The government鈥檚 overall interest payments grew by 21 per cent in the 2023-24 financial year largely because of a 60-per cent rise in the external interest payment against foreign loans, mostly taken for financing megaprojects by the Awami League government ousted on August 5, 2024.
Compared with the sharp increase in the external interest payment, the payment obligation for the domestic borrowing grew by 17 per cent in the past financial year, according to a report on the country鈥檚 overall debts released in the past week by the Finance Division.
Economists said the report revealed an unwarranted picture on the overall debt payment in the past financial year, the last of the AL鈥檚 15 years of rule marred by a severe shortage of dollars and growing concerns over a debt trap.
The Finance Division鈥檚 report said that the past government had started paying interest on some major foreign loans without disclosing those.
The report, however, said that the total debt-to-gross domestic product ratio was 36.30 per cent based on the GDP projection for FY24 by the Bangladesh Bureau of Statistics that is significantly lower than the International Monetary Fund threshold of 55 per cent.
Referring to the white paper on state of the Bangladesh economy submitted recently to the interim government, former World Bank Dhaka office chief economist Zahid Hussain said the country鈥檚 external debt carrying capacity had weakened due to growing exposure to foreign currency-denominated non-concessional loans taken for the megaprojects.
Padma Multipurpose Bridge Project, Multi Lane Road Tunnel under the River Karnaphuli, Dhaka Mass Rapid Transit Development Project, Padma Bridge Rail Link Project, Dohazari to Cox鈥檚 Bazar Railway Track, Payra Deep Sea Port, Matarbari Ultra Super Critical Coal Fired Power Project are seven such projects costing about Tk 1,95,116.87 crore.
Two other projects are Maitree Super Thermal Power Project that cost Tk聽16,000 crore and Rooppur Nuclear Power Plant being implemented at a cost of Tk 1,13,092.91 crore.
The white paper highlighted that the optimal debt to export plus remittance ratio at 124 per cent showed Bangladesh debt exceeded the threshold in FY22.
The megaprojects implemented mostly with foreign loans by the AL regime had left the country with concerns over the debt trap amid the questionable expected returns, said the white paper.
The Finance Division report said the banks, non-bank financial institutions and government provident funds were the sources of domestic borrowing.
Of them, interest payment on banking sources grew by 37 per cent in FY24 while interest payment for non-banking source and GPF grew by 3 per cent and by 11 per cent respectively.
Institute for Inclusive Finance and Development executive director MK Mujeri said that growing domestic debt was also concerning.
Domestic debt relative to government revenue increased from 212 per cent in FY19 to 258 per cent in FY23, he said, adding that the concentration of the investor base, dominated by commercial banks and the Bangladesh Bank, crowded out private sector lending.