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Record debt repayment last fiscal year

Jacaran Chakma
Bangladesh made a record in external debt repayment last fiscal year, in yet another indication of the growing stature of the economy.
In fiscal 2018-19 the government paid off $1.57 billion to external lenders, up 12.23 percent year-on-year, according to data from Economic Relations Division (ERD) and Bangladesh Bank.
Of the amount, $1.18 billion was principal and $387 million interest.
"Foreign loan repayment is not a burden for Bangladesh at this moment," said Zahid Hussain, former lead economist of the World Bank's Dhaka office.
Bangladesh's external debt repayment is still less than 1 percent of its GDP.
But it may put pressure on the economy after five to six years when repayment of big and supplier credit loans will start.
"There is nothing to be worried about as the outstanding debt is still at a comfortable level,” he said, while emphasising proper utilisation of the foreign loans as implementation delays of infrastructure projects will not bring expected returns.
If the returns are lower than the implementation costs, it will definitely create pressure on the economy and the government will have to reduce allocation for education, health
and social welfare to make loan repayments, he added.
The interest portion in the repayment sum is on the rise, said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue.
In future, the government will be confronted with the challenge of high interest payment due to the decline in concessional loans.
"If the government can implement the foreign-funded projects on time and reap expected returns, debt repayment will not be a problem at all."
Bangladesh received $6.21 billion in foreign aid in fiscal 2018-19, the second highest after the previous fiscal year"s inflow of $6.37 billion, according to data from the ERD. A senior ERD official told The Daily Star that the amount of Bangladesh's external debt was very low as per the International Monetary Fund's permissible limit.
"Bangladesh can borrow up to 40 percent of GDP," he said, while ruling out the possibility of falling into a debt trap in the next decade. Since independence, the country's foreign borrowing stands at $58.83 billion. Of the sum, the government repaid $23.54 billion, with $34.50 billion outstanding as of June 30.