Interest on external debt is growing faster than domestic lending

The government will earmark Taka 80,275 crore in the budget for the coming fiscal year to settle interest payments, with the allowance for foreign debt increasing at a faster rate than for domestic loans.

Of this amount, about 69,800 crore taka will likely be earmarked for domestic interest income payments and the remaining 10,475 crore taka for foreign loans, finance division officials said.

The amount of foreign debt interest payment in FY 2023 will therefore be five times higher than the Tk 1,841 crore paid in FY 2017 for the same purpose.

In fiscal year 2017, the interest payment on domestic debt was Tk 48,377 crore, which is 1.5 times less than the amount required for the new fiscal year.

Finance Minister AHM Mustafa Kamal is expected to announce the new budget in parliament on June 9.

In the outgoing fiscal year, the government had earmarked Tk 6,589 crore for payment of interest on external debt, while the amount was Tk 3,434.93 crore for the fiscal year 2020-2021.

According to data from the Economic Relations Division, the country’s overall external debt soared to $60.15 billion in fiscal 2021 from $23.61 billion in fiscal 2011, registering a 2.5 times increase under the current government.

DRE officials said short-term commercial borrowing had risen sharply compared to concessional lending from the country’s traditional multilateral lenders like the World Bank and the Asian Development Bank.

The Standing Committee on Nonconcessional Loans, headed by the Minister of Finance, has approved 65 nonconcessional loan proposals through June 2021 from 2013.

One of these loans, amounting to 11.38 billion dollars, comes from Russia to implement the Rooppur nuclear power plant project.

Russia extended the loan bearing more than 4 percent interest, with a repayment period of 30 years and a grace period of 10 years.

The country will have to repay the first installment of the principal amount in March 2027.

Clifton L. Boyd