- Tk 3.25 trillion of debt next targets
- No money be borrowed from savings account
- Current debt ratio is 37.34 Pc of GDP
The government has initially set a target of Tk 3.25 trillion of debt in the budget of the next financial year (2024-25). A major part of the target will be taken from banking sector. It is about more than Tk 1.50 trillion. Besides, foreign loans of more than Tk 100 million ($11.7 billion) will be taken. More than Tk 1 lakh 6 thousand crore have to be calculated for the interest payment of this huge amount of debt, which is estimated at Tk 94 thousand 376 crore in the current financial year.
This is the first time that no money will be borrowed from the savings account. Savings bonds are being reined in to meet IMF conditions. IMF has given Bangladesh a loan of $4.7 billion, against which the condition is to reduce borrowing from savings bonds. Now the government is walking on that path. The outline of the mentioned local and foreign loans will be announced in the next budget. It was recently approved by the Coordination Council meeting on Monetary and Currency Exchange Rates. The meeting was held under the chairmanship of Government’s Finance Minister Abul Hasan Mahmud Ali.
Before this, soon after assuming the new responsibility, Abul Hasan Mahmud Ali held a meeting with the stakeholders to review the country’s macroeconomic situation. There was a wide discussion about the debt situation of the government. Especially regarding the debt repayment pressure, the Secretary of the Economic Relations Department Shahriar Quader Siddiky said, the amount of debt repayment will increase in the financial year 2026-27 as the loan received from Russia and the mega project are scheduled for repayment. $53 million is expected to be paid in that financial year. It is then calculated to repay $519 million in the financial year 2027-28 and $507 million in the financial year 2028-29. This trend of growth will continue till 2030, but after 2034 the debt repayment pressure will decrease.
Former caretaker government’s finance advisor Mirza Azizul Islam said that it is necessary to see where the loans taken in the past have been used. It remains to be seen whether the debt repayment capacity will increase in the future or not.
He also said that overall, the ratio of debt to GDP is not bad. But even if there is reason not to be alarmed, take loans with caution. Efforts should be made to take flexible (low-interest) loans from donors including the World Bank and IMF. I discourage private sector borrowing from abroad. Because these loans come and go suddenly, putting pressure on the reserves. Besides, their loan terms and interest rates are high.
Mahbub Ahmed, former senior finance secretary said that the government’s debt-to-GDP ratio is about 22 percent. In many countries of the world, this ratio is more than 70 to 100 percent. But there is the matter of our ability to repay the debt. Next year’s debt and interest payments will be about 5.59 percent of our total remittance and export earnings. Analyzing this data, it can be seen that the level of borrowing is still at a tolerable level. But those who are telling the government to be careful in taking loans are right. Care must be taken. Loans should be selected for those projects which will not cause any hindrance in repayment and will help in investment. Otherwise, it will not be right to take a loan anywhere.
It was known that the economy of Bangladesh is already under pressure due to the dollar crisis and in the meantime, the loan installments of some big projects have started to be paid from this year. Besides, exports and remittances are not increasing as desired. Analysts fear that if the supply of dollars is not increased in such a situation, the crisis surrounding the foreign debt may intensify. According to them, many are worried about what the situation will be when the principal payments of the mega projects start.
According to the government, the current debt ratio is equal to 37.34 percent of GDP. However, according to International Monetary Fund (IMF) criteria, a country’s borrowing level of up to 55 percent of its GDP is considered risk-free. As a result, the government concerned believes that the level of debt is still risk-free. However, experts said, even if the debt to GDP ratio is low, revenue, exports, remittances will increase and the value of the dollar will be at risk. Income growth in these sectors and the simultaneous reduction in foreign debt flows could create huge pressure in the next few years.
According to sources from the Finance Department, the country’s external debt status is Tk 8 lakh 74 thousand 562 crore and domestic debt is Tk 9 lakh 78 thousand 577 crore till December.
ZH
