Originally posted in The Business Post on 7 June 2023
At the end of December last year, the amount of per capita external debt of the country stood at $561.88.
In the last five years, the external debt has increased by 62 per cent, which was $346.72 at the end of 2018, according to the Foreign Direct Investment and External Debt (July-December, 2022) report published by Bangladesh Bank on Tuesday.
The report stated that the total foreign debt was $96.25 billion at the end of 2022, an increase of 68.65 per cent from $57.07 billion at the end of 2018.
Bangladesh’s foreign debt jumped nearly $20 billion after 2020. At the end of 2020, the amount of foreign debt was $72.94 billion and increased to $90.79 billion at the end of 2021.
Towfiqul Islam Khan, senior research fellow at Centre for Policy Dialogue (CPD), told The Business Post that Bangladesh’s overall external debt is not high compared to GDP.
“But that is not the real point. The real issue is the ability to repay the loan and whether there is enough foreign currency to repay that loan. Bangladesh is in trouble, unable to pay back the loans,” he said.
At the end of 2022, the country’s foreign debt was 20.2 per cent of total gross domestic product (GDP). At the end of 2018, this was 17.8 per cent of GDP.
Meanwhile, as the amount of foreign exchange reserves is decreasing, the foreign loan is increasing, resulting in a decrease in the proportion of reserves to total external debt.
While Foreign Exchange Reserves to total foreign debt was 56.1 per cent in 2018, it has come down to 35.1 per cent at the end of last year, according to the central bank report.
Towfiq said another thing in the case of foreign loans is the currency mismatch.
“We need to see that foreign loans received in USD need to be used so that it generates green back. But we are not able to do that and that is why the foreign debt has increased.”