Bangladesh’s external debt repayment to double in F25

The maturity of a number of large foreign loans, whose grace periods are ending soon, will nearly double the country’s external debt repayment to $4.02 billion in FY25 from 2.4 billion in the outgoing fiscal year 22, according to the Economic Relations Division.

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

The ERD calculated that the overall debt repayment would be $2.7 billion in the next fiscal year 23, including $1.9 billion in principal and the remainder in interest.

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

In fiscal 2010, the country’s total debt repayment amounted to $876 million, including $686 million in principal and $190 million in interest.

Economists noted that the county’s overall debt service obligation would increase further after FY26, as repayment of more high-value loans would begin at the end of their grace periods.

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

The Standing Committee on Nonconcessional Loans, headed by the Minister of Finance, approved 65 proposals for such loans between 2013 and 2021, according to an ERD report.

In 2017, non-concessional lending of $14.3 billion was mobilized, representing 79.62% of total lending committed by multilateral and bilateral lenders that year.

In 2018, Tk 4,688.26 crore or 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 repay the first installment of the Chinese credit in April 2023, with the five-year grace period ending next year.

The 1,320 MW Payra coal-fired power plant project in Patuakhali is also being implemented with a non-concessional loan – around $2 billion – from the Exim Bank of China.

Payra Power Station Project Manager Shah Abdul Moula said they are expected to repay about $200 million in FY23 in debt servicing.

The former chief economist of the World Bank’s Dhaka office, Zahid Hussain, said the volume of repayments would increase further after FY26.

He noted that the loan for the Roopur nuclear power plant project would mature in FY27.

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

Bangladesh will be required to repay the first installment of principal in March 2027 after the 10-year grace period has expired.

Distinguished Center for Policy Dialogue colleague Mustafizur Rahman said the management of the external debt will be critical in the coming days.

From 2026, external borrowing will be more expensive than before due to the country’s promotion to developing country status, the economist added.

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

Economists also argued for greater domestic revenue mobilization through pragmatic measures expected to be announced in the upcoming budget.

Finance Minister AHM Mustafa Kamal is due to announce the budget for 2022-2023 on June 9.

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