As Bangladesh grapples with a foreign currency reserve shortage, the pressure of repaying foreign loans continues to mount, with new loans harder to secure and existing debts piling up.
Bangladesh is facing a growing crisis in foreign loans, with the country struggling to meet repayment obligations amidst a shortage of foreign currency reserves. Despite the interim government’s increased focus on foreign debt, the expected assistance from international development partners has not materialized, leading to a stagnation in economic progress.
In the first eight months of the current fiscal year, the government has been under greater pressure to repay loans. Loan disbursements have decreased, new loan commitments have dropped significantly, and the economic situation remains critical. According to the Economic Relations Division (ERD), the amount spent on loan repayments has nearly doubled compared to the previous fiscal year, while loan disbursements have declined.
Dr. Wahiduddin Mahmud, a planning adviser, highlighted that corruption and irregularities in development projects have caused delays in loan disbursements, exacerbating the financial strain. He further noted that the government is using much of its new loan to repay previous debts, complicating the economy further.
As of February, Bangladesh received $413.44 million in foreign loan disbursements, but $263.64 million of that went towards repaying past debts. The government has repaid $263.64 million in loans, a $60 million increase from last year. Interest payments have also risen by $14 million compared to the previous year.
Despite efforts from major lenders like the Asian Development Bank (ADB) and the International Development Association (IDA), loan disbursements have fallen by $86 million compared to the previous year. Moreover, loan commitments have seen a sharp decline—down by $485 million from $720 million last year.
Dr. Mustafa K. Mujeri, Executive Director of the Institute for Inclusive Finance and Development, attributed the slowdown to political instability, which has delayed project progress and, in turn, reduced loan disbursements.
Liberty News’ economic correspondent states that experts warn that without immediate and effective action, the government may face even deeper economic challenges, further straining the nation’s finances.
LND/BG
