November 8, 2022
DHAKA – The visiting IMF staff mission yesterday enquired about the status of loan repayment to Russia, which is disconnected from the international financial system thanks to SWIFT’s ban on the country for the Ukraine war.
SWIFT, which stands for the Society for Worldwide Interbank Financial Telecommunication, is the global financial artery that allows the smooth and rapid transfer of money across borders. Since March, Russian banks are suspended from the network.
Bangladesh is up-to-date on its payments to Russia, the Economic Relations Division informed the ten-member IMF delegation during their meeting, according to people familiar with the discussions.
An account has been opened in Russia’s name with Sonali Bank, where the dues are deposited against the $11.39 billion line of credit for setting up the Rooppur nuclear power plant.
At present, Bangladesh is repaying the $500 million taken for the project’s primary work; two more instalments are payable but they are not due yet.
Payment for the $11.39 billion loan is scheduled to begin from March 2027 or two years after commercial operation begins.
Seeing that a considerable amount of work remains to be done on the transmission front, the commercial operation is unlikely to begin on time in 2024.
So Bangladesh will get more time before loan repayment kicks in.
The IMF mission, which is in the country on a 15-day tour to work out the conditions for the prospective $4.5 billion loan, also wanted to know if the economy would come under pressure for future debt repayments.
Bangladesh’s foreign loan servicing burden will peak in fiscal 2029-30 with a repayment of $5.15 billion, according to a projection made by the ERD, which manages foreign debt repayment activities, in May-June as part of the government’s updated medium-term debt strategy.
After that, it would successively decline. For instance, in fiscal 2034-35, it would be $4.45 billion.
“There will be no pressure on the economy,” the ERD officials told the IMF mission.
The team also wanted to know the loan commitments and expected disbursement for the next ten years to get a proper sense of Bangladesh’s foreign loan scenario.
At present, $50 billion of foreign aid committed remains in the pipeline.
The mission called for ways to speed up disbursement from the pipeline.
It also wanted to know about the delays in mega projects.
The ERD officials told the delegation that the delays were due to teething problems; now, implementation of the projects is in full swing.
The team, which will wrap up its tour tomorrow after a meeting with Finance Minister AHM Mustafa Kamal, also wanted to know from whom Bangladesh has sought budget support.
So far, the country has sought budget support from the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank and the Japan International Cooperation Agency.
Save for Jica, everyone has expressed interest in extending budget support.