Bangladesh is facing a serious financial crisis. Its debt has grown significantly in recent years, leading to concerns about the country’s economic stability.
Several factors have contributed to this debt crisis. One major factor is the government’s overspending. The government has spent more money than it has earned, creating a deficit. Another issue is the government’s failure to collect enough taxes. This has resulted in a shortfall in revenue, further exacerbating the debt problem.
Additionally, corruption has played a role in the debt crisis. Mismanagement of funds and fraudulent activities has contributed to the increased debt burden.
The high debt level has several negative consequences. One of the most significant impacts is the high interest payments that the government must make. These payments divert resources away from other essential areas such as education, healthcare, and infrastructure. Moreover, the growing debt poses a risk of default.
If the government is unable to repay its debt, it could face severe economic consequences.
The tendency to favor short-term, high-interest loans over low-interest and long-term ones has exacerbated the debt situation. The debt service-to-revenue ratio, which stood at 58.7% in FY21, surged to 71.8% in FY23 and is projected to exceed 100% in the current fiscal year.
This alarming trend underscores the urgent need for increased tax revenue to support essential public spending and achieve sustainable growth. The International Monetary Fund (IMF) has highlighted the rising debt service-to-revenue ratio as a significant concern.
With the NBR failing to meet its tax targets for the 11th consecutive year, the debt-to-GDP ratio is forecasted to surpass 40% in FY24 and reach 43.5% by 2028-29.
To address the debt crisis, Bangladesh needs to implement several measures. Increasing tax collection is crucial to generate additional revenue. The government should also take steps to reduce corruption and ensure that public funds are used efficiently. Additionally, borrowing money wisely is important.
The government should only borrow when necessary and on favorable terms. By addressing these issues, Bangladesh can work towards resolving its debt crisis and ensuring a stable and prosperous future.
