The overseas debt repayment hit more than three times higher to Tk 37,307 crore in recently concluded FY24 than the amount paid three years ago.
In FY21, around Tk 12,018 was required to clear the overseas debt payment, according to an updated report on foreign loan repayment by the Economic Relations Division on Sunday.
The overseas debt payment in the eventful FY24, characterised by a severe dollar shortage and high inflation, also surpassed the revised projection of Tk 36,500 crore by around Tk 807 crore.
Economists blamed the devaluation of local currency over the past two years and growing interest payment against the loan spree over the past decade for ballooning overseas loan payment.
The Economic Relations Division update showed that interest payment grew by 58 per cent in one year in FY24, compared with 29 per cent growth in payment of principal amount during the same period.
The division鈥檚 officials said that the payment obligation for interest against foreign loans was calculated from the next month of borrowing, while the payment of the principal amount began after the grace period which varied between minimum five years and 30 years.
The government鈥檚 outstanding foreign debt grew to $79.69 billion by March 2024, which was more than double in seven years from $38.2 billion in FY18.
The higher overseas borrowing has been attributed to implementation of big-budget development projects such as the Roopur Nuclear Power Plant, Padma Bridge Rail Link Project, Karnaphuli River Underneath Tunnel, Metro Rail Line Project, LNG Terminal in Maheshkhali, and Payra Sea Port.
The government is under pressure for the growing overseas debt payment, said executive director Ahsan H Mansur of think tank Policy Research Institute.
He noted that the situation became complicated due to the devaluation of local currency and shortage of forex reserves.
Local currency devalued by 37.2 per cent to Tk 118 until FY24 from Tk 86 at the end of FY22 against $1, while forex reserves dropped below $20 billion from $48 billion in August 2021.
The government also faces revenue shortage reducing its loan repayment capacity, said Centre for Policy Dialogue distinguished fellow Mustafizur Rahman.
He apprehended that the government would require more borrowing to maintain debt obligation.
A new medium-term debt strategy for FY25 to FY27 of the government has identified half a dozen risks which are likely to have negative impact on the management of borrowing liability amid pressure on foreign exchange reserves.
Inflation, exchange rate, banking and non-banking financial sector, contingent liability, fiscal position, and external factors are the macroeconomic risks that may have implications for debt management strategy, according to the publication released by the Finance Division in the current month.
According to the strategy, revenue shortfalls and the overshooting of expenditure in comparison with baseline fiscal projections will require extra borrowing from local and foreign sources.
The National Board of Revenue has failed to achieve revenue targets in the past 12 financial years until FY23, despite mostly downward revisions, which forced a 177 per cent increase in government borrowing in the eight financial years ending in FY23.
The total debt as a percentage of GDP decreased to 26.2 per cent in FY17 from 35.9 per cent in FY07 before taking an upward trend to reach 36.0 per cent in FY23.
At the end of FY24, domestic debt is projected to be 56 per cent of the total debt stock, and the remaining 44 per cent is external debt, compared to 63 per cent and 37 per cent external debt at the end of FY20.
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