Debt service payments by the government for previously taken foreign loans reached $3,357.23 million in the fiscal year 2023-24, with $2,009.96 million going toward principal repayment and $1,347.26 million for interest, according to the latest report from the Economic Relations Division (ERD) of the Ministry of Finance.
The report, released on Saturday, revealed that the foreign debt servicing cost in the fiscal year 2022-23 was $2,670.22 million, marking a 25.73% increase from the previous year and surpassing the $3 billion mark for the first time, thanks to a 44% rise in interest costs.
A drastic rise in interest payments by 44% pushed up the public sector foreign debt service cost, the ERD report revealed, while the cost for repayment of principal increased by 15.88%.
The tendency of borrowing non-concessional loans has surged the government's debt servicing cost, said Dr. Ahsan H. Mansur, economist and executive director of the Policy Research Institute (PRI).
He explained that the provision of lower interest loans has reduced over the years and will decrease further as Bangladesh is set to graduate from the list of Least Developed Countries (LDCs).
Additionally, development partners are now keen to provide loans at floating interest rates instead of fixed rates. The recent drastic rise in global interest rates has pushed up the government's interest costs, Dr. Mansur elaborated.
Interest payment increased by 58% in terms of taka:
The interest payment for foreign loans in the last fiscal year increased by 58.22% in terms of domestic currency (Taka), up from Tk 9,452.34 crore in the fiscal year 2022-23, revealed the report.
The report showed that the government paid a sum of Tk 14,955.37 crore in the last fiscal year for foreign loan interest, which is 20.84% higher than the target set in the original budget and 3.35% lower than the revised budget.
The government had set a target of spending Tk 12,376 crore in the original budget and later revised it up to Tk 15,800 crore.
The report stated that all development partners disbursed $9,861.96 million in the last fiscal year, with $9,266.81 million as loans and $595.15 million as grants.
The disbursement of foreign aid in the fiscal year 2022-23 was $9,214.82 million, marking an increase of $647.14 million or 7.02% in a year.
Analyzing the report, it was found that the net disbursement of foreign loans in the last fiscal year stood at $5,909.58 million, after subtracting debt service costs from the total disbursed amount of loans.
The net disbursement of foreign loans in the fiscal year 2022-23 was $6,033.98 million, with a disbursement of $8,704.2 million and debt service costs of $2,670.22 million.
Net disbursement of foreign loans decreased by 2.06%, despite a 6.46% increase in gross disbursement in the last fiscal year compared to FY 2022-23.
The report also found that the government spent 36.23% of the amount disbursed in the last fiscal year on loan repayments, while the amount was only 30.68% in the fiscal year 2022-23.
Commitment increased by 21.88%:
The development partners made commitments worth $10,723.36 million in the last fiscal year, including $9,906.09 million in loans and $817.27 million in grants.
The government received commitments of new aid in the fiscal year 2022-23 worth $8,798.62 million, which increased by $1,924.74 million or 21.88% over the year.
The partners committed grants worth $336.47 million in FY 2023, an increase of $480.80 million or 142.9% compared to the previous year. The commitment of loans increased by $1,443.94 million or 17.06%, reaching $8,462.15 million in FY 2023.
World Bank disbursed the highest amount, ADB committed the highest amount:
The World Bank disbursed a sum of $2,154.03 million in favor of Bangladesh in the last fiscal year, the highest among all development partners. The Asian Development Bank (ADB) ranked highest with new commitments worth $2,941.27 million. The ADB also ranked second with a disbursement of $2,135.71 million in the last fiscal year, according to the ERD report.
Japan disbursed the third-highest amount, $1,918.02 million, in the last fiscal year, followed by Russia with a disbursement of $1,295.87 million.
Asian Infrastructure Investment Bank (AIIB) ranked fifth position with a disbursement worth $644.25 million in the last fiscal, while China and India secured the sixth and seventh positions respectively.
On the other hand, the World Bank secured second position following the ADB in terms of commitment ensuring loan and grant agreement worth $2618 million.
Japan secured the third position with a commitment worth $2039.17 million, while the AIIB ranked the fourth position with a commitment of $400 million.
The government signed no agreement with India, China and Russia to borrow any loan or receive any grant.
