Saturday, June 22, 2024

Repayment of the government’s foreign debt

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26 billion in the last 15 years and 16 billion in the previous 36 years

Repayment of the government's foreign debt | 26 billion in the last 15 years and 16 billion in the previous 36 years

From the fiscal year 2008-09 to 2022-23, the government has paid 26.09 billion (2,609 crore) dollars in foreign debt and interest on the debt. After independence, from 1973-74 to 2007-08 fiscal year, about 16.1 billion (about 1610 crore) dollars have been paid in 36 years. According to figures from the Economic Relations Department (ERD), the government has had to repay 62 percent more foreign debt in the last decade and a half than in the previous 36 years.

According to ERD’s latest ‘Flow of External Resources’ report, the government paid a record amount of debt and interest on debt in the last financial year (2022-23). At this time, more than two and a half billion dollars had to be paid only for medium and long-term loans, which amount to 267 million 17 million dollars. And adding short-term loans from the International Monetary Fund (IMF) and various state-owned institutions, it stands at more than 3.5 billion dollars. In total, in the last financial year, the government had to pay 366 crore 44 lakh dollars in foreign debt and loan interest.

Experts fear that the government’s foreign debt repayment may exceed 4.5 to 5.5 billion dollars in the next two to three years. In that case, if revenue and remittances along with foreign exchange collection are not increased, these loans can become a cause of great pressure in the overall economy.

The government borrows from various foreign sources to implement development projects and budget support. These loans are taken for different periods from various bilateral development partner countries and international organizations. According to the term of the loan agreement, the government has to repay them in various installments after a certain period, including interest.

According to ERD data, the government’s medium and long-term debt repayments were around $20.64 billion in the last 15 years. However, over the previous 36 years, such loans had been repaid at a little over $12 billion.

Experts say that since 2009, the trend of government borrowing in various sectors has been increasing. In the 36 years up to 2007-08, the government had to repay only 374 million dollars in the aviation sector. In the fiscal year 2008-09, Biman Bangladesh Airlines signed an agreement with the American aircraft manufacturer Boeing Company to purchase 10 aircraft. These include four Boeing 777-300 ERs, two Boeing 737-800s and four Dreamliner 787-8s. With the arrival of the last aircraft ‘Rajhans’ under the scope of this agreement, all the aircrafts mentioned in the agreement have been understood by Biman. The loan taken to buy them has already been repaid. In the last 15 years, the government has had to repay the debt of 106.5 million dollars in the aviation sector, which is three times more than in the previous 36 years. Discussions are currently underway to add 10 more aircraft to the fleet.

The executive director of the Policy Research Institute said that the country’s debt repayment amount will increase further. Ahsan H. Mansoor, a merchant, told Barta, “The debt repayment capacity should be increased. If remittances, exports and foreign direct investment are not increased, these debts will become a burden. We have to increase our revenue more quickly than in the last 10 years. The service and technology sector should be expanded.

Since independence, the electricity sector of the country has not had to pay any separate debt. But after 2009, foreign borrowing in this sector started increasing. The repayment of this loan started in the financial year 2013-14. After that, in the last 10 years, the government has to repay 267 million 52 million dollars in this sector. Economists said that once the repayment of the loans of big projects like Rooppur, Matarbari, Payra and Rampal power plants starts, the amount will increase to a greater extent.

In this regard, the former professor of economics department of Chittagong University. Moinul Islam said to Vanik Barta, “In the last two-three years, huge loans have been taken for various mega projects. As a result, the total debt amount has exceeded 100 billion dollars. If the debt repayment of these big projects starts in full swing, there is a danger that the debt repayment amount will exceed 4 and a half billion dollars by the fiscal year 2024-25.

Before 2009, the government had no debt in the telecommunication sector. In the last decade and a half, Bangladesh Telecommunications Company Limited (BTCL) has implemented various projects including the installation of optical fiber cable with foreign loans. A little more than 1 million dollars has to be paid in the last 10 years in this sector.

Bangladesh Chemical Industries Corporation (BCIC) has set up Ghorashal Palash Urea Fertilizer Factory at a cost of Tk 15,500 crore. Of this, 10,920 crore rupees are being given by lenders from China and Japan. The organization is implementing several other such projects. Against these loans, the government has to repay 6.3 million dollars in the last two years.

Bangladesh Telecommunication Regulatory Commission (BTRC) took a loan from multinational bank HSBC to launch Bangabandhu Satellite-1. Apart from this, the company has collected loan financing from abroad for various projects. In the last six years, the government has to repay 96.1 million dollars for BTRC’s debt.

The government had to spend 143 million dollars in the last 15 years to repay the IMF loan. In the previous 36 years, 302 million 51 million dollars had to be paid. And the government is taking a new loan of 4.5 billion dollars from the company. The liability of repaying these loans will also be added up front.

Former Chief Economist of World Bank’s Bangladesh Residential Mission thinks that the amount of debt repayment is increasing due to the old loan installments of multinational organizations. Zahid Hossain. He told Vanik Barta, “There is also a danger that the total annual debt repayment amount will reach 5.5 billion or 5.5 billion dollars in the next two years.” As a result, if the revenue income is not increased, there will be problem in payment of interest. And if you can’t get new foreign financing, there will be trouble in actual payment. So if remittances do not increase, there will be pressure on the economy. Even essential expenses may have to be cut.

If you want to know about the whole matter, the former Minister of State for Planning. Shamsul Alam Banik told Barta, “Debt repayment can go up to 4.5 billion dollars.” But the government is also cautious now. No unnecessary projects are being taken up. Instead of taking short-term loans, long-term low-interest loans should be taken. And the mega projects have now started giving financial returns. Money is coming from Padma Bridge. Commuting through the Karnaphuli Tunnel has become easier. These projects will play a role in attracting foreign investment. We have not built a beautiful park. I have built the necessary infrastructure with loan money.

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