Interest expenses for external borrowing jumped 167 per cent in the first half of the outgoing FY24 compared with the same period of FY23 owing to the payment liability of some major foreign loans against the backdrop of ongoing dollar shortages.
The government spent Tk 7,056 crore to clear the interest payment liability against foreign loans for the July鈥揇ecember period of FY24, Tk 4,411 crore higher from the same period of FY23.
Around Tk 2,645 crore was spent to meet the interest payment liability in the first half of FY23, according to the latest Debt Bulletin of the finance ministry.
鈥楾his is due to the start of interest payments on some major foreign loans,鈥� said the Debt Bulletin.
However, the debt bulletin did not identify major foreign loans.
It, however, showed that the overall foreign loans stood at Tk 7,05,520 crore until December 2023 from Tk 4,20,357 crore in June 2021, a 67 per cent increase in just two and a half years.聽聽聽
Economic Relations Division officials said that the government has been implementing mega 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 with borrowing from various foreign sources.
The debt bulletin also showed that interest payment for domestic borrowing increased by 8 per cent to Tk 41,286 crore in the first half of FY24 from Tk 38,147 crore during the same period of FY23.
Economists blamed the sharp rise in interest payment for foreign loans on the depreciation of local currency by around 30 per cent over the past two years amid the shortage of dollars.
The government is borrowing from the International Monetary Fund under a 4.7 billion loan programme to check depletion of forex reserves to $18 billion from $48 billion in August 2021.
The IMF has already disbursed $1.1 billion, while another $1.15 billion is expected to be released in the next month.
The currency devaluation has a huge impact on external trade, said Policy Research Institute executive director Ahsan H Mansur.
Besides, low revenue income also forces the government to rely on borrowing from both local and foreign sources to make up the budget deficit, he said.
Finance ministry officials said that the government鈥檚 projected borrowing is set to exceed the annual development programme size of Tk 2.65 lakh crore for the coming financial year implying that the development budget is entirely dependent on local and foreign borrowing sources.
Centre for Policy Dialogue distinguished fellow Mustafizur Rahman said that such trend increased interest payment liability.
The ERD has already projected that high growth in interest payment for foreign loans would continue.
In FY25, some Tk 20,500 crore will be required for interest payment of foreign loans, while Tk 12,367 crore has been projected for the same purpose in the outgoing FY24, said the ERD.
