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Bangladesh’s external debts soared by $31 billion in the past three years, reaching nearly $94 billion at the end of December 2022, indicating a growing reliance of the country on foreign loans for its development initiatives.
According to Bangladesh Bank data, the country’s foreign debts were $62.99 billion at the end of December 2019 and the figure rose rapidly to $93.8 billion in December 2022.
The foreign debts in 2022 in Bangladeshi currency stood at more than Tk 9,47,363 crore at the rate of Tk 101 a dollar.
The external debts were $72.94 billion in 2020 and $90.79 billion in 2021.
The December-end figure was $1.1 billion higher than that of $92.69 billion in September.
The country usually receives foreign loans from multilateral institutions, such as the World Bank, the International Monetary Fund, the Asian Development Bank, the Islamic Development Bank, and major overseas commercial banks.
The country’s foreign debts have doubled in just six years as the debts were $41.67 billion in 2016, $51.14 billion in 2017 and $57.06 billion in 2018.
The increase in external liabilities, which include principal and interest, will consume a significant portion of the country’s income.
Bangladesh’s central bank data showed that the public sector took $69.48 billion in foreign loans by the end of December 2022, with $58.33 billion borrowed directly by the government and the rest by various government institutions.
Meanwhile, the country’s private sector’s foreign debts declined to $24.3 billion at the end of December from $25.4 billion at the end of September.
Experts said that the rapid increase in external debts could pose a threat to the country, as it was struggling with the depreciation of the local currency and a worsening debt burden due to the appreciation of the dollar.
As the external loans in the private sector remained very high, the government must strengthen its monitoring of private companies receiving foreign loans to prevent payment default, they said.
Former Bangladesh Bank governor Salehuddin Ahmed told New Age that the government had undertaken several expensive projects that were heavily dependent on foreign loans.
He said that the government and the private sector would face pressure in repaying the foreign debts.
He suggested that the government should exercise caution when taking and using foreign loans and prioritise raising domestic revenues to finance its budget deficits instead of relying on massive foreign loans.
Salehuddin also said that the government should avoid taking unnecessary projects to cut its foreign loan burden.
The approaching maturity of a number of large foreign loans, with their grace periods ending soon, will almost double the volume of the country’s external debt repayment at $4.02 billion in FY25 against $2.4 billion in FY22, according to the Economic Relations Division.
In FY24, the overall repayment volume would be some $3.28 billion, with $2.3 billion in principal and $980 million in interest.
The growing imbalance in foreign trade has caused instability in the currency market, with a rise in the interbank dollar rate and a decrease in foreign exchange reserves.
In July 2021, the exchange rate per dollar in the country was Tk 84.80 that increased to Tk 104 after the central bank allowed the rate to be floating.
The country’s foreign exchange reserve dropped to $32.22 billion on January 31 after reaching a record high of $48.06 billion in August 2021.
The country’s trade deficit was $12.3 billion in the July-December period of FY23, and its import payments stood at $38.13 billion in the first six months of FY23.
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