Originally posted in The Financial Express on 25 September 2024
Public debt management amid limited foreign currency reserves is becoming one of the major economic challenges for Bangladesh, noted economist Dr. Mustafizur Rahman said on Tuesday.
“We are moving towards a debt trap. I think debt management will become a major challenge for us,” he said at a discussion at the Dhaka University campus.
The university’s Economics Study Centre (ESC) organised the discussion titled “Reconstructing the Economy after the Student-Civil Uprising”.
“When our reserves were around US$48 billion, our foreign debt servicing cost was around $2.0-2.5 billion. The debt service now hovers around $4.0 billion while the reserves are around $20 billion,” Prof Rahman said.
He added that the grace period of foreign loans for many mega projects, including the Rooppur Nuclear Power Plant, is about to end and the time has come to pay back the loan with interest.
Mr Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD), further said the country should focus on increasing domestic savings.
A Professor of Economics at the DU and Executive Director of the South Asian Network on Economic Modelling (SANEM) Dr. Selim Raihan moderated the session.
Chairman of Financial Excellence Limited Mamun Rashid and Associate Professor of DU’s Department of Development Studies Dr. Asif Shahan also spoke as the panellists.
Dr. Mustafizur Rahman, who is a member of the committee to prepare white paper on the economy, made a brief highlight on different types of corruption that took place during the last one and half decade.
He emphasised that a lack of investment in the private sector, money laundering, rising economic disparity, the prevalence of fake invoices, and unsustainable interest rates undermined overall economic growth of the country.
The economist also said a huge sum of money has been looted through overcapitalisation of mega projects.
He also called for implementation of sustainable reforms and suggested progressive taxation to address economic disparities.
Dr. Selim Raihan identified some challenges like slow pace of economic development, issues in the investment, rising inflation, labour market instability, and a lack of economic diversification.
He referred to the last 15 years as the “lost decade” as lack of good governance crippled many institutions, as well as the country failing to develop human capital through investment in education and healthcare at an optimum level.