$1.62b in private sector foreign loan instalments due in 2023

Infograph: TBS

The country's private sector has to pay off instalments of long-term foreign loans amounting to $1.62 billion in 2023 amid the ongoing dollar crisis.

According to a report by the Bangladesh Bank, the principal amount of long-term foreign loans to be paid from January to December this year is $1.27 billion with more than $354 million in interest payments. 

The central bank said the interest amount for 2023 is the highest in 31 years between 2009 and 2040.

As per projection, the private sector's foreign debt service suddenly increased to $1.77 billion in 2024 from the previous period due to the bullet payment of commercial borrowing in the telecommunications sector. The projection shows that debt service payments would progressively decline during the coming decades.

Stating that the country's forex situation may turn more complicated while paying the instalments of such a large amount of foreign loan, the managing director of a private bank, on condition of anonymity, told The Business Standard, "When these loans were taken, the rate of the dollar was less than Tk85. Now it stands at Tk109-110. As a result, businessmen have to take more pressure to pay back the principal amount with interest." 

Besides, there is a tendency among businessmen to pay off these foreign loans quickly due to the fear of the dollar price soaring further, he added. 

According to the central bank report, repayments of private sector long-term loans were $2.82 billion during the year 2022, recording an increase of 29.6% over the previous year 2021 ($2.18 billion).

It is worthwhile to note that during the period of 2022, the new borrowings of this type of loan were $2.82 billion, recording a decrease of 30.3% over the previous year 2021 ($4.05 billion).

Md Arfan Ali, the former managing director of Bank Asia, told TBS, "Already our forex liquidity is not in a very good condition. Banks will be under pressure to pay this amount of dollars. It will ultimately strain our reserves."

"Due to the 19% devaluation of the taka over the last year, the borrowers of these long-term foreign loans will have to spend more than usual to buy dollars. Because of this, they will not be able to profit as much as they were supposed to with business loans," the banker added.

At the end of December 2022, the private sector long-term foreign loan was $7.89 billion. Around 73.7% of this loan charges a floating interest rate, 24% charges a fixed rate and 2.3% charges no interest.

Selim RF Hussain, chairman of the Association of Bankers, Bangladesh (ABB) and managing director of Brac Bank, told TBS, "While making these loan payments, there will definitely be pressure on our dollar market. Generally, good customers take these loans, so they are less likely to default. But defaulting on loan payments will not be good for the country." 

"The dollar liquidity situation of banks is getting better. Our financial account balance is negative now but in the next two-three months we will be able to reach a good position," he added.