Originally posted in The Business Standard on 18 September 2024
Public foreign debt rises $4.2b in three months
Outstanding foreign debt reaches $104 billion at the end of FY24
The country’s public foreign debt increased by $4.2 billion in the last quarter of fiscal year 2023-24 due to receiving instalments of long-term loans from the IMF, World Bank, and various bilateral and multilateral parties.
According to a central bank report, by the end of June, public foreign debt outstanding reached $83.22 billion. Of the amount, at least $80 billion is long-term debt. Additionally, private foreign debt stood at $20.57 billion. Altogether, by the end of FY24, the country’s gross foreign debt stood at $103.79 billion.
The figures show that nearly 80% of the external debt was taken by the government and the remaining 20% was sourced by the private sector.
By the end of FY24, the per capita debt of the country’s population reached $605, or Tk72,480. Eight years ago, at the end of FY16, the figure was just $257.
A central bank policymaker told TBS that since a large portion of the foreign loans taken are long-term, the repayment pressure is lower. These loans also come with lower interest rates, he said. “However, due to the increase in the exchange rate, we are facing a greater burden.”
He commented that if the previous Awami League government had properly utilised these loans, the current dollar crisis would not have been as severe.
At the end of December 2023, the country’s external debt reached $100.64 billion for the first time.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told TBS, “We do not have enough dollars in hand, which forces us to take foreign debt from many countries and institutions. If we review the trend over the past few years, we can see that this debt has been consistently increasing.
According to the central bank’s report, by the end of FY24, Bangladesh’s foreign debt-to-GDP ratio stood at 22.60%, compared to 15.6% at the end of FY16.
She mentioned that many developed countries also take on foreign debt and, compared to other countries, Bangladesh’s foreign debt-to-GDP ratio is not excessively high. “What’s important is how we utilise these loans. If we manage the debt well, we will be able to repay it effectively.”
Bangladesh’s foreign debt servicing surged nearly 26% to $3.36 billion in FY24, according to the latest report from the Economic Relations Division.
The increase is bolstered by a record 44% rise in interest payments, which reached nearly $1.35 billion, driven by a significant rise in borrowing costs.
Bangladesh paid development partners $2.67 billion — $1.73 billion in principal and $935.66 million in interest — inFY23.
In FY24, principal and interest payments increased to $2 billion and $1.34 billion, respectively.
Commenting on the increase in interest and principal payment pressures due to rising foreign debt, the economist noted that while it is true that the payment liabilities are increasing, proper debt management will prevent this from becoming a major concern.
“The focus now should be on how the new government handles debt management. We must work to minimise waste and corruption in the use of these loans as much as possible,” Fahmida said.
Bangladesh’s external debt increased by over 350% over the last decade from $29.3 billion in June 2013 to $104 billion by June 2024.