Home ›› 22 Jul 2022 ›› Front
Bangladesh seriously needs to take out a loan from the International Monetary Fund (IMF) to help tackle inflation and ensure a stable exchange rate with USD, but the government’s statement in this regard is not very encouraging, said Dr Debapriya Bhattacharya.
The distinguished fellow at the Centre for Policy Dialogue (CPD) added, “Sri Lanka’s experience shows that borrowing from the IMF is necessary before the situation worsens. If Bangladesh takes a loan from this agency, the world will see that they are with us.”
This will boost the global community’s confidence in Bangladesh, which in turn will help us regain the value of Taka against USD, he said while addressing an online discussion with journalists titled “Top Twenty Mega Projects in Bangladesh: Trends and Status” on Thursday.
To meet the on-going USD shortage, the Bangladesh Bank provided support to the money market from the forex reserves. This is the key reason behind Bangladesh’s forex reserve position falling from $48 billion in August last year to $39.79 billion in 14 July 2022.
Recent media reports claim that the Bangladesh government is seeking $4.5 billion support from the IMF.
However, at a press conference following a purchase Committee meeting on Wednesday, Finance Minister AHM Mustafa Kamal said there is no need for foreign loans at the moment, and Bangladesh will take loans when necessary.
Commenting on the minister’s remark, Dr Debapriya said, “It is very important to take a loan of $2 billion or $4 billion from the IMF to stabilise the balance of payment (BOP).”
The eminent economist analysed 20 mega projects of Bangladesh, including the Padma Bridge, Rooppur Nuclear Power Plant, Karnaphuli Tunnel, Matarbari Coal Based Power Plant, Metro Rail, and Padma Bridge Rail Link.
According to his analysis, the cost of 20 mega projects of Bangladesh has reached $70 billion, which is 61 per cent or around $43 billion in foreign debt. Fourteen projects have more than 50 per cent financing from foreign sources.
“The repayment pressure of this debt will begin from 2024 and debt service liabilities will increase from the current 1 per cent of GDP to 1.5 per cent to 2 per cent. The first debt repayment pressure will come from China, and later from Russia,” he added.
Bangladesh has to repay the most debt to Russia, Japan and China. Of the total foreign debt, 36.6 per cent of the repayment will go to Russia, 35 per cent to Japan and 21 per cent to China, as calculated by Dr Debapriya.
Those 20 projects are scheduled to be completed by 2028. But the implementation rate of 11 projects among the 20 is below 25 per cent. Besides, 13 projects – approved between 2014 and 2018 – have an overall poor rate of implementation at around 32 per cent.
Dr Debapriya expressed doubt whether the implementation of the projects will be completed in 2030 at the current pace.
To tackle debt servicing liabilities, Debapriya advised the government to try rescheduling Bangladesh’s foreign debt. Besides, the projects that have yet to see any disbursement should be suspended for the time being.
“And the ongoing projects, which have come to the attention of the government as having incurred abnormal expenditure, should be revised,” Debapriya recommended.
The economist said the pressure of foreign debt repayment in future is not a seasonal problem, but a structural one. To resolve this, the government should try to increase exports, remittance income, foreign investment and aid.
“However, necessary coordination among the government departments is not visible at the moment. The policy leadership must be taken by the finance ministry. An integrated medium-term plan should be made.”
