By Motaher Hossain

The large-scale projects being undertaken in the country, coupled with massive foreign loans taken under the guise of these projects, have now become a major burden. Along with this, a massive debt trap has been created. After the implementation of these excessively loan-dependent projects, the benefits derived from them are meager compared to the financial liabilities; moreover, some projects, like the Karnaphuli Tunnel, have now become serious liabilities. This is because, immediately after the implementation of these projects, the pressure to repay loans and interest installments began, but no tangible economic benefits are emerging.

A study has revealed that, out of the 20 major projects in the country, foreign loans worth approximately 43 billion USD were taken, despite the total cost of these projects amounting to 70 billion USD. Following the fall of the Awami League government, the responsibility for repaying this debt now lies heavily on the shoulders of the people and the current government.

According to a white paper prepared by an interim government on the financial irregularities of the previous Awami League government, the amount spent on foreign loan interest is expected to triple by 2028. The white paper states that for various projects and budget support, the foreign debt interest repayments will be 2.73 billion USD in the 2025-26 fiscal year and 3.2 billion USD in the 2026-27 fiscal year. The report also warns that limited revenue generation and remittance income may further increase this pressure. Dr. Debapriya Bhattacharya, head of the white paper preparation committee, has expressed concerns, stating that foreign debt repayment for large-scale projects has created significant risks and pressure for both the state and the economy.

According to the research paper titled “Mega Projects of Bangladesh: Trends and Situation” by Dr. Debapriya Bhattacharya, Honorary Fellow of the Center for Policy Dialogue (CPD) and convener of the Citizen’s Platform for SDGs, 43 billion USD of foreign debt was taken for 20 mega projects during the tenure of the Awami League government. The largest share of this debt—36.6%—will be repaid to Russia, 35% to Japan, and nearly 21% to China. Additionally, loans have been taken from development agencies such as the World Bank, ADB, JICA, and others.

As of June 2023, the Economic Relations Division has reported that Bangladesh owes 62.4 billion USD to donor agencies. In the fiscal year 2022-23, the government repaid 1.74 billion USD, and in 2023-24, it will need to repay 2.47 billion USD. In the current fiscal year 2024-25, the interim government will need to repay another 2.6 billion USD. Dr. Zahid Hossain, former lead economist of the World Bank, has opined that foreign loans were taken for some projects without proper scrutiny, and there are questions regarding how much of these loans were actually utilized and how much might have been siphoned off. He added that if these loans had been used properly, the economy would have benefited.
It is noteworthy that the 800 MW Combined Cycle Power Plant installed at Khalishpur in Khulna was funded with a 500 million USD loan from the Asian Development Bank (ADB). While construction is nearly complete, due to a gas shortage, the plant is unable to enter commercial production. This has raised doubts about the benefits of the foreign loans for this project, which has become a burden for the government.

In this regard, Dr. Zahid Hossain further mentioned, “The responsibility for these loans lies not only with the borrowers but also with the lenders. If the lending agencies had properly assessed the viability of these projects, the burden of repaying the foreign debt would not have been so heavy. Now, the repayment will have to come from the people’s taxes, and there are questions about how much money might have been misappropriated.”

Investigations reveal that some of the foreign debt burden stems from mega projects financed by Russia, Japan, and China. For example, Bangladesh entered into a 2.66 billion USD loan agreement with China in 2018 for the Padma Bridge Rail Link Project. The five-year grace period for this loan ended in April of the previous year, and repayments have begun in the current fiscal year. The government will have to repay this loan over the next 15 years. Similarly, in 2019, the government borrowed 1.4 billion USD from China for the DPDC project to expand and strengthen the power system network. The grace period for this loan also ended in June of the previous year, and repayment has started from July. Additionally, repayments for the loan taken from China for the Karnaphuli Tunnel project began even before the project was inaugurated.

The total cost of the Karnaphuli Tunnel project is approximately 11,000 crore Taka, with joint funding from China and Bangladesh. China has lent 6,000 crore Taka at a 2% interest rate. The grace period for this loan also ended, and repayment began in the 2022-23 fiscal year. Aside from these Chinese projects, repayments for other loans are also starting to pile up, such as the Russian-funded Rooppur Nuclear Power Plant, the Dhaka Mass Rapid Transit Development Project (Metro Rail Line-1), the Matarbari 1200 MW coal-fired power plant, and the Dhaka Elevated Expressway, among others. Each of these large-scale projects is adding pressure on the foreign loan repayment burden every year.

Given this situation, the concerned government departments should find ways to reduce unnecessary expenses for these projects. Additionally, bilateral meetings with the lending institutions could explore options to extend repayment periods and reduce interest rates. This approach could be beneficial for the country, the government, and the people.

The writer is a, Journalist, General Secretary Bangladesh Climate Journalist Forum.