Foreign debt builds up to $103.64b, as of Dec

Bangladesh saw its overall external debt rise by 3.0 per cent to US$103.64 billion up to last December and this increase was primarily driven by public sector's growing appetite for foreign funds.

Though the unpaid volume of debts remained below the International Monetary Fund (IMF)-recommended ceiling by then, there were some concerns in the current macroeconomic context marked by a rapid depletion of the country's foreign-exchange reserves.

According to the latest Bangladesh Bank data, the country's overall external debt buildup reached $103.64 billion by December 2024, which was $3.0-billion higher from the corresponding period a year ago when the volume was  $100.64 billion.

While the latest outstanding figure of debts dropped slightly from $104.37 billion recorded until September last, it was higher from $103.41 billion and $98.93 billion recorded in June and March 2024 respectively, according to the data.

According to the central bank data, long-term debt stands at $90.69 billion, while short-term borrowing $12.95 billion.

The public sector incurred the maximum of the debt, $84.21 billion, with the remaining $19.42 billion owed by the country's private sector.

In terms of country-wise external debts, China is the leading creditor nation, with Bangladesh owing $3.31 billion.

The United Kingdom follows at $1.14 billion, then the Netherlands $990 million and the United States of America $750 million.

Speaking on condition of anonymity, a Bangladesh Bank official said the rise in external debt is due mainly to government's increased borrowing to finance development activities.

Asked about the growing external-debt obligations, the central banker downplayed concerns, saying the long-term nature of most of the debts mitigates pressure on the economy.

"The country does not need to consider immediate repayment," the BB official said. "Repayment pressure will gradually increase over a longer period."

The official mentions that Bangladesh's external debt-to-GDP ratio remained within the IMF-designated 40-percent threshold.

Contacted, Director-General of Bangladesh Institute of Development Studies (BIDS) Dr AK Enamul Haque said most foreign loans are used for public infrastructure development, with the government repaying them using the economic returns from these projects.

"So, I'm not concerned about the debt size itself. The key issue is whether it is used effectively to accelerate economic growth here," Mr Haque said.

Dr Masrur Reaz, founder-chairman of the think-tank Policy Exchange Bangladesh, says the country's overall external-debt obligation is still manageable but it had expanded in the last 7-8 years at such a rate which is alarming.

"Such rapid rise in foreign borrowing happened mainly because of indiscriminate use of foreign funds to finance a good number of inefficient public-sector projects."

The encouraging part is, says the economist, the interim government and the current leadership of the central bank have taken a strict stance on proper use of the funds through ensuring prudent public-fund management.

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