Foreign loan disbursement falls

Foreign loan disbursements for development projects in Bangladesh fell nearly 12 percent year-on-year last July, doing little to ease pressure on foreign exchange reserves.

Agencies implementing the projects usually submit bills based on their progress every month or so. The government pays the bills and afterwards seeks disbursement of the amounts in loans from foreign entities and countries.

Therefore, one reason for the drop in loan disbursements could be inefficiencies of the implementing agencies.

Usually, the implementation of projects slows down at the beginning of a fiscal year, which results in lower disbursements, according to officials of Economic Relations Division (ERD).

Besides, the political unrest caused by student protests throughout July may have deferred the implementation of some projects, contributing to the drop in disbursements, officials said.

Bangladesh received $358.3 million in foreign loans in the first month of the current fiscal year of 2024-25, according to the ERD.

Japan provided the highest amount of $105 million, followed by Asian Development Bank ($81.56 million), European Union ($64.57 million), the World Bank ($38.39 million), Russia ($29 million) and India ($21.59 million).

The foreign currency reserves are quite low when considering the country's obligations, such as import payments.

There was $20.48 billion in foreign currency reserves as of August 21, according to International Monetary Fund's (IMF) calculation methods which are used by Bangladesh Bank.

This is roughly enough to cover import bills of around three months, which is considered by the IMF as a minimum reserve for a low-income country.

However, loan repayments in July increased by 52.34 percent to $385 million. Of it, $264.88 million was the principal amount, which was a rise of 80.76 percent.

It was $146.53 million in the same period last year.

Meanwhile, the amount of interest was $120.79 million last July whereas $106.56 million in the same month last year.

Besides, foreign loan commitments in July amounted to $16.40 million, up from $6.92 million in the same period last year.