Bangladesh sees ballooning debt buildup with the amount increasing by over Tk 2.0 trillion to Tk 13.44 trillion at the end of past fiscal year, further feeding into fiscal deficit.
According to the latest report prepared by the finance division and released Wednesday, the total debts grew from Tk 11.43 trillion in the previous fiscal year (FY) 2020-21.
The total debt-to-GDP ratio stood at 33.79 per cent at the end of FY 2021-22 or up by 1.41 percentage points from fiscal year 2020-21, the report mentioned.
The domestic debt-GDP ratio stood at 21.32 per cent or up by nearly 1.0 percentage point while external debt-to-GDP stood at 12.47 per cent or up by 0.56 percentage point at the end of June last.
The statistics are based on provisional GDP estimates for FY 2022 by the BBS or Bangladesh Bureau of Statistics.
Of the total debts, domestic debt stood at Tk 8.48 trillion. Debt from the banking source stood at Tk 4.2 trillion, non-banking source at Tk 4.3 trillion and the external source at Tk 4.96 trillion, the report shows.
The gap between the debt from the banking source and debt from the non-banking source has been on the decrease.
In the meantime, interest expenses borne by the government in FY22 are much higher compared to FY21 as it paid Tk 757.6 billion, up by more than 15 per cent.
Economists, however, forecast that the debt may surge more rapidly in this fiscal year (FY2022-23) following loans from the IMF and other sources home and abroad.
But the debt-GDP ratio is still significantly lower than the IMF threshold of 55 per cent.
The Ministry of Finance began the practice of preparing the data on the International Monetary Fund (IMF) prescription from April 2021.
The disclosure will go some way towards quelling fears of debt distress stemming from government's recent bid to secure financial assistance from development partners in budget and balance-of-payments support.
Dr Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh or PRI, told the FE that the current fiscal year would also have such increase in the debts as the nominal depreciation contributes to an increase in external-debt burden.
Bangladesh forex market remained volatile for nearly a year, leading to depreciation of the local currency.
"Depreciation is a key reason for spiking external debt," Dr Mansur notes. .
Dr Zahid Hussain, former lead economist at the World Bank Dhaka office, says bilateral loans tend to be costlier than those from multilateral lenders with a relatively shorter maturity.
"If the share of bilateral debt keeps rising, as generally presumed to be the case in recent years, external debt management could become concerning in the not-too-distant future," he told the FE, on a note of caution.
He said at present domestic debt management is more of a challenge than external debt management.
In the meantime, government's external debt stock is dominated by SDR (special drawing rights) followed by the US dollar and Japanese Yen.
SDRs are units of account for the IMF and not a currency per se but they represent a claim to currency held by IMF member-countries for which they may be exchanged.
The report says the debt is sustainable due to the robust GDP-growth rate over the decade along with a prudent fiscal policy that maintained a deficit limit at or below 5.0 per cent of the GDP.