Photo : Messenger
As of the end of September, the foreign debt of the country has decreased by $2 billion, bringing Bangladesh's total foreign debt to $96.5 billion. Within this figure, government and public institutions account for $75.36 billion, while the private sector has acquired the remaining $21 billion in foreign loans. This updated information was provided by Bangladesh Bank in a report released on Thursday.
The data reveals that the government's borrowings include no short-term loans, with approximately 86 percent of the foreign-sourced loans classified as long-term. The remaining 14 percent, equivalent to $11 billion, constitutes short-term debt. Out of the total government debt of $75 billion, $64.18 billion is categorised as general government debt, and the remaining $11 billion represents the debt of government agencies.
According to data from the central bank, approximately 70 percent of the country's total foreign debt has been accumulated in the last 10 years. By the end of the 2015-16 financial year, the combined foreign debt position of the public and private sectors stood at $41.17 billion. Among this, $34.19 billion constituted long-term debt, while the remaining $6.98 billion was categorised as short-term debt. During that period, foreign debt represented 15.5 percent of the country's total GDP.
Foreign debt has steadily increased since 2016. At the end of the 2016-17 fiscal year, the foreign debt position stood at $45.81 billion. At the end of the 2017-18 financial year, the debt status exceeded $56 billion. At the end of the 2018-19 financial year, the foreign debt position stood at $62.63 billion.
Foreign borrowing has reached its highest point since 2018. By the conclusion of the fiscal year 2019-20, the foreign debt amounted to $68.55 billion. In the subsequent financial year 2020-21, there was a notable increase, exceeding 19 percent, bringing the foreign debt to $81.62 billion by the end of that fiscal year.
In the fiscal year 2021-22, foreign debt witnessed a growth of 16.9 percent, reaching a total of over $95.45 billion by the end of the financial year. Subsequently, a significant withdrawal of short-term loans from Bangladesh occurred due to the rise in international interest rates, leading to a reduction in the growth of foreign credit flows. By the end of the fiscal year 2022-23, the external debt position further increased to $98.94 billion.
As of the first quarter of the current financial year, in September, there has been a decrease in the foreign debt position by $2 billion compared to the previous quarter, settling at $96.54 billion.
According to central bank calculations, the combined foreign debt position of the public and private sectors in the country stands at approximately 22 percent of the total GDP. Both the government and Bangladesh Bank consider this debt-to-GDP ratio to be non-alarming for the economy. Bangladesh Bank spokesperson Majbaul Haque commented on this, stating, "Even with a foreign debt of $96 billion, it is not significant in comparison to the size of the country's GDP. We still have the capacity to take on more foreign loans. The decrease in the private sector's short-term debt by about $5 billion, influenced by global interest rate increases, prevented the foreign debt position from surpassing $100 billion much earlier.
However, renowned economist Ahsan H. Mansoor does not agree with this statement of Bangladesh Bank. He told The Daily Messenger, "It is meaningless to calculate the foreign debt-GDP ratio in a country like Bangladesh." The economist said, “Bangladesh's tax-GDP ratio is only 8 percent. This means that the government is not able to repay the debt with its own income. Therefore, there is no benefit in calculating the ratio of debt to GDP here. Debt ratio in Bangladesh should be compared with government revenue.”
A country's debt-to-revenue ratio is acceptable up to 200-250 percent. But the debt-to-income ratio in Bangladesh is more than 400 percent. Accordingly, the debt of the government has exceeded the dangerous level long ago.
The economist also said, “Bangladesh's net foreign exchange reserves are now around 15 billion dollars. In contrast, short-term foreign debt is higher than reserves. From this point of view, the position of Bangladesh is risky in terms of foreign loans. The pressure to repay foreign debt instalments will continue to increase from next year. If the supply of dollars does not increase, the situation can turn very bad.”
In addition to various government mega projects, the power sector has also received a huge amount of foreign loans in the past decade. Among these, the highest came in the Rooppur Nuclear Power Plant construction project. Russia has provided loan of $11.38 billion to build the power plant. A loan of 2.48 billion dollars has been taken from China for the construction of Payra thermal power plant. And India has given loan assistance of 1.6 billion dollars for the construction of Rampal thermal power plant.
Apart from this, loan assistance amounting to Tk 43,921 crore is being taken from Japan for Matarbari power plant and other projects. Apart from the government, government institutions are also taking loans from foreign sources. The foreign debt position of government institutions is now more than 11 billion dollars. This includes short-term foreign debt of about $2.5 billion.
Sources said that the loan instalments for numerous mega projects are slated to commence from the next year, which will escalate the foreign debt repayment obligations. This, in turn, will amplify the pressure on the country's already strained dollar reserves. With a severe crisis in the availability of dollars, the heightened demand for foreign debt service will necessitate additional dollar resources. However, the traditional sources of dollar inflow, such as remittances and export earnings, have witnessed shrinkage. Simultaneously, the country is grappling with a persistent increase in the depletion of foreign exchange reserves.
Messenger/Sun Yath
