Bangladesh's foreign debt repayment to double in F25

The maturity of a number of big foreign loans, with their grace periods ending soon, will almost double the country’s external debt repayment at $4.02 billion in FY25 against $2.4 billion in the outgoing FY22, according to the Economic Relations Division.

The ERD has calculated the external debt repayment projection for the next three financial years as part of the budget preparation process.

The ERD has figured out that the overall debt repayment would stand at $2.7 billion in the upcoming financial year FY23, of which $1.9 billion would be principal and the rest interest.

In FY24, the overall repayment volume would be some $3.28 billion, with $2.3 billion in principal and $980 million in interest.  

Back in FY10, the country’s overall debt repayment amount stood at $876 million, of which $686 million was principal and $190 million interest.

Economists noted that the county’s overall debt servicing obligation would grow further after FY26 as the repayment of more high-value loans would start with the end of their grace periods.

These loans are non-concessional credit mostly taken from China, Russia and India, they said. 

The standing committee on non-concessional loans, headed by the finance minister, approved 65 proposals for such loans between 2013 and 2021, according to an ERD report.

In 2017, a $14.3 billion non-concessional loan was mobilised, which was 79.62 per cent of the total loans committed by multilateral and bilateral lenders that year.

In 2018, Tk 4,688.26 crore, equivalent to some $500 million, was borrowed from the Exim Bank of China to implement the Single Point Mooring with Double Pipe Line project in Cox’s Bazar.

The country will have to pay back the first installment on the Chinese credit in April 2023 as the five-year grace period ends in the next year.

The 1320MW Payra Coal-Fired Thermal Power Plant project in Patuakhali is also being implemented with a non-concessional loan —about $2 billion — from the Exim Bank of China.

Payra power plant project director Shah Abdul Moula said that they would have to repay about $200 million in FY23 in debt servicing.

Former World Bank Dhaka Office chief economist Zahid Hussain said that the repayment volume would rise further after FY26.

He noted that the Roopur Nuclear Power Plant project loan would mature in FY27.

The RNPP, the country’s first nuclear power plant, is being built with a $11.38 billion loan from Russia at 4 per cent annual interest.

Bangladesh will have to pay back the first installment of the principal amount in March 2027 on the conclusion of the10-year grace period.

Centre for Policy Dialogue distinguished fellow Mustafizur Rahman said that the external debt management would be critical in the coming days.

From 2026, the external borrowing will be costlier than before because of the county’s promotion to a developing nation, added the economist.

Referring to the current debt crisis in Sri Lanka, the two economists advised that the government should be careful in selecting foreign loans.

The economists also advocated for higher domestic revenue mobilisation through pragmatic measures that should be announced in the next budget.

Finance minister AHM Mustafa Kamal is scheduled to announce the budget for 2022–23 on June 9.

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