The government has to make upward revision in payment of interest by around Tk 600 crore against foreign debts in the outgoing fiscal year marred by the COVID-19 pandemic, said the economic relations division officials.
The revised amount of interest payment stood at Tk 4,868 crore from original Tk 4,273 crore for 2019-20 because of the price hike of dollar against the local currency and signing at least four suppliers’ credit deals.
The deals, according to officials of the Foreign Aid Budget and Accounts wing under the Economic Relations Division, are expansion of electricity transmission under the state-owned PGCB and DPDC with Chinese credits.
The others include procurement of 70 locomotives and 200 coaches, also with the suppliers’ credits, which economists called the worst form of loans as the borrowers had no option to check the quality of goods supplied.
FABA wing chief Pear Mohammad said that the rise in payment of interest payment was usual as the county’s borrowing from foreign sources increased substantially in recent years.
Besides, the US currency dollar is being traded at over Tk 85 in the current month from Tk 84 a year back, he said.
The ERD officials said that the higher interest payment put undue pressure on fund management amid the falling revenue income by National Board of Revenue which led to a shortfall of Tk 45,000 crore in the first eight months of the fiscal.
According to the finance ministry’s medium-term macroeconomic outlook, the country’s external credit will be more than double in five years to Tk 5,08,940 crore in 2021-22 from Tk 2,34,670 crore in 2016-17.
Experts have been expressing concern over the country’s sharp rise in payment of debt with the maturity of the short-term borrowings made over the past decade to finance ‘politically motivated projects’ since it poses a number of risks.
Former caretaker government adviser Mirza Azizul Islam said, ‘The risks include debt sustainability, which has so far been maintained prudently by the country.’
ERD officials, however, said that the ratio of external debt to GDP was hovering around 13 per cent until last year.
The debt to GDP ratio at 50 per cent is difficult to manage, they said.
The Bangladesh Bank’s ‘Financial Stability Report 2018’ released in May 2019 highlighted that the short-term external debt was in a rising trend and stood at 4.5 per cent of the gross domestic product in the 2017-18 fiscal year from only 1.3 per cent in 2011-12. The size of the country’s GDP became Tk 22,38,498 crore in 2017-18 with its one per cent being Tk 22,384 crore.
Suppliers’ credit and commercial borrowing at high interest rates from sources like India, Russia, China and merchant banks have increased substantially in recent years for financing the costly projects like Rooppur Power Plant, Dhaka Metro Rail, Padma Bridge Rail Line and Karnaphuli Tunnel.
The BB report also highlighted that long-term borrowing was declining until 2016-17, followed by a marginal increase in 2017-18 to stand at 15.5 per cent of the GDP.
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