TDS Desk:

Bangladesh’s foreign debt servicing surged nearly 26% to $3.36 billion in the fiscal year ending 30 June 2024, according to the latest report from the Economic Relations Division (ERD).

This increase is bolstered by a record 44% rise in interest payments, which reached nearly $1.35 billion, driven by a significant rise in borrowing costs.

Principal repayments are rising as the grace periods for loans taken for various mega projects end. Additionally, high interest rates have increased the pressure on debt servicing, according to ERD sources.

Experts warn that the significant rise in debt servicing, especially in interest payments, will strain Bangladesh’s fiscal budget, potentially restricting the government’s capacity to invest in critical sectors such as infrastructure, education, and healthcare.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said, “Our debt is increasing, and so are the repayments.”

“Over the next two to three years, debt repayment is expected to rise to $5-6 billion. If revenue collection and foreign exchange supply are not increased, the debt repayment pressure may lead to distress in the economy,” he voiced concerns.

Bangladesh paid development partners $2.67 billion – $1.73 billion in principal and $935.66 million in interest – in the fiscal 2022-23.

In the FY24, principal and interest payments increased to $2 billion and $1.34 billion, respectively.