United News of Bangladesh

Planning Adviser Dr Wahiduddin Mahmud on Wednesday said the government will no longer take foreign loans merely because they are available, emphasising that external financing will now be reserved for essential projects aligned with national priorities. In the past, loans from the World Bank, IMF, ADB and other development partners were often accepted as a matter of principle, irrespective of actual need or the merit of the projects, the Adviser said while briefing reporters after the ECNEC meeting. February polls to be peaceful, festive despite attempts to delay: Prof Yunus “This is not a sound economic policy. We no longer want to burden the country with unnecessary debt just because concessional loans are offered,” he said. The Adviser explained that as Bangladesh graduates from Least Developed Country (LDC) status, concessional loans with low interest and longer repayment schedules will gradually disappear. For this reason, the government is carefully choosing which projects should be financed with external borrowing. “If a project is not a genuine priority, we are not interested in taking a loan for it. On the other hand, if a project is essential and concessional finance is available, we will consider it,” he added. He also disclosed that several large foreign loan-dependent projects are currently on hold at his desk. “I will not name them, but some stakeholders are unhappy because we have stopped projects that are not justified. We want this policy shift to continue beyond our time, so future governments also don’t take loans unnecessarily,” the Adviser said. Bangladesh not ready yet to tap booming $1 trillion semiconductor industry Rising costs of major infrastructure schemes remain another concern. Citing examples of metro rail and highways, he said Bangladesh is paying more per kilometer than neighboring countries. “Foreign financing does not guarantee efficiency. Local and foreign vested groups often push up costs. This needs to be studied in depth,” he said, adding, “From now on we will design projects according to our priorities and then approach development partners for financing. Not the other way around.”

Bangladesh received a record $8.41 billion in foreign loans in 11 months of current FY2021-22, the Economic Relations Division said on Thursday. At current exchange rate the amount is equivalent to Tk 78221 crore, the highest loan ever in a single fiscal year. The amount is 47 per cent higher than the previous fiscal year. The ERD officials estimate that the foreign debt will exceed $9 billion by the end of the fiscal year on June 30, 2022. After the economic crisis in Sri Lanka, there is a lot of talk about Bangladesh's foreign debt. Also read: Default loans cross over 126 crore: Finance Minister However, economists and analysts are dismissing the comparison between the two countries. They say foreign debt is still below 13 per cent of Bangladesh's GDP. In case of Sri Lanka, it is close to 50 per cent. Economist and researcher Ahsan H. Mansur said, "The leap has been made by receiving more loans than expected from various donor countries and organizations, including the World Bank and the ADB, to offset the effects of the two-year pandemic." Analysis of ERD data shows that in the last FY2020-21, Bangladesh received $7.10 loan assistance from development partners. Before that, in the fiscal year 2019-20, Bangladesh received $7.38 billion foreign loan that was the history of the country till FY 21. Also read: FBCCI seeks loan moratorium till December Foreign debt has been increasing in Bangladesh since the fiscal year 2017-18. In the same year, it jumped to $6.37 billion. Then in the fiscal year 2018-19 it stood at Tk6.54 billion.

A stronger US dollar is usually grody news for emerging market economies with heavy dollar-denominated debt. And Bangladesh is no exception. In this country, the corporate sector has borrowed heavily in foreign currencies from external sources at lower interest rates. A stronger dollar has now made their foreign debt expensive, hitting them really hard as they struggle to tide over the Covid-induced economic slowdown. Those entrepreneurs who took hassle-free loans from abroad some five years ago -- when the interest rate on bank loans in Bangladesh was more than 12% -- are now facing the wrath of the appreciating dollar, having forced to count 10% more on money they borrowed at just 3-4% interest. The approved debt from external sources for Bangladesh’s private sector stood at USD 14,003.95 million as of June 2021, of which USD 9,601.27 million had been repaid along with USD 677.37 million interest. In the January to March quarter of the last financial year, the approved external debt for the private sector was USD 617.95 million, while it declined to USD 230.81 million in the last quarter of 2020-21 fiscal, as per Bangladesh Bank (BB) statistics. Read: Govt targets 17% expenditure of GDP for next two fiscals: Document

Bangladesh Bank has brought further flexibility in accessing foreign loans by foreign-owned companies operating in Bangladesh.

Two Hong Kong based credit rating companies have begun working in Bangladesh from today (Tuesday) to provide assistance to banks, financial institutions and business houses for getting credit from abroad.