Originally posted in UNB on 11 October 2022
Commenting on the emerging external debt situation, Dr Debapriya Bhattacharya, told UNB – United News of Bangladesh that outstanding external debt increased alarmingly by $2.65 billion in the last quarter of the fiscal year 2021-22, which has never happened before. According to Dr Debapriya, “This has also led to an increase in total debt as a share of GDP. For example, total debt-to-GDP ratio increased from 15.5% in FY20 to 16.9% in FY21, according to Economic Relations Division data.” Dr Debapriya pointed out that there are two distinctive features of the said increase. He said the increase in debt obligation is comparatively more driven by public sector borrowing, while external borrowing has been accruing on account of short-term borrowing. “One wonders for which public sector projects such costly foreign loans were accessed,” Dr Debapriya said. He underscored that the exchange rate risks associated with these external loans is increasing rapidly. He said the taka depreciated by around 20 percent against the US dollar in the last three months (July-September 2022) in the country, increasing the external debt repayment burden in terms of Taka. “The interest risk may also increase in the coming months as global financial market is raising the interest rate in the face of increasing inflation, he said adding that the next two years are very crucial for the domestic economy in the context of the global turmoil. So, the government should refrain from costly borrowing by withholding new development projects requiring such funding,” he added. Dr Debapriya said “Notwithstanding certain level of export revenue and remittance inflow growth, the deficits in trade balance and in the current account are widening. In such a situation increasing external debt servicing liability will further aggravate the challenges of the domestic economy.”
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