Govt’s domestic debt almost doubled in five years

Staff Reporter :
Bangladesh’s outstanding domestic debt position almost doubled in the last five years, and stood at Tk 8.09 lakh crore in October 2023, according to the latest Bangladesh bank’s data published on Thursday.

In 2019, the outstanding domestic debt position was only Tk 4.28 lakh crore and at the end of FY22 the amount reached Tk 6.91 lakh crore.

The central bank’s report showed, the overall internal debt of the government has increased. However, the debt of the government from domestic sources has decreased in July-October of the current financial year 2023-24.

Economists said no significant reforms have been taken by the country to boost revenue, and foreign debt utilization lacked efficiency, this in turn led to an increase in government borrowing from domestic sources.

The rising domestic debt compared to GDP may not be an issue for Bangladesh, as it is normal for a country’s debt positions to grow along with its economy. However, proper utilization of borrowed funds and the government’s growing interest payments are key issues, they added.

In the ongoing FY24, the country is projected to spend around Tk 94300 crore on debt servicing, including both domestic and external interests. This constitutes Tk 82,000 crore for domestic interest and Tk 12,300 crore for external interests which leaves a little room for the government to allocate funds toward development projects and other expenditures.

The government has projected to borrow around Tk 1.55 lakh crore from domestic source in FY24.Out of the amount, more than 1.32 lakh crore will be borrowed from the banking sector and Tk 23,000 crore from non-banking sector.The government has set a target of collecting Tk 18000 crore by selling savings certificates.

Bangladesh Bank identified that the actual sale of savings certificates has decreased during this period (July-October) of FY24 as a result the government’s internal borrowing also decreased which helps to reduce the overall government debt by now.

Eminent Economist Zahid Hussain,Former lead economist of World Bank Dhaka office, said, “If we compare our debt-to-GDP ratio with other countries, the domestic debt of Bangladesh is not concerning.

But the biggest issue for us is that the increase in debt is raising our interest expenditure, which in turn is shrinking the government’s fiscal space.”