The repayments of debts are increasing while the commitments are decreasing.
Although the foreign debt repayment increased during the first five months of the current fiscal year of 2024-25, the volume of commitments and disbursements of loans decreased. Economists estimate this increased pressure has put new challenges in the way of ensuring development projects as well as overall economic stability.
The loan commitments are down 91.07 percent, and disbursements decreased by 27.07 percent compared to the last year, while loan repayment increased by 28.44 percent, reflecting an increasing pressure on the country’s financial resources, according to data from the Economic Relations Department (ERD).
It is learnt that the development partners committed $522.68m during July-November, a fraction of the $5.86 billion in the same period last year. The disbursements have also dropped to $1.54 billion from $2.11 billion. Bangladesh, on the other hand, has paid $1.71 billion as principal and interest, up from $1.33 billion a year earlier.
Under the present circumstances, economic experts have warned that foreign financing for proposed development projects may not be available. To be more specific, decrease in loan commitments and their disbursements may exacerbate the concern about uncertainty in the world economy and the current economic situation in the country because the government will need to limit investment in priority areas such as infrastructure and social programs due to rising debt repayment requirements.
ERD officials said political unrest in July and August hampered the implementation of projects, so the disbursement is down. Many projects financed through foreign loans have been stalled in the current situation. This situation has emerged due to the absence of foreign consultants and staff. The government is also revisiting loan proposals. This has resulted in a temporary halt in loan agreements. The government, after the review, began the loan application process and attempted to reach the target. Development partners, like the World Bank and ADB, have already shown their interest in financing various projects in Bangladesh. To this end, the interim government has started prioritizing projects that require foreign financing and closing unnecessary projects. Accordingly, the ERD has asked the agencies to send a list of priority projects for allocation of external loans.
ADB was the highest disbursing partner during July-November of the current fiscal year. It disbursed $318 million, Japan $308 million, Russia $245 million, the World Bank $205.44 million and India $63.42 million.
Dr. Zahid Hossain, former chief economist of the World Bank’s Dhaka Resident Mission, says that one reason for creating an economic crisis may be due to the growing burden the country is facing in case of debt servicing. “There is greater pressure on some large projects like Padma Bridge, rail connectivity and Bangabandhu Tunnel, which may have a big potential impact on Bangladesh’s economy, to pay back debts”, he added.
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