Repayments of foreign loans resumed after a break of more than a week

Repayment of principal and interest on foreign loans for various development projects and government purchases of oil, gas and fertilisers have resumed after a hiatus of more than a week, sources at the Economic Relations Department (ERD) said.

The ERD representative, who provided anonymous information to the TBS news agency, said that yesterday the Bangladesh Bank received approval to repay the overdue installments.

Although the central bank is responsible for making these payments, the ERD prepares the payment schedule and sends it to the central bank via the Finance Department.

Sources in ERD, the finance department and Bangladesh Bank said the loan repayments were suspended for about 10 days due to severe political unrest and the ousting of the Awami League government, which led to the paralysis of the country.

ERD officials said this is the first time Bangladesh has defaulted on foreign loans, an unprecedented event in the country’s history.

Bangladesh follows a fixed daily repayment schedule for foreign loans, including principal and interest, even on public holidays.

The country typically spends about $10 million a day on development loans and budget support, plus $25-26 million on fuel and fertilizer imports.

There are currently about 300 active projects financed from foreign funds, with regular interest payments. This also includes repayment of the capital of loans taken out as much as 30 years ago.

In fiscal year 2023-2024, $3.35 billion was disbursed for project-related loans, of which $2 billion was for principal repayments and $1.34 billion for interest.

The government expects to spend about $4.5 billion this fiscal year to repay several loans for mega projects.