Shawdesh desk:

The government has decided to borrow around $2.4 billion at high interest rates, mainly for importing fuel oils and liquefied natural gas, amid growing pressure on debt payments and the shortage of dollars.

The non-concessional loan committee, headed by finance minister Abul Hassan Mahmood Ali, on Sunday, approved three proposals in this regard in a meeting at the secretariat, officials said.

Of the total amount, $2.1 billion will be taken from the International Islamic Trade Finance Corporation, a member of the Islamic Development Bank Group, for importing petroleum fuel oils and LNG for the upcoming financial year starting in July.

The interest rate of the loan has been estimated at Secured Overnight Financing Rate plus 1.8 per cent for six months.

Another loan worth $100 million will be taken from the same ITFC, almost at the same interest rate and time frame. The loan will be co-financed by Bangladesh Bank.

The SOFR, according to officials, is prevailing at 5.3 per cent, more than one percentage point higher than a year ago and almost double from 2022.

Policy Research Institute executive director Ahsan H Mansur said that the government had been forced to borrow at a high interest rate for the uninterrupted import of fuel oils.

The country imported petroleum oils worth $5.7 billion in FY23, compared to $7.0 billion in FY22.

The country relies on borrowing from local commercial banks and international financial entities for the import of petroleum products.

The government’s dependency on international financial entities has increased because of a shortage of dollars in the local banking channel since April 2022, said Ahsan H Mansur.

The import of LNG since 2019 has also increased the overall energy import bills, forcing the government to borrow $4.7 billion in seven tranches by May 2026 from the International Monetary Fund to ease the pressure on the balance of payments.

Mansur said that borrowing at a high interest rate for oil and LNG imports would increase the country’s overall debt payment quickly.

The government’s debt payment for foreign loans will grow by 53 per cent to around Tk 57,800 crore in FY25, compared to Tk 37,775 crore in outgoing FY24.

The rise in foreign loan repayment between FY23 and FY24 was around 38 per cent, according to the ERD projection sent to the finance division in the past week as part of the budget-making process.

The country’s external debt crossed the $100 billion mark in the past month.

Of the amount, $79.69 billion is taken by the government, marking a more than threefold increase in 14 years for the implementation of mega projects such as the Roopur Nuclear Power Plant, the Padma Bridge Rail Link Project, the Karnaphuli River Underneath Tunnel, the Metro Rail Line Project, the LNG Terminal in Maheshkhali, and Payra Sea Port.

The rest of the $20.31 billion is taken by the private sector.

Officials said that the non-concession loan committee, which approved 65 proposals between 2013 and 2021, nodded to a loan worth $289 million.

The Islamic Development Bank will provide the loan to Bangladesh House Building Finance Corporation, which will utilise the fund for its Rural and Peri-Urban Housing Finance Project.