THE cost of debt servicing has risen significantly amid a higher flow of loans from development partners and an elevated level of interest payments, compounding pressure on the foreign currency reserve of Bangladesh.
Owing to higher import bills and lower-than-expected remittance and export earnings, the reserve has been falling since July 2022.
At that time, it stood at $31.17 billion and has fallen to $21.71 billion this month as per the new calculation adopted by the Bangladesh Bank in line with the formula of the International Monetary Fund (IMF).
In July, the first month of the current fiscal year of 2023-24, the debt servicing repayment climbed 41 per cent to $253 million.
It was $179 million in the same month in 2022-23, data from the Economic Relations Division (ERD) showed.
The country’s outstanding foreign debt stood at $95.71 billion in March this year, according to the BB.
Of the sum, the public sector owes $73.53 billion to their foreign lender that also includes $61.89 billion in government debt.
A World Bank-IMF debt sustainability analysis in January assessed that Bangladesh remained at low risk of debt distress.
The country’s forex reserves are still in good shape owing to the disbursement of funds for the foreign assistance-backed mega projects.
A document of the ERD showed the fund release for mega projects such as the Dhaka Metro Rail, Matarbari Coal Power Plant, and Rooppur Nuclear Power Plant has increased in recent times as their implementation is now in the last phase.
Of the lenders that collectively disbursed $405.79 million in July, Japan lent $251.89 million, the World Bank provided $57.53 million, and the Asian Development Bank released $70.43 million.
The utilisation of foreign loans is not increasing despite a ballooning of such funding in the pipeline and a rise in foreign loans.
The lower release of funds prompted the government to order ministries to accelerate the use of loans with a view to giving a much-needed fillip to the forex reserves.
The government who is in the driving force is highly reluctant to the cause of the plights of Bangladesh.
No policy is actually working, not any one responsible for coordinating efforts.