Bangladesh’s debt-to-GDP ratio well below danger line

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According to the International Monetary Fund (IMF), Bangladesh’s public debt-to-GDP (gross domestic product) ratio was well below the danger threshold, making it eligible for more foreign loans.

They were speaking at a seminar organized by the Economic Relations Division (ERD), adding that it was possible to accelerate development by increasing the amount of loans from abroad because the pressure on debt repayment is at a bearable level.

However, due to lack of proper surveys, poor design, ineffective negotiations with donor agencies and slow implementation of projects, this possibility was fading as a huge amount of promised aid was stuck in the pipeline, they feared.

Speaking at the Seminar on Managing External Debt to Ensure Good Governance under the Knowledge Management for Development Project funded by the United Nations Development Organization (UNDP) held on Sunday at the NEC conference center in the capital, senior planning guest minister MA Mannan said external debt was playing a central role in development.

He, however, advised caution on excessive borrowing.

Stressing the need for foreign borrowing until the country achieves development, Minister of State for Planning Shamsul Alam said the external debt stood at 13% of GDP and it was possible to double it.

He said foreign loans are available at lower interest rates than domestic loans.

Being cautious about such loans, however, Alam pointed out that foreign loans are available at an interest rate of 0.70% to 1.5%, while domestic loans would range up to 7%.

Concerning the good management of the debt, the Minister of State indicated that there was a lot of criticism on the external debt.

Cabinet Division Secretary Khandkar Anwarul Islam claimed that all corruption in foreign lending stems from the weakness and inefficiency of the DRE.

Expressing his anger at the ERD’s loan agreement process, he said that the ERD entered into loan agreements without complying with the law.

The cabinet secretary also asked to know the process of forgiveness of foreign debt.

Anwarul Islam said irregularities of Tk70-80 crore in the project were created from here. Accordingly, lenders also work as entrepreneurs.

This results in increased project costs, irregularities and procurement delays.

He also said that ERD’s loan agreements were contradictory. Many times a contract was signed after midnight.

He said if someone files a lawsuit to oppose it, the parties involved could be in trouble.

DRE Secretary Sharifa Khan, Planning Secretary Mamun Al Rasheed, IMED Secretary Abu Hena Morshed Zaman and officials from the Ministry of Planning and DRE were present at the seminar.

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