Bangladesh has increased repaying foreign loans despite global crisis to live up to its good reputation worldwide, experts said.
Bangladesh's foreign loan repayment increased to $1.28 billion during the first seven months in the current fiscal 2022-23.
In the same period of previous fiscal, the country paid $1.22 billion back to its development partners. The country has been successfully repaying foreign loans since independence, economists said.
The country has never defaulted on repaying foreign loans in its history because of its cautious management of external debt, which has a much higher portion of soft loan with longer maturity periods, some leading economists pointed out.
They said Bangladesh's economy is constantly growing, besides, the capacity to pay interest is also increasing.
At present the economy of Bangladesh is in a good position, they said, adding that as a result, the on time repayment of foreign interests on loans has increased several times.
Planning Minister MA Mannan said that Bangladesh is regularly increasing capacity to handle foreign loans and the size or the amount of the soft loans has been decreasing with time.
“Bangladesh always palns projects in terms of the ground reality as we do not accept anything with emotion,” he mentioned.
“The country’s remittances and reserves are fairly good. For these reasons, we are repaying foreign loans and interest money regularly. I have never failed, I will not fail in these cases. We are always using foreign loans for the right purpose. We are not eating with the loan, the main reason is that we are paying regular interest and principal,” he mentioned.
Dr Zahid Hussain, the former lead economist of the World Bank, said, Bangladesh's foreign loan was taken with low interest rates and long grace periods and long repayment periods.
As a result, the country can have a chance to repay the loan after a long time, he mentioned.
However, the country external loan repayment will double in the next three-four years, which may pressure the economy.
As the country’s economy is downturn due to the global crisis, Bangladesh will have to pay the highest debt outstanding to Russia, China, and India in the next 2-3 years as massive infrastructures are being constructed provided loans from these development partners.
According to the Economic Relations Division (ERD) sources, Bangladesh will have to pay around $4 billion to these three countries by the 2024-25 fiscal year.
These three countries have provided huge loan amounts to Bangladesh which will have to pay huge amounts of loans with capital and interest in the next 10-15 years and the volume of loan repayment will double within the next three years.
The country took loans from Russia, China, and India. So far over $ 3.5 billion in loan agreements have been signed with these three countries.
The World Bank, Asian Development Bank (ADB), Japan, and other countries and donor agencies have provided loans. The repayment period is 30-40 years. Besides, the loan repayment period to these countries is half where the interest rate is almost the same.
The government is constructing various projects including Rooppur Nuclear Power Plant, the Karnaphuli tunnel in Chattogram, and Dasherkandi Sewage Treatment Plant which project assistance from these three countries.
The loan repayment of most of these projects will begin after their grace periods ends in the next 2-3 years.
According to ERD sources, Bangladesh paid a foreign debt of $2.01 billion including capital and interest in the outgoing fiscal while foreign debt is likely to exceed $ 4 billion in 2024-25 fiscal.
State minister for planning Shamsul Alam, said, “The government took loans from any development partners considering the country's overall situation. The economy of the country is stable and strong enough.”
From July-January, foreign aid commitments fell by 62.4 percent to $1.76 billion from $4.69 billion in the same period last fiscal year, according to the ERD data.
Foreign aid disbursement has also decreased to $4.25 billion, registering a 9.19 percent fall compared to $4.69 billion in the same period of FY22.
According to ERD's annual borrowing plan, the government expects $9.7 billion in probable commitments in FY23, including budget support.
So far, Bangladesh has received $250 million in budget support from the Asian Infrastructure Investment Bank (AIIB).
The country has received the highest $840.75 million commitments from the ADB, following the second highest of $300 million by the World Bank.
According to ERD data, Japan released the largest chunk of foreign aid for Bangladesh in July-January.
The island nation disbursed $1.04billion to Bangladesh, followed by $695.47 million by the World Bank.
Of the key donors, the ADB released $638.33 million, China $562.65 million and Russia $463.84million and AIIB $328.83million to Bangladesh in the first seven months of FY23.
The government has set a $12 billion disbursement target for this year, as disbursement in FY22 stood at record $10 billion.