Home ›› 06 Feb 2022 ›› Opinion
According to the ‘International Debt Statistics 2022’ released recently by the World Bank, World gross domestic product (GDP) fell by an estimated 4.3 per cent in 2020-the sharpest contraction of output since the Great Depression. Actually, the output was estimated to 5.6 per cent for 2020 amid the pandemic of Covid-19 that ravaged the global economy. Regional development banks and multilateral institutions began to lend the virus- hit economies in the world. The fast-spreading deadly virus forced the economies to take debt from various sources. So, every economy is now carrying a debt stock which is alarming. The statistics said that low- and middle-income countries’ combined external debt stocks at the end-2020 were $ 8.7 trillion. They rose 5.3 percent in 2020, an annual rate of increase comparable to that in 2018 and 2019.
In order to keep vulnerable countries’ economies afloat, G20 launched the Debt Service Suspension Initiative (DSSI). In the aim of giving speedy and sustainable support, G20 took the admirable step among others. According to International Debt Statistics 2022, the World Bank (WB) and the International Monetary Fund (IMF) raised net inflows from multilateral creditors to $117 billion, the highest figure in a decade. Net debt inflows rose 9 per cent to $ 435 billion. The external debt stock of low- and middle-income countries rose, on average 5.3 per cent in 2020, about the same pace as the two previous years. The rise in external indebtedness was not matched by gross national income (GNI) and exports growth. Low- and middle-income countries’ external debt-to-GNI ratio rose to 29 per cent in 2020 from 27 per cent in 2019, and the debt-to-export ratio increased to 123 per cent from 106 per cent in 2019.
Bangladesh is all set to emerge as a developing country in 2026 recommended by the United Nations. From the maiden Five Year Plan (FYP) beginning in 1974, Bangladesh had been relying on donor agencies in respect of grants and loans. In order to heal the war ravaged economy, the grants and loans taken in 1st FYP were quite significant in volume. The grants and loans sanctioned by donor agencies in 1st FYP was about $ 3531 billion, $ 6.08 billion in 2nd FYP, $ 8.0 billion in 3rd FYP, $ 7.30 billion in 4th FYP, $ 7.16 billion 5th FYP, $ 12.82 billion in 6th FYP, $ 20.14 billion in 7th FYP. Like all other nations, Bangladesh faced untold sufferings and troubles when coronavirus started to affect. Bangladesh failed to achieve the expected GDP target set by the government because of this virus. On the contrary, the government’s revenue earnings dropped drastically. The number of new poor has increased due to the layoff of the vast number of the labour force.
Despite introducing stimulus packages, Bangladesh was looking forward to seeking external help in order to survive amidst Covid-19 pandemic. Moreover, for executing the mega projects, external financial assistance was needed. According to World Bank Debt Statistics 2022, Bangladesh’s external debt stock was registered at about $ 67.75 billion in 2020 where the figure was around $ 26.57 billion in 2010. Bangladesh’s external debt stock in fiscal year 2021 was around $ 49 billion according to Debt Bulletin, a Bangladesh government publication. Currently, Bangladesh’s external debt stocks to Gross National Income (GNI) are 20 per cent- the report said. External debt stock to export ratio increased to 174 per cent. Debt service to export ratio is 10 per cent. Reserves to external debt service ratio are 62 per cent. From 2010 to 2020, Bangladesh’s GNI increased from $ 124,617 million to $ 338,933 million.
Over the last decade, Bangladesh’s per capita debt is growing for many reasons. A World Bank study revealed that per capita debt was $ 226.31 in 2015, $ 239.27 in 2016, $ 287.72 in 2017, $ 316.72 in 2018, $ 342.87 in 2019. During the sixth five year plan (2011-2015), Bangladesh showed the highest growth performance next to world’s second largest economy China. At that time only $ 12.82 billion came from donor agencies as grants and loans. Bangladesh’s growth rate was 6.3 per cent whereas 5.5 per cent in India, 5.8 per cent in Indonesia, 3.3 per cent in Thailand, 2.9 per cent in Latin America. Since Bangladesh has become a role model in the world in terms of growth rate, the development partners might contribute to our economy in alternative ways. In 2016 when Chinese president Xi Ping visited Bangladesh, more than two dozens of deals were signed between two countries amounting to $ 2,053 crore dollars.
Considering the need of the economy, Bangladesh is obliged to be dependent on external supports. The effects, worries and negative externalities of rising external debt can be offset by the effective and timely implementation of the mega projects financed by donor agencies, making the external debt some sort of a blessing. Bangladesh earned a good reputation in respect of loan repayment. So, the attention should be given on proper utilization of loan amounts borrowed from regional development banks and donor agencies. Current debt stock to export ratio has become a matter of concern. There needs to be thought about external debt stock to export ratio. After getting the status of developing country in 2026, Bangladesh will likely lose loan facilities. Hence, utilizing external debt in an appropriate and timely manner has no other alternative.
The Writer is an economic affairs analyst & PhD Research Fellow.
He can be contacted at [email protected]
