Bangladesh’s external debt repayment rises quickly
The country’s external debt repayment which has increased quickly for the past two years would soar in the next few years due to growing high-interest loans.
The interest payment against foreign loans would cross $1 billion or around Tk 8,730 crore in the financial year 2023-24 from $630 million in the current financial year 2020-2021, according to the Medium Term Macroeconomic Policy Statement 2021-22 to 2023-24.
The interest payment against foreign debt in the financial year 2019-20 was $477.44 million.
The external debt servicing liability — principal amount plus interest — stands at $2.1 billion in FY21 whereas it was $1.7 billion in FY20 and $1.5 billion in FY19.
The policy statement, however, contains no projection for the principal amount of foreign debt in FY24.
Former Bangladesh Bank governor Salehuddin Ahmed on Sunday said that the government needed to be cautious about the growing external debt against lower revenue income.
The reliance on borrowings from local and external sources will grow further in future unless the present trend of revenue generation improves, he noted.
The inadequate revenue collected by National Board of Revenue amid the Covid pandemic has pushed up the budget deficit to 6.1 per cent of the gross domestic product in the outgoing fiscal year.
The budget deficit will grow further to 6.2 per cent of the GDP as projected by finance minister AHM Mustafa Kamal while announcing the budget for the new fiscal year in the parliament on Thursday.
The government has not been able to mobilise domestic resources adequately to keep pace with the country’s economic growth and development over decades, said economists.
A comparative revenue analysis shows that the country’s average revenue-GDP ratio stood at 9.9 per cent in the past five years compared with that of 19.7 per cent in India, 21.5 per cent in Nepal, 14.9 per cent in Pakistan and 12.7 per cent in Sri Lanka, according to the policy statement.
The revenue-GDP ratio is 24.7 per cent in emerging and developing Asia and 35.8 per cent in advanced Asia, says the statement.
Former World Bank Dhaka office lead economist Zahid Hussain said that to maintain a prudent debt servicing in future, the government should look for foreign loans on low interest rates.
Besides, it should avoid taking unnecessary development projects having no economic potential for good returns, he said.
Costly projects like Rooppur Power Plant, Rampal Power Plant, Padma Bridge Rail Line and Karnaphuli Tunnel also are being implemented with loans from Russia, China and India with high interest rates. The macroeconomic policy statement said that growing external loans had raised the external interest payment slightly.
The ‘Financial Stability Report 2018’ released by the Bangladesh Bank in 2019, also highlighted that the short-term external debt was in a rising trend and stood at 4.5 per cent of the gross domestic product in the financial year 2017-18 from only 1.3 per cent in FY12.
General Economics Division member Shamsul Alam said that the country’s external debt stock was ‘reasonably low’ at less than 15 per cent of the gross domestic product.
As a middle-income country, more external loans could be taken for development needs, he said.
The country’s external debt stock stands at $53.5 billion or 14.7 per cent of the GDP at the end of the outgoing fiscal year, growing from $44.5 billion or 13.4 per cent of the GDP in the past fiscal year.
The amount of external debt will go up substantially if the guarantees and counter-guarantees given by the government against loans of state-owned enterprises in power, energy, civil aviation and agriculture sectors are included.
As of May 2021, the face value of the government guarantees and counter-guarantees has stood at Tk 1,066.6 billion and the outstanding amount of loans against those stood at Tk 738.4 billion.
News Courtesy:
http://www.newagebd.net/article/139877/bangladeshs-external-debt-repayment-rises-quickly
