Pressure will mount on the next government to repay foreign debt

Foreign debt is the main source of development activities, including the implementation of mega projects, in the country.

As the foreign debt continues to rise, the pressure on the next government to repay it will increase. The country’s total foreign debt reached $113.20 billion at the end of the 2024-25 fiscal year, almost six times higher in last 15 years. Currently, the per capita foreign debt is $655.

Indiscriminate mega projects, irregularities, and corruption have played a greater role than productive and economically profitable projects behind this debt increase.The bulk of this loan was taken under various mega projects during the ousted Awami League regime.

Although a huge amount of foreign loans were taken, a significant portion of it could not provide the expected benefits to the economy.

Unfortunately, the debt burden is increasing due to overstating project costs, money laundering through corruption, and lack of proper planning.

The cost of implementing development projects is also higher than in other countries in the world. More loans have been made for unnecessary projects. As a result, even if projects are launched, they are not yielding the expected returns. The government is now having to repay the debt by borrowing.

As the government’s foreign debt repayment pressure will increase in the coming days, it will put pressure on foreign exchange reserves. As the grace period for major projects has ended, both interest and principal have to be paid. As a result, the pressure to repay debt will naturally increase.

This pressure is coming at a time when the country’s economy is not at a level that can withstand the pressure to repay debt.

In this situation, we need to negotiate with the relevant parties to soften the terms of our foreign loans. It is important to start discussions with various donor countries and organizations so that debt repayments can be made in a sustainable manner.

We also need to be very careful when taking on new foreign loans. Otherwise, policymakers will not be able to make the right decisions on time.

Economists say that government debt has ballooned to such an extent because of loans for indiscriminate projects aimed at looting in the name of development.

We must consider how many billions of dollars the country has to spend annually on interest payments. We also know that export earnings and remittances play a role in increasing the flow of dollars.

To address the pressure of debt repayment, we need to increase revenue collection, diversify exports, and increase remittance flows.