Reducing domestic and foreign debt pressure is critical for economy
AB Siddique :
The amount of foreign debt per capita has already exceeded 95 thousand crores. Bangladesh’s foreign debt reached $99 billion at the end of June 2023, up from $23.5 billion in June 2009 at the start of the current Awami League-led government.
He blames the country’s growing dependence on foreign loans for development projects behind the $75 billion or 322 percent increase in foreign debt over the past 14 years.
Bangladesh generally receives foreign loans from multilateral institutions such as the World Bank, International Monetary Fund, Asian Development Bank, Islamic Development Bank and major foreign commercial banks.
According to the World Bank’s International Debt Report 2022, in the 10 years between 2011 and 2021, India’s foreign debt increased by about 83 percent, Pakistan’s by 101 percent, and Sri Lanka’s by 119 percent.
At the same time, the data of the Central Bank showed that Bangladesh’s foreign debt increased by 213.6 percent. Generally, external debt is considered risky if it exceeds 40 percent of GDP.
In such a situation, even though Bangladesh is currently in a safe state, excessive dependence on foreign loans needs to be reduced.
The main declaration of the Awami League’s manifesto in the 12th National Parliament election manifesto contains the commitment to build a smart Bangladesh.
Special emphasis is being given to addressing the challenges of the fourth industrial revolution and reaping the benefits.
There will be four main foundations for the formation of Smart Bangladesh.
These are – Smart Citizen, Smart Economy, Smart Government and Smart Society.
Awami League’s election manifesto will announce the implementation of this goal by 2041.
According to a newspaper report quoting member secretary of Awami League’s election manifesto formulation subcommittee Salim Mahmud, Awami League’s election manifesto formulation subcommittee has been formed in the second week of September.
The sub-committee will formulate the manifesto for the next national elections. Besides, the election manifesto announced in 2018 will be evaluated.
The data will be analyzed on the extent to which this manifesto has been implemented.
Meanwhile, the government’s debt from internal sources including banks continues to increase.
In the last five years alone, loans from this sector have increased by about Tk 4 lakh crore. In this case, the debt has increased by 124 percent.
At the end of December 2017, the total debt of the government from the domestic sector was Tk 3 lakh 20 thousand 272 crores. At the end of 2022, it has exceeded 7 lakh 17 thousand 189 crores.
Along with Bangladesh Bank, the government has taken this loan from the people using various instruments including bank and financial sector, savings certificates.
With 2 lakh 45 thousand 64 in the current financial year, the government announced the budget. Debt from domestic and foreign sources is increasing to cover the record budget deficit.
In the current financial year also, the government announced to take a loan of 1 lakh 6 thousand 334 crores from the banking sector of the country.
However, the country’s banking sector does not have the capacity to give this amount of loans.
Therefore, the central bank itself is providing this loan without selling treasury bill bonds to the banks.
As a result, the amount of loan taken by the government from Bangladesh Bank is increasing at an abnormal rate. This loan has increased by 927 percent in the last five years.
By reviewing the data of the central bank, it can be seen that at the end of 2017, the amount of loan given by Bangladesh Bank to the government was 11 thousand 833 crores. At the end of December 2022, it exceeded 1 lakh 21 thousand 471 crores. As such, it has increased by 927 percent in five years.
In 2017, the government’s borrowing from commercial banks was Tk 70 thousand 7 crores. At the end of last year, the amount of this loan has reached 1 lakh 80 thousand 964 crores. According to that, government debt from the banking sector has increased by 158 percent in five years.
The loans taken from other sectors including the sale of savings bonds have increased by 74 percent during this period. In November 2017, the amount of loan taken by the government from these sources was Tk 2 lakh 38 thousand 432 crores.
In November last year, the amount of loans taken directly from the people has increased to 4 lakh 14 thousand 754 crores. Out of this, the amount of loan due to the sale of savings bonds alone is Tk 3 lakh 62 thousand 399 crores.
Government debt is believed to be increasing due to failure to collect revenue. The size of the deficit budget is constantly increasing due to failure to collect revenue.
In the first four months of the current financial year, the revenue deficit is about 8 thousand crore rupees.
Meanwhile, as a result of the ongoing political activities, it is believed that the amount of revenue deficit will be higher this year.
It should be noted that the larger the size, the greater the debt of the government.
The central bank itself is now lending to the government due to liquidity crunch in the money market. This means that Bangladesh Bank is printing new money even if wealth is not created.
If this situation continues, the upward trend of inflation in the country will not stop. Again, the base of the economy will also be in a fragile situation.
In the three months of July-September this year, defaulted loans decreased the most in the state-owned Janata Bank. The bank’s defaulted loans have decreased by about 11,500 crores.
At the same time, the largest increase in non-performing loans was in the private sector National Bank. Besides, the public sector Sonali Bank and private Islami Banks have also a significant increase in defaulted loans.
The defaulted loans in these three banks have increased by about 7 thousand crores. In another 12 banks, defaulted loans increased from Tk 150 crore to Tk 700 crore.
However, Janata Bank has reduced default loans in a big way. In three months, total default loans in the banking sector have decreased by Tk 642 crore. This information was found in Bangladesh Bank’s report on defaulted loans.
It has been said that at the end of last June, defaulted loans in the banking sector were Tk 1 lakh 56 thousand 39 crore, which decreased to Tk 1 lakh 55 thousand 397 crore at the end of September.
When Awami League formed the government in 2009, the total defaulted debt in the country was Tk 22 thousand 481 crore 41 lakh. Now it is more than one and a half lakh crore taka. In the last 14 years, defaulted loans have increased almost 7 times.
All in all, Bangladesh is trapped in the debt trap. In this situation, it is feared that if the domestic and foreign debt dependence of the government is not reduced, it will soon face a critical situation.
(The writer is a journalist.)
