After three years of liability abroad, the country could find itself in an awkward position.

May 10, 2022

Debapriya Bhattacharya, a special fellow at the Center for Policy Dialogue (CPD), a private research institute, said Bangladesh may find itself in an uncomfortable position in terms of external debt after the next three years, ie after 2024-25. Bangladesh is currently in a green (comfortable) position. It is feared that it will gradually turn yellow (uncomfortable). Traditionally, those who used to lend at low interest rates, including the World Bank and Japan, now charge higher interest rates. So the place of relief decreases. “We are now borrowing more at a higher price from foreign bilateral sources,” he said. Eg China, Russia and India. These countries’ grace period is coming to an end. In addition, the level of domestic and foreign credit has increased at an unusual rate. Devapriya thinks I borrow a lot from bilateral sources rather than multilateral sources

But I can’t use the affordable ৫০50 billion loan in the pipeline.

Devapriya Bhattacharya said so in a virtual conversation with journalists on Monday. He expressed his views on the total debt of the Bangladesh government in this discussion entitled Government Debts of Bangladesh.

Devapriya Bhattacharya thinks that the liabilities of domestic sources of foreign liabilities are no less important. According to him, there is a growing tendency to borrow from internal sources at higher interest rates. Borrowing from both domestic and foreign sources has increased over the past three years. The last two federal elections, the year before and after the election year, the tendency to borrow has increased. The election cycle is becoming an indicator for explaining the country’s debt situation.

Asked if Bangladesh could have a crisis like Sri Lanka, Devapriya Bhattacharya said, “I don’t see it.” No country is like any other country. The main thing – what I learned from Sri Lanka. Earlier in our country there was a rumor about the issue of bonds. The government was conservative in this regard. However, experts in Sri Lanka have spoken out against the port of Hambantota. But the country’s government has done so. 

Devapriya Bhattacharya has taken stock that shows that not everything is included in the government’s debt balance sheet. According to him, the national debt in fiscal year 2020-21 is 44.10 percent of gross domestic product (GDP). Currently, the per capita debt is ২432. He believes that in order to fully calculate total liabilities including the repayment of government debt, both external and domestic debt, private sector debt and combined government debt should be taken into account. The situation may differ from the International Monetary Fund (IMF) assessment when presented as such. 

On that occasion, Devapriya Bhattacharya said that Bangladesh’s liabilities are undoubtedly smaller than those of South Asia. According to the IMF, the liabilities amount to 34.08 percent of GDP by 2020. And by 2021, Bangladesh’s liability is 131.14 billion. In the last three years, the average debt has increased by about 16 billion. An analysis of the overall statistics shows that the growth rate of liabilities from 2002 to 2011 was 44.1 percent. But from 2012 to 2021 it has increased to about 6 percent. Our debt situation has increased by a factor and a half in the current decade.
“We raise 10 billion a year,” he said. It has to spend ৭0.6 billion every year to pay off debts. The debt growth rate is increasing at a much faster rate.
At the same time, the growth rate of domestic debt is very high. Internal liabilities are 69 billion. Over the past ten years, the growth rate of this debt is about 54 percent. After 2013, this growth rate will increase from 15 to 19 percent. On the other hand, the amount of foreign liabilities is $80.15 billion. From 2013 to 2016, foreign liabilities increased from 16.6 percent to 14 percent and from 2019 to 2021 from 14.7 percent to 16.9 percent. 
The article goes on to say that the calculation of interest payments on loans shows that in 2007 foreign interest payments were 36.91 percent and domestic 61.09 percent. Due to the increase in debt after 2013, interest rates on foreign loans have increased. In 2021, 7.75 percent of interest is spent on foreign loans and 32.35 percent on domestic loans. It’s the complete opposite. This is because foreign loans are taken out at higher interest rates.
Devapriya Bhattacharya believes that five types of risks arise in the sovereign debt situation. B. increasing exchange rate risk, rising interest rates on domestic borrowing, rising interest rates on foreign borrowing, taking on projects at higher prices and reducing the economic benefit of projects. 
In response to various questions from journalists, Devapriya Bhattacharya spoke about inflation. Ordinary people are under a lot of pressure because of inflation. He said it is time for the government to take various steps to alleviate people’s plight and for the central bank to raise interest rates.
However, one argument against raising the key interest rate is that it will reduce investment. The amount of money spent by people is decreasing.
Devapriya Bhattacharya said the rise in interest rates has not boosted private investment in the country over the past three years. It is still around 23 percent of GDP.
He said the business environment needs to be improved to increase investment, and at the moment there is a need to raise interest rates to keep people out of inflation.
He said money laundering from Bangladesh and abroad increased in the years before and after the elections. So says the data from Global Integrity. Such a tendency is amplified when there is a crisis of democratic existence and trust.
CPD Special Fellow Mostafizur Rahman was also present on the occasion. He said the country’s public debt, as well as private debt, has risen sharply over the past 10 years. Interest rates are rising for those in the private sector who have borrowed from flexible libraries. He believes that this issue also needs to be kept in mind. He said that if that debt defaults, the country’s debt value will be adversely affected.
Journalists and researchers from various media outlets in the country were also present on this occasion.