Undue burden of foreign loans on nation’s debt sustainability
In the last 15 years, Bangladesh has undertaken ambitious infrastructure projects and commercial ventures, propelling its gross domestic product growth to an impressive six percent on average.
However, the repercussions of these endeavours are becoming unexpected as the annual debt repayment skyrockets, reaching a staggering $25.9 billion.
With economists warning of a potential doubling of debt repayment to $4.02 billion by FY25, urgent action is needed to safeguard the nation’s fiscal health.
A news report published in an English newspaper said the substantial portion of these financial commitments stems from purchases made predominantly from the United States, Russia, China, Japan, India, and France.
While these acquisitions aimed to accelerate economic growth, concerns arise over the viability of returns from these projects against initial estimation.
The acquisition of defense equipment and the Rooppur Nuclear Power Project from Russia, while crucial for strategic interests, raises questions about the cost-effectiveness of such projects.
Researchers highlight that the per-kilowatt cost of power production from Rooppur is significantly higher than a similar plant in India, emphasizing the consideration of cost-benefit analysis in future ventures.
China’s substantial contribution of around $7 billion for various projects, including the Padma Bridge Rail Link, also raises concerns about the costliness of these endeavors.
The Padma Bridge Rail Link, identified as one of the costliest among Asian railway schemes, calls for a reevaluation of project costs to ensure transparency and fiscal responsibility.
Japan, with a financial infusion of over $10 billion, has supported projects such as the Matarbari coal-fired power plant.
The recent operational costs of the Matarbari plant, exceeding those of comparable power plants, warrant a thorough investigation into project expenses and the value derived.
India’s loans, primarily allocated for the Rampal coal-fired power plant and communication-related projects, have also raised eyebrows due to frequent shutdowns and doubts about the plant’s machinery quality.
This emphasizes the need for meticulous scrutiny of project specifications and implementation processes.
The government must exercise fiscal prudence as Bangladesh seeks to address its pressing infrastructure needs.
Caution should be exercised when acquiring foreign loans to fund projects, ensuring that they are economically viable and do not unduly burden the nation’s debt sustainability.
Additionally, transparent cost assessments, rigorous quality checks, and stringent project evaluations must be the integral components of decision-making process.
