Bangladesh's foreign debt servicing surged nearly 31 percent year-on-year in the first four months of fiscal year 2024-25 owing to the country's expanded foreign loan portfolio and a rise in global interest rates.

Bangladesh returned $1.44 billion in principal and interest payments on foreign loans during the July-October period, up from $1.10 billion during the same period of fiscal year 2023-24, according to data of the finance ministry.

Individually, principal payments climbed 41 percent to $896 million while interest costs by 16 percent to $542 million.

And in a report, titled "Medium-Term Macroeconomic Policy Statement (MTMPS)", the finance ministry said interest payments would continue to rise gradually in the coming years.

Bangladesh returned $1.44 billion in principal and interest payments on foreign loans during the July-October period

The proportion of external interest payments as a percentage of the national budget will rise to 2.6 percent in FY27 from 0.9 percent in FY22, reflecting the growing impact of external debt, the report said.

Meanwhile, loan disbursement by global lenders and multilateral partners fell by 26 percent year-on-year to $1.20 billion in the July-October period of FY25, as per the finance ministry data.

Therefore, one reason for the drop in loan disbursements could be inefficiencies of the implementing agencies, according to officials of the finance ministry.

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

Apart from this, the implementation of projects usually slows down at the beginning of the fiscal year, which results in lower disbursements, officials said.

Besides, foreign loan commitments in the July-October period dropped to $254.57 million, from $3.62 billion in the same period last fiscal year.

Japan provided the highest amount of $266.30 million, followed by Asian Development Bank ($266.11 million), Russia ($194.53 million), and the World Bank ($178.16 million).