Bangladesh’s foreign debt repayments surge by 30%

The sluggish execution of development projects has stalled the disbursement of foreign loans in Bangladesh.

By the end of February, as in previous months, the government paid more in interest and principal than it had borrowed.

Between July and February of the 2024-25 fiscal year, foreign funding for development projects declined by more than 17 percent, reflecting a slowdown in external support.

At the same time, repayments on existing loans surged by nearly 30 percent.

In an effort to curb the budget deficit, the government has begun reducing the number of approved projects, scrutinising allocations, and tightening disbursements.

This has led to a decline in overall project costs, which, in turn, has contributed to a drop in foreign financing, officials from the Economic Relations Department (ERD) said.

The latest report on Bangladesh’s external debt, released by the ERD on Monday, shows that disbursements for project loans and grants amounted to $4.13 billion over the past eight months.

This represents a decrease of $4.99 billion, or 17.27 percent, compared with the same period in the previous fiscal year.

At the same time, while new foreign borrowing has slowed, repayments on outstanding debt have climbed to $2.63 billion, marking a 30 percent increase.

Of the total repaid, $1.69 billion went toward principal payments, while $944 million was paid in interest.

In the first eight months of the previous fiscal year, external debt repayments stood at $2.03 billion.

Despite continued interest from development partners in extending loans, the number of new agreements has remained low.

The total value of loan agreements signed between July and February stood at $2.35 billion.

Meanwhile, $9.16 billion remains in the pipeline.

This marks a sharp contrast with the same period in the previous fiscal year, when new loan commitments amounted to $7.2 billion.

The decline of $4.84 billion, or 67.32 percent, reflects a significant slowdown in external financing commitments.

Meanwhile, international donors have allocated $25 million for food aid over the past eight months, compared with $10 million during the same period in the previous fiscal year.

This represents a notable increase of 138 percent, underscoring the shifting priorities in external assistance.