Per capita foreign debt in Bangladesh has more than doubled in the past eight years, rising by 135% to $605 in FY2023-24 from FY2015-16, driven by unplanned foreign-funded projects and corruption. The total external debt now stands at $103.79 billion, with $83 billion in public sector debt. Debt servicing increased by 26% to $3.35 billion in FY2023-24.
Economists, such as Zahid Hussain, argue that mismanagement and corruption, including capital flight and poorly chosen projects, have exacerbated the issue. For instance, foreign-funded power plants in Khulna are idle due to lack of gas, yet debt continues to mount.
While Bangladesh’s per capita income has risen, the external debt-to-GDP ratio has grown to 22.6%, compared to 15.5% in FY2015-16. Though the debt is moderate relative to GDP, the strain on foreign exchange reserves is a concern. Additionally, arrears of state-owned enterprises, estimated at $5 billion, are not included in the debt figures, worsening the financial stress.
To meet these obligations, the government is relying on foreign loans, especially from the IMF and World Bank, which offer low-cost financing. However, the government must balance loan repayments and future imports to sustain the economy.
Comment here