Bangladesh Faces Escalating Foreign Debt Crisis

Bangladesh Faces Escalating Foreign Debt Crisis

Bangladesh finds itself in the grip of a mounting foreign debt crisis, exacerbated by the recent surge in the cost of borrowing and the appreciation of the US dollar. As the nation struggles to manage its burgeoning debt obligations, experts warn of dire consequences for the economy unless decisive measures are taken.

The latest figures reveal a grim reality: Bangladesh's foreign debt has soared past the 10 thousand crore (100 billion) dollar mark, marking a threefold increase from previous periods. Alarmingly, debt repayment obligations have also surged, with a staggering 67 percent rise in expenditure for servicing interest and principal payments compared to the previous financial year.

The depreciation of the Bangladeshi Taka against the US dollar has further compounded the crisis, leading to a significant escalation in the cost of debt repayment. With the official price of the dollar climbing to Rs 117 and the open market rate reaching Tk 115, the cost per dollar has surged by seven rupees in a single day. This sharp increase in the cost of borrowing poses a severe strain on Bangladesh's financial resources.

Eminent economists such as Mainul Islam, former president of the Bangladesh Economics Association, and Dr. Salim Raihan, Executive Director of SANEM, underscore the gravity of the situation. They emphasize that foreign loans and interest must be repaid in dollars, necessitating the purchase of dollars at increasingly inflated rates. Moreover, the relentless rise in debt servicing costs threatens to destabilize the economy and deplete foreign reserves.

As Bangladesh grapples with the mounting debt burden, concerns loom over the sustainability of its economic policies. Dr. Mohammad Helaluddin, Director of Sirdap and Dhaka University economist, warns of the repercussions of continued reliance on borrowing and the potential consequences of resorting to currency printing to meet debt obligations.

Experts advocate for a prudent approach to mitigate the crisis, emphasizing the need to prioritize essential projects and curtail unnecessary expenditures. Dr. Moinul Islam emphasizes the imperative of steering away from frivolous projects and adopting measures to bolster revenue generation and fiscal discipline.

In response to the escalating crisis, the government is exploring avenues for additional borrowing, including seeking assistance from international organizations such as the IMF, World Bank, ADB, and other bilateral partners. However, experts caution against over-reliance on borrowing as a sustainable solution to the debt predicament.

As Bangladesh grapples with mounting debt and escalating borrowing costs, urgent action is needed to avert a full-blown economic crisis. The government must adopt prudent fiscal policies, prioritize essential expenditures, and explore sustainable solutions to alleviate the burden of foreign debt. Failure to address these challenges promptly could have far-reaching repercussions for the nation's economic stability and prosperity.