The interest payment for external debt increased by 162 per cent to Tk 11,602 crore during July鈥揗arch of FY24 over same period in FY23, prompting the interim government of Bangladesh to go for debt restructuring with overseas lenders.
An update on the debt released by the Finance Division in the past week attributed the steep rise in interest payment for external debt to the start of payment obligation of some major foreign loans.
The debt update did not name the foreign-funded projects.
On Tuesday, finance and commerce adviser Salehuddin Ahmed asked China for restructuring its loans given to the immediate past government for development projects on high interest rates and shorter grace periods.
He made the request for reduced interest rates and an extension of grace periods for the China-funded projects for 10 years when Chinese ambassador in Bangladesh Yao Wen paid a courtesy call to the adviser at the finance ministry.
Economic Relations Division officials said that China so far disbursed loans worth $4 billion against a commitment of $7 billion.
Some of the Chinese funded projects, including a tunnel underneath Rriver Karnaphuli in Chattogram, have failed to fulfil major aims, and a sewage treatment plant at Dasherkandi in Dhaka has not started operation despite inauguration of the project in 2023.
The debt update also revealed that the interest payment for domestic borrowing up to the third quarter in FY24 grew 7 per cent to Tk 59,589 crore over the same period of FY23.
Interest payment on the domestic debt taken from banks grew 21 per cent during the reporting period, but interest payment on the domestic debt taken from non-banking sources recorded 2.28 per cent negative as the Finance Division discouraged selling of saving certificates.
The government鈥檚 overall foreign and domestic debt stood at 16.97 lakh crore up to the third quarter of FY24, compared with Tk 16.1 7lakh crore in June 2023,聽 Tk 13.43 lakh crore in June 2022聽 and Tk 11.44 lakh crore in June 2021.
Until March 2024, the overall domestic debt stood at Tk 9.82 lakh crore while the overseas debt at Tk 7.14 lakh crore.
Besides, the outstanding stock of government guarantee known as contingent liability was Tk 1.11 lakh crore until March 2024, of which Tk 72,930 crore originated from external sources and Tk 38,600 crore came from domestic sources.
The Finance Division in its new medium-term debt strategy for the period of FY25鈥揊Y27 released in July has identified half a dozen risks which are likely to have negative impacts 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, said the strategy paper.