The country’s external debt will jump to Tk 4.4 lakh crore in the new fiscal year from Tk 3.7 lakh crore in the outgoing fiscal year due to the spike in short-term borrowing and receiving suppliers credits for development projects.
According to the ministry of finance’s Medium Term Macroeconomic Policy Statement FY20–FY22, a whopping Tk 68,020 crore would be added to the country’s external debt portfolio in 2020–21 beginning from July 1.
In the outgoing fiscal year, Tk 47,180 crore was projected to make entry into the country’s external debt portfolio.
The amount was TK 54,070 crore in 2018–19.
Economic experts have attributed the steep rise in the external debt to the spree of resorting to costly short-term loans and suppliers credit to implement development projects.
Despite the surge in the country’s overall external debt it is at a tolerable level, said Economic Relations Division officials.
Newly-appointed ERD secretary Fatima Yasmin said that the ratio of external debt to the GDP was hovering around 13 per cent until last year, much below the danger level of 50 per cent.
According to the Bangladesh Bank, the external debt repayment amount has been increasing over the years and stood at $1.59 billion in the FY2019, from $1.4 billion in the FY 2018 and $1.1 billion in the FY2017.
Besides, there are many projects being implemented by state-owned entities with loans guaranteed from the government of Bangladesh.
The value of guarantee and counter-guarantee was Tk 52,2250 crore as of June, 2019, with the power sector alone accounting for 71.1 per cent of the contingent liability.
The Power Division projects include the controversial Rampal 1,320MW coal-fired power project near the Sunderbans being implemented jointly by Bangladesh and India at a cost of nearly $2 billion.
The Rampal coal-fired power project is implemented by ignoring the UNESCO request for suspending it and the protests from local and international experts and green activists.
Jahangirnagar University economics professor Anu Muhammad said that many projects, including the Rampal project and the Roopour Nuclear Power Plant with loan from Russia, would turn into liabilities for the nation.
The projects have been undertaken only for serving political interests, he commented.
In addition to the annual loan amortisation, the county is facing an annual remittance outflow of around $5 billion and suffered some yearly capital flight of $7.4 billion on average in 11 years until 2015 as per an assessment by the Washington-based Global Financial Integrity in 2019.
Having mainly through under- and over-invoicing, economic experts noted, the capital flight might have been linked to the steep rise in the defaulted loans crossing over one lakh crore taka in the country’s banking sector.
Former chief economist of the World Bank Dhaka office Zahid Hussain said that the nation received some benefit from the remittance outflow by utilising services of Indians and Sri Lankans in the growing manufacturing sector.
But there was zero benefit from the capital flight as the country’s surplus fund, ie savings, generated by the labour of millions of marginal people, was smuggled out, he said.
Policy Research Institute executive director Ahsan H Mausur said that the sharp rise in the external borrowing posed many risks because many projects were undertaken without proper feasibility studies.
Such projects often failed to pay expected dividend due to the cost escalation and the delay in implementation. In the long run, the nation might face debt distress as a result, he said.
The Bangladesh Bank’s ‘Financial Stability Report 2018’, released in May 2019, highlighted that the short-term external debt was in a rising trend and stood at 4.5 per cent of the GDP in 2017–18 from only 1.3 per cent in 2011–12.
The size of the country’s GDP grew to Tk 22,38,498 crore in 2017–18 with its one per cent being Tk 22,384 crore.
The BB report also highlighted that long-term borrowing was declining until 2016–17, followed by a marginal increase in 2017–18 to stand at 15.5 per cent of the GDP.
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