 billion.

The decline of $4.84 billion, or 67.32 percent, reflects a significant slowdown in external financing commitments.

Meanwhile, international donors have allocated $25 million for food aid over the past eight months, compared with $10 million during the same period in the previous fiscal year.

This represents a notable increase of 138 percent, underscoring the shifting priorities in external assistance. Bangladesh's foreign debt stock has exceeded $104 billion, with the government and public sector loans totaling $84.45 billion.

The remaining $19.91 billion has been taken by the private sector, bringing the total foreign debt to $104.36 billion.

Bangladesh Bank released this data in a report in January, covering the foreign debt status up to the September quarter of 2024.

According to the report, 81 per cent of the total foreign loans were received by the government sector, while the private sector accounted for the rest.

Of the total debt, $91.72 billion, or 88.19 per cent, is long-term, while short-term loans in the private sector amount to $12.6 2 billion.
At the end of the June quarter, the foreign debt stood at $103.40 billion, indicating an increase of over $960 million within three months.