The Center for Policy Dialogue (CPD) has claimed that the government is taking fresh loans to repay the debt.
The agency says Bangladesh’s debt and repayment obligations are rising, forcing the government to continually take on new debt to repay debt amid insufficient revenue collection. Government borrowing has accelerated for different reasons, not Covid or the Ukraine war.
This information was given during the presentation of an article on ‘Bangladesh’s foreign debt and debt repayment capacity’ on Thursday (April 4) afternoon. CPD and Asia Foundation jointly organized this event at Lakeshore Hotel in Dhaka. The chief guest was the Prime Minister’s Economic Adviser. Mosiur Rahman.
Presenting the keynote, Mostafizur Rahman, Honorary Fellow of CPD said, We are borrowing to repay a large portion of our publicly guaranteed debt obligations. So there is no option but to increase domestic resource mobilization rapidly.
He said the rate of foreign debt and debt repayment obligations has increased in recent years. In June 2023, Bangladesh’s public and private external debt was $98.9 billion, which crossed $100 billion in September of the same year.
He also said that currently the foreign debt-GDP ratio of 21.6 percent is relatively not high. However, he cautions, the ability to repay the debt is very important.
Read more
CPD said on the occasion that the composition of the loan portfolio is changing rapidly. The proportion of concessional loans is decreasing, while the share of concessional and market-based loans is increasing. Loan terms are also getting stricter. Prof. Mostafizur expressed concern over the rapid increase in foreign debt and debt repayment liabilities, especially when compared to GDP, revenue, exports, remittances and foreign exchange reserves.
The economist said that debt carrying capacity and debt repayment capacity have created concern. At the end of the day domestic resource accumulation is important, which has to be considered for repayment of both domestic and foreign debt. An increasing share of domestic resources is being used to pay principal and interest on domestic and foreign debt.
Distinguished Fellow of CPD in Dhaka. Debapriya Bhattacharya said that in the last two weeks the issue of debt has come up for discussion. Debt repayment figures, factors come about due to a variety of macroeconomic outcomes. The attitude of denial by policy makers is always more pronounced.
He said, policy makers often say that economists cannot analyze properly, nor can they predict the future. Professional economists are often sarcastic and sarcastic by high-level policy makers. Two years ago today, sitting in the CPD, I said that the year 2024 will be difficult for us. There may be a big shock in debt repayment. From the year 2025, the debt repayment discomfort will begin. It will increase further in 2026. There are defaults as to debt. As such, many things have not yet been taken into account.
Regarding foreign and domestic debt. Debapriya said that if 100 percent of the loan is taken, 80 percent of the government and 20 percent of the private sector.
Can anyone tell what is the status of private sector loans. Some have taken this money abroad. Someone paid the bank. This calculation is not less important.
Read more
He said that the government is also taking loans within the country. What is the amount of that loan? What we borrow from abroad, we borrow twice from the country. Two-thirds of the government’s current debt is domestic debt, which is a big issue. In order to understand the debt situation of the government, we have to look at the external debt as well as the internal debt. If the per capita debt due to external debt is $310, adding domestic debt will increase it to about $850.
We have ample cause for concern, he said, adding that the debt servicing capacity has reached such a point that the revenue budget cannot provide even a single penny to finance the development projects. We are in deceptive reality or illusive reality.
At the event, Sri Lanka fell into the trap of short-term debt, such debt is also increasing in Bangladesh, said Economist Professor Rehman Sobhan, chairman of the Center for Policy Dialogue. He said that the country’s mega infrastructure projects are being done with foreign loans. These projects are spending 20 to 50 percent more than required.
Rehman Sobhan said Sri Lanka was trapped in short-term debt. Due to decrease in exports, the country could not repay these loans properly. Such a situation has also developed in some African countries. Bangladesh is not in such a position. But the amount of short term loans in the country is increasing.
