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Bangladesh gets deeply indebted as, over the past 16 years, the Awami League government led by Sheikh Hasina had borrowed $74.40 billion from external sources and repaid $39.31 billion-nearly half the total-before stepping down amid a student-mass uprising.
As of June last year, Bangladesh's public sector-external debt had surged to $78.18 billion-3.67 times higher than the $21.80 billion recorded in FY 2007-08 before the Awami League took office-according to Flow of External Resources in Bangladesh, a flagship publication of the Economic Relations Division (ERD).
Experts and economists say public -sector foreign-debt stock surged abnormally in recent years for unchecked borrowing in the infrastructure sector without properly assessing tangible development outcomes and the country's repayment capacity.
They warn that the country's reliance on loans is likely to grow further as concessional financing declines and borrowing on relatively tighter conditions gets more prevalent.
The ERD report reveals that the foreign- debt stock in the fiscal year 2022-23 was $70.78 billion and it increased by $7.41 billion in the last fiscal. The stock increased by 10.47 per cent in a year to reach $78.18 billion.
The debt stock surged by $72.48 billion in FY 2022-23 and by $3.37 billion in FY 2021-22.
The rise in stock pushed to increase the cost for foreign-debt servicing to cross the mark of $6 billion in the last fiscal year to $6.08 billion, over 27 per cent of that in the fiscal year 2022-23. The debt- service cost was $3.61 billion in the FY-2022 and $4.78 billion in the fiscal year 2023.
The debt-service cost in proportion to revenue mobilization reached 17 per cent, very close to the 18-percent threshold determined by the IMF and the World Bank. The rate was only 12.76 per cent in the fiscal year 2023 and 9.22 per cent in the fiscal year 2022.
But the overall debt- to-GDP ratio reached 17.03 per cent in the last fiscal year, far lower than the threshold 40 per cent. However, it increased from 13.78 per cent in the FY-2022 and 15.59 per cent in the FY-2023.
The report reveals that the weighted average interest rate on the foreign borrowing reached 2.3 per cent in the last fiscal year, which was 0.9 per cent in the fiscal year 2015-16. The rate of interest has increased 2.45 times in the last couple of years.
Average time to maturity of loans also decreased by 1.7 years from 13.1 years in the fiscal year 2016 to 11.4 years in the last fiscal.
"Average time for repayment also got reduced by 3.8 years from 12.3 years in 2016 to 8.5 years in the last fiscal. The 31- percent closer repayable loans are making pressure on the debt-service management," said one of the experts.
"The term debt-to-GDP ratio is illusive and the overall borrowing should be accessed
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Debt stock stood at $74.40b when Hasina govt fell
through repayment capacity, which is degrading over the years," says Professor Mostafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD).
He warns that government's foreign -debt -repayment pressure will intensify in the coming years, further straining the country's foreign- exchange reserves.
He notes that once the grace periods for large projects expire, both interest and principal payments will become due, escalating the repayment burden.
Dr. Mustafa K. Mujeri, former Director -General at the Bangladesh Institute of Development Studies, says government's "foreign- debt burden is rising as it covers loan repayments for state-owned institutions that fail to pay".
He stresses the need for careful loan assessment and an effective debt- management strategy to avoid future financial strain.