Foreign Loan Commitments Decrease by 67.3%, Debt Repayment Pressure Increases

Economic Desk

In the first 8 months of the current fiscal year, both loan disbursements and commitments from development partners have decreased, while foreign debt repayment pressure on the government has increased.

According to data published by the Economic Relations Division (ERD), during July-February of this fiscal year, new loan commitments decreased by 67.3%, loan disbursements decreased by 17.3%, and debt repayment amounts had to be increased by 29.9%.

The ERD report mentioned that during this period, development partners committed only $2.35 billion in loans, significantly lower than $7.20 billion during the same period of the previous fiscal year.

During the same period, development partners disbursed $4.13 billion in loans, lower than $4.99 billion in the previous fiscal year.

On the other hand, Bangladesh had to repay $2.636 billion in loans to development partners during this period, which is 29.9% higher than $2.03 billion in the previous fiscal year.

Within this, actual principal repayment increased from $1.224 billion to $1.962 billion. Interest payments also increased from $805.95 million to $944 million.

ERD officials said the interim government has decided to reduce foreign borrowing according to the ‘Term Loan Strategy’, resulting in reduced new loan commitments from development partners.

However, while officials of the Yunus government claim that development partners are willing to provide more loans than the previous fiscal year, the government is only borrowing for emergency budget support and important projects. As a result, the pace of loan agreement signing has slowed and commitments have decreased.

ERD officials also said that to manage repayment pressure, the government has reduced new borrowing, especially for loans whose grace periods are ending.

To reduce repayment pressure, the government has planned to accelerate disbursement of previous loans. However, they noted that due to the country’s current situation, the expected benefits from this disbursement are not being fully realized.