by Rejaul Karim Byron in Daily Star,Dec 21, 2023
Bangladesh’s debt service to revenue ratio is projected to cross the 100 percent mark for the first time owing to rising loans and lower tax and export receipts, highlighting the growing risk to the country’s capacity to repay.
The debt service-to-revenue and grants ratio stood at 58.7 percent in the fiscal year of 2020-21 but it surged to 72 percent in FY22 and 71.8 percent in the last fiscal year of 2022-23, according to the International Monetary Fund (IMF).
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It is projected to grow to 101.1 percent in the current financial year. Debt service is defined as the sum of interest and amortisation of medium and long-term, and short-term debt.
“The increasing debt service to revenue ratio highlights the urgency of Bangladesh remains at a low risk of external and overall debt distress,” the IMF said.
The higher ratio comes as the National Board of Revenue (NBR) missed its tax target for the 11th consecutive year in FY23, in the face of slowing growth of collections amidst economic slowdowns and ambitious goals set by the government.
Export earnings in terms of gross domestic product (GDP) stood at 10.7 percent in FY21 and 12.9 percent in FY22 and it is expected to reach 14 percent in FY24.
In Bangladesh, the risk of external debt distress and the overall risk of debt distress has remained low.
But the persistently low revenue receipts have not only limited the government’s ability to spend but is also posing threat to the country’s debt sustainability.
A spike in interest rates owing to the global monetary policy tightening and the sharp depreciation of the local currency have also deepened the risk.
The government’s total debt amounted to $166.65 billion in FY23. Of the volume, external debt stood at $74 billion, which is predominantly owed to multilateral and bilateral creditors, at $38.81 billion and $25.35 billion, respectively.
The government owes $19.53 billion to the World Bank, $14.11 billion to the Asian Development Bank, and $1.5 billion to the Asian Infrastructure Investment Bank.
Among the bilateral lenders, Japan is the biggest creditor with $11 billion in loans, followed by Russia $5.9 billion, China $5.34 billion, and India $1.3 billion……..
https://www.thedailystar.net/business/news/debt-burden-gets-heavier-bangladesh-runs-low-capacity-repay-3499246
