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Bangladesh - August 23, 2023

Wave of development by borrowing money

Foreign debt increased 409 pc in 16 yrs

Special Correspondent: The government has implemented a good number of development programmes including a number of mega projects. This has created huge fame at home and abroad but the development works have been conducted by borrowing money from abroad. These mega development programmes have eaten up the targeted goal of becoming ‘mid-level income status country by the year 2024.
After the departure of the BNP-led four-party coalition government at the end of 2006, the foreign debt of Bangladesh was $18.96 billion. However, during the current government, especially in its third term, it increased rapidly. At the end of December 2022, the amount of foreign debt stood at $96.50 billion. That meansthe foreign debt has increased by 409 percent or more than four times in 16 years.
Both public and private sector external debt increased during this period. However, the foreign debt in the public sector has increased more.
According to sources, the BNP left power on October 28 in 2006. Two months later, Bangladesh’s foreign debt stood at $18.96 billion. The majority of these were public sector loans. Its amount was $17.80 billion while the amount of private sector debt was $1.16 billion.
Then on January 11, 2007, the caretaker government took over. Fakhruddin Ahmed led government was in power for two years. Bangladesh’s foreign debt increased by 38.34 percent during the period. By reviewing the data of the central bank, it can be seen that the amount of foreign debt at the end of 2008 stood at $22.79 billion. Of this, public sector debt was $21.19 billion and the private sector was $1.59 billion.
On January 6, 2009, the Awami League-led grand coalition government came to power. Foreign debt increased by 39.47 percent in the next five years. According to Bangladesh Bank, this loan increased to $31.79 billion in 2013. Even in the five years, the debt of the public sector has increased the most. At this time, the foreign debt status of the public sector increased by $6.53 billion and stood at $27.72 billion. And private sector debt increased by $2.46 billion to $4.06 billion.
Analyzing the data of the five years, it can be seen that although foreign debt increased by $1.2 billion in 2009, it decreased by $836 million in 2010. But next year it increased to about $1 billion. However, in 2012 and 2013, foreign debt increased to about $4 billion.
In 2014, the Awami League government came to power again. In the next five years (years 2014-2018) foreign debt increased rapidly. Foreign debt increased by 79.51 percent in the five years. According to the report of Bangladesh Bank, the foreign debt position at the end of 2018 stood at $57.07 billion. That is, foreign debt increased by $25.28 billion in five years.
Public sector debt increased by $16 billion in five years. As a result, the debt status of this sector stood at $44.55 billion at the end of 2018. In those five years, private sector debt increased by $8.46 billion. At the end of 2018, the private sector debt stood at $12.52 billion.
Analysis of the data of those five years shows that foreign debt increased by $5.48 billion in 2014. But next year it will increase to only $1.32 billion. In 2016, foreign debt increased to $3.1 billion, in 2017 it was a record $9.46 billion and in 2018 it was $5.93 billion.
Meanwhile, the foreign debt has increased by more than 69 percent in the first four years of the third consecutive term of the Awami League government. According to the report, the foreign debt status of Bangladesh at the end of December 2018 was $57.07 billion. At the end of 2022, it has increased to $96.50 billion. That is, four-year foreign debt has increased by $39.43 billion.
In these four years, the foreign debt status of the public sector increased by $27.64 billion and stood at $72.19 billion. Among them, short term debt was $2.11 billion and long term debt was $70.07 billion. And in the last four years, private sector debt has increased by $11.79 billion. At the end of 2022, the debt status of the private sector stood at $24.31 billion. Among them, short term debt is $16.41 billion and long-term debt is $7.89 billion.
External debt has grown at the fastest rate in the last four years. Among them, $5.92 billion increased in 2019, $9.95 billion in 2020, a record $17.85 billion in 2021 and $5.71 billion in 2022.
Data analysis shows that in 2021 only government debt increased by $9.54 billion and private debt increased by $8.32 billion. Analysts say that there was stagnation in the global economic activity in the post-corona year. Then the interest rate of foreign loans decreased a lot. At that time the demand for dollars also decreased. Many countries then increased debt repayments. But the exceptional scenario was seen in Bangladesh. At that time, Bangladesh Bank provided an opportunity to extend the term of the loan phase by phase through policy support. By relaxing the loan repayment terms. Businessmen also borrow heavily from abroad due to low interest and easy terms. As a result, a record amount of debt increased in 2021.
On the other hand, one of the reasons for the decrease in debt in 2022 was the increase in the exchange rate of the dollar. In addition, global interest rates also started to increase at this time. In addition to the dollar crisis, the cost of debt repayment has increased. The debt to the private sector has increased by only $1 billion.
Private entrepreneurs say that at the beginning of last year, the price per dollar was Tk 85. At the end of December, it stood at Tk 107. This means, the cost has increased by Tk 22 per dollar only due to exchange rate. Interest rates have also increased several times. At the beginning of 2021, the interest rate on short-term foreign loans, including all expenses, was less than 3 percent. Now the interest on that loan is more than 9 percent. Again, no one can say whether the exchange rate or interest rate will remain stable at this level. A class of businessmen are discouraged from taking foreign loans as the cost of foreign loans is higher than that of domestic loans. It reduces the inclination towards foreign debt.

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