The government plans to increase the use of foreign credit in offsetting the budget deficit, Economic Relations Division (ERD) Secretary Kazi Shofiqul Azam has said.
He said there is a 5% deficit in the present budget and the government meets up this deficit by taking 3.5% credit from domestic sources and 1.5% from foreign sources.
"But we want to increase the foreign part from 2% to 2.5% because of lower interest rate," said the ERD secretary on Sunday.
He was speaking at a press conference at the Finance Ministry auditorium at the Secretariat in Dhaka, held to brief reporters on Bangladesh’s participation in the South-South and Triangular Cooperation in Brazil and the Global South-South Development Expo in Turkey. Both events took place in November.
Azam said the government paid interest worth Tk42,000 crore, of which only Tk2,000 crore was paid against foreign loans and the rest of the amount was paid against domestic credit.
He, however, added that foreign credit and assistance would decline when Bangladesh becomes a lower middle income country in March next year.
“Now the World Bank charges 0.75% interest for its loans, but it will be 20% afterwards,” he said. “If the interest rate goes up, investments will also increase.”
When Bangladesh becomes a middle income country, interest rate of foreign loans would go up by three times, the secretary said.
“But even then, it will be beneficial for Bangladesh to take loans from foreign sources.”