Bangladesh’s external debt reached $97 billion at the end of 2022, rising by 265% from $26.5 billion recorded back in 2010.
Moreover, the country’s debt repayments with interest have witnessed a 6-fold surge during the same period. Bangladesh repaid $1.02 billion with interest at the end of 2010, which rose to $6.17 billion in 2022 – in a span of 12 years.
These figures came to light in a recent World Bank International Debt Report (IDR), formerly known as International Debt Statistics (IDS).
While the world’s low- and middle-income countries witnessed a decrease in foreign debt in 2022, Bangladesh experienced an increase, an analysis of the report shows.
Despite a 3.4 per cent year-on-year decrease in the total foreign debt posted by low- and middle-income countries last year, Bangladesh has seen a significant rise of 6.59 per cent. At the end of 2021, Bangladesh’s foreign debt was $91.47 billion, which rose to $97 billion in 2022.
The foreign debt in low- and middle-income countries was $9.3 trillion in 2021, which decreased to $9 trillion at the end of 2022, pointing at a 3.4 per cent decrease year-on-year in these countries.
In the report, the global lender has identified several factors as reasons for the decline in the flow of external debt in low- and middle-income countries.
The key reason highlighted is the withdrawal of investments from both government and non-government bonds in these countries, and due to such a condition, non-government investors have withdrawn $189 billion from these countries.
This fight against inflation has led to policy improvements worldwide. As a result, interest rates on debts have increased, which in turn lead to a higher expenditure on loans in low- and middle-income countries.
Another issue is the increase in bond interest rates in Europe and the United States.
Investors are now raising funds from low- and middle-income countries and investing in those bonds. In this process, $127.1 billion has flowed from these low- and middle-income countries.
Those investors have invested an average of $202 billion per year in these countries during the 2019 and 2021 period. Another reason for the change in the flow of loans is the increase in the repayment amount, compared to the loan acquisition in these countries.
Due to the depreciation of the local currency against the greenback, repayments have gone up in these countries, which in turn decreased intake of fresh foreign debt.
Commenting on the matter, former lead economist of the World Bank Dhaka Office Zahid Hussain said, “Our foreign debt-to-GDP ratio is not that high as yet. The concern is about its proper uses.”
“If this debt is properly used, and infrastructure and systems are developed, our forex earnings will go up through increased economic activities. Otherwise, the country will face difficulties in debt servicing.”
He added, “The country’s foreign debt is exceeding the bearable level, while the other low- and middle-income countries are slipping to a bearable level. That is why they are decreasing their tendency to take up fresh foreign debt.”
Hussain recommended an increase in the supply of foreign exchange, instead of keeping the value of Taka high artificially to maintain macroeconomic stability. He also suggested focusing more on loan conditions, repayment schedule, and proper utilisation of debt.
