Bangladesh’s external debt repayment obligation will double in the next three years, according to data from the Economic Relations Division (ERD).
The country has paid off over $2 billion in external debt in the 2021-22 financial year and the amount is expected to double and cross the $4 billion mark in the 2024-25 financial year.
The ERD, however, said external debt had increased in absolute terms, but had fallen as a percentage of gross domestic product (GDP).
According to ERD’s debt sustainability analysis, Bangladesh’s total debt stood at 12.94% of GDP in FY 2020-21, down from 13.36% in FY 20 and 14.71% in FY19.
The amount of FY21 debt is still well below the 40% of GDP threshold.
Regarding the decline in external debt, ERD Deputy Secretary Abdul Baki said, “Our external debt is sustainable in the short to medium term.”
He spoke while sharing a presentation on “Development Finance Negotiation Strategies” at a meeting organized by ERD at Sher-e-Bangla Nagar in the capital yesterday.
“The disbursement of project aid should be accelerated to contain the cost of borrowing and ensure the desired impact of a project. The disbursement rate should be at least 25% of the total outstanding external debt “Baki said.
The disbursement ratio stood at 20.84% in the 2021-22 financial year, according to data from the ERD.
DRE officials also said the government should be careful when choosing the loan currency and payment currency.
As of June 30, the largest portion – 41% – of Bangladesh’s outstanding debt by currency was in Special Drawing Rights or SDRs, which is an international reserve asset created by the International Monetary Fund, according to data from the DRE.
About 32% of outstanding debt was denominated in US dollars, 18% in Japanese yen, 3% in euros and 6% in other currencies.
Currently, the country’s outstanding external debt stands at 56.66 billion dollars, of which 76.95% is at fixed rate and 23.05% at variable rate.
On foreign loans, Planning Minister MA Mannan said: Bangladesh is gradually gaining the capacity to handle foreign loans and the country’s concessional loan amount has been decreasing over time.
“Bangladesh has developed a lot since 1972 when foreign loans played a key role. There is nothing to fear from foreign loans. There is no alternative to borrowing from outside sources to the development of a country.
“But we have to be careful with foreign lending to make sure it’s used properly,” he said.
At the event, Minister of State for Planning Shamsul Alam said the government had disbursed $10 billion in foreign loans in June this year and had more than $48 billion in loans. In progress.
Cabinet Secretary Khandker Anwarul Islam, DRE Secretary Sharifa Khan and Planning Secretary Md Mamun-Al-Rashid also spoke.