The Awami League government during its 15-year rule took a large sum of foreign loans, with a proclivity towards taking bilateral loans.
Only three countries accounted for one third of the total loans taken by the Awami League government in the tenure.
Although the conditions of these loans are tougher, the monitoring and quality of project implementation is weak.
As time to repay such bilateral debt is less, the economy gets burdened. Bangladesh has already started to feel the pressure of debt repayment.
Analysing the information of the Economic Relations Department (ERD), it was found that Bangladesh took one third (32 per cent) of its debt from India, China and Russia during the reign of Awami League.
It was learnt that the AL government took USD 44.38 billion in foreign loans between 2009 and June 2024. Of the amount USD 14.01 billion was taken from China, Russia and India.
Stakeholders think taking loans indiscriminately from these three countries have only contributed to increasing the foreign debt burden of the country.
The per capita external debt of the country surged 166 per cent in the last 15 years.
Several infrastructure projects were implemented by funds from China, Russia and India.
Projects such Karnaphuli Tunnel, Rooppur nuclear power plant, elevated expressway, as well as different projects of railway and power sector were financed by loans taken from various donor organisations and countries including India, China and Russia on tougher conditions.
ERD officials said the repayment period is usually short for bilateral loans. As a result, a large amount has to be paid as instalment as soon as the grace period ends. Repayment of loans taken from China and Russia has already started.
The country’s economy has been under pressure for the last several years due to repayment of huge amounts of loans. Bangladesh's foreign debt servicing crossed USD 3 billion for the first time in a single fiscal year in FY 2023–24
South Asian Network on Economic Modeling’s (SANEM) executive director Selim Raihan told Prothom Alo, “Loans from China, Russia and India have burdened us … We have to remain alert so that the pressure does not mount too much.”
Selim Raihan further said that loans from organisations such as the World Bank and Asian Development Bank (ADB) are more closely monitored and terms are tougher. As a result, there is less interest to take loans from such organisations. On the other hand, getting bilateral loans from countries such as China and Russia is relatively easier. Monitoring of projects funded by such loans is also comparatively less which makes both borrower and lender happy.
Selim Raihan pointed out that looting money from such loans is easier. In case of such loans, the chance remains to implement projects at a higher price.
Source of loan
Bangladesh used to prioritise borrowing from multilateral organisations due to low interest rates and less pressure of debt repayment. JICA was Bangladesh’s choice for taking bilateral loans.
Getting bilateral loans from countries such as China and Russia is relatively easier. Monitoring of projects funded by such loans is also comparatively less which makes both borrower and lender happySelim Raihan, SANEM executive director
In the last 15 years, the Awami League government received foreign aid at a regular rate from global organisations such as the World Bank, ADB and JICA.
However, the government was more inclined to take bilateral loans from China, Russia and India instead of western countries including the US and UK.
Although China and Russia quickly granted loans in different mega projects, these have increased Bangladesh’s foreign debt burden. Also, debt repayment has added extra pressure on the budget of the country.
Bangladesh borrowed USD 12.65 billion from the Russia EXIM Bank for the Rooppur Nuclear Power Plant project. A bilateral agreement was signed on this matter in 2016, which was followed by the release of the funds in 2017.
Since June, Bangladesh has received a total of USD 7.33 billion for the project. However, payment of interest has already begun. Since Russia faces international sanctions, Bangladesh cannot send money through the country’s EXIM bank. So, Dhaka is depositing USD 220 million in two instalments annually in a special account of Bangladesh Bank.
A total of 14 projects including the elevated expressway are being implemented with Chinese loans. The share of Chinese loans is around USD 10 billion in these projects.
Disbursement of these Chinese loans started increasing after 2017. From China, around USD 4.87 billion loans have been disbursed.
India pledged to provide Bangladesh loans amounting to USD 7.36 billion through three lines of credit (LoCs) in the last 15 years. But the money was not released at an expected amount. A mere USD 1.81 billion has been released as of June this year.
Officials think that implementation of projects with loans from India is slower due to the condition that most of the purchases to be made from India.
Per capita loan increases by 166 pc
External debt of Bangladesh has increased 3.25 times in the 15 years of Awami League. ERD sources said Bangladesh’s external debt was USD 20.85 billion in 2008-09 when Awami League came to power. The amount increased to USD 67.9 billion in 2023-24.
Per capita external debt increased to around USD 400, from around USD 150 in 2009. That means, the per capita foreign debt has seen an increase of 166 per cent within the last 15 years.
The country’s economy has been under pressure for the last several years due to repayment of huge amounts of loans. Bangladesh's foreign debt servicing crossed USD 3 billion for the first time in a single fiscal year in FY 2023–24.
Experts think foreign debt servicing has created added pressure on the reserve and budget of the country.
The committee formed by the interim government to publish a white paper on the overall condition of the economy has been scrutinising the mega projects.
The committee is scrutinising the terms of these loans, necessity and economic utility of these projects. The committee has been asked to submit its report within 90 days.