Power sector external debt: Repayment may pose a challenge
"We are at a point when we are seeking budgetary assistance from the World Bank and International Monetary Fund. We have to ensure that we do not have to borrow to repay loans. We have neither the revenue surplus, nor the forex reserve needed."
The repayment of foreign loans in the power sector may worsen the country's debt-servicing burden as the government will have to pay the lenders Tk 197,677.27 crore in the 30 years from 2024-25 fiscal.
The loans, taken out for the construction of 27 power plants and a network expansion project, are equivalent to 4.44 percent of the country's current GDP.
The Rooppur Nuclear Power Plant alone has a debt of Tk 90,474 crore.
For the 26 other plants, Tk 94,174.79 crore will have to be repaid, according to the Power Division data submitted last week to the parliamentary standing committee on power, energy and mineral resources ministry.
The Dhaka Power Distribution Company's network strengthening initiative has a debt of over Tk 13,000 crore.
Foreign loans account for three-quarters of the costs of the 26 public power plants.
The data submitted to the parliamentary body was signed by a deputy secretary of the Power Division on July 17.
According to the documents, the government has repaid about 16 percent of the total amount.
Economist Debapriya Bhattacharya has repeatedly warned about the intense pressure that such debts would place on the economy.
"We are at a point when we are seeking budgetary assistance from the World Bank and International Monetary Fund. We have to ensure that we do not have to borrow to repay loans. We have neither the revenue surplus, nor the forex reserve needed," he told The Daily Star yesterday.
"Will we have enough foreign exchange to do the debt servicing? We need to have a repayment plan," he said.
He added that the power plant projects should be implemented as per schedule so as to guarantee economic returns on the investment.
Addressing an event on Thursday, he said the country should be cautious about the debt situation, because the repayment of multiple large loans taken for mega projects will begin between 2024 and 2026.
"There is a need for defining a repayment strategy, including rescheduling of imminent payments, given the current account and foreign reserve status. Very close monitoring will be paramount in keeping the debt situation in check," he said while commenting on several mega projects.
The debt repayment period of the loans taken for the power plants is 2024-2054.
Rooppur Nuclear Power Plant project is being implemented by the Bangladesh Atomic Energy Commission while the rest are by the Power Division.
The biggest chunk of the debt is due for repayment in 2054 for the first phase of Matarbari coal power plant project.
The second and third largest chunks of debt repayment are to be made by 2035 and 2037 for four power plants.
The biggest amount, Tk 47,070 crore, will have to be paid to Japan International Cooperation Agency (Jica). The money was borrowed for the construction of five plants.
Tk 15,060 crore will be paid to the Export-Import Bank of China for Patuakhali 1320 MW coal-fired power plant. This debt needs to be repaid by 2035.
Exim Bank India is owed Tk 12,800 crore for Rampal Power Plant. The debt is to be repaid in 27 instalments from March 31, 2024, to March 31, 2037.
Two other major lenders, the World Bank and Asian Development Bank, have to be repaid between 2028 and 2038.