Bangladesh's economy is likely to face trouble from 2024 to 2026, as foreign debt repayments for the mega projects will rise during the period, Centre for Policy Dialogue (CPD) Distinguished Fellow Debapriya Bhattacharya said on Thursday.
"After 2023, the grace period of some big loan packages will end. It means their debt servicing will start from 2024. After 2026, the repayment for some other big loans, including the Russian one for the Rooppur power plant, will start."
Dr Debapriya expressed his concern while analysing the debt situation of 20 large foreign-funded projects of Bangladesh at a discussion with media professionals virtually.
He analysed 20 major projects of the country, including Rooppur Nuclear Power Plant, Karnaphuli River Tunnel, Matarbari Coal-Based Power Plant, Metro Rail, and Padma Bridge railway connection.
He said the current ratio of foreign debt repayment to gross domestic product (GDP) is 1.1 per cent, which may double by 2026.
The CPD distinguish fellow opined that Bangladesh should go for negotiations with its development partners on loan rescheduling to deal with the pressure of foreign debt repayment.
He said Bangladesh's total debt liabilities are 36.9 per cent of the GDP. Of the outstanding loans, the foreign debt is 16.90 per cent of the GDP, and the internal debt is 17.06 per cent of the GDP.
There are 40 loan packages and five grants for the 20 mega projects, where US$32.26 billion fund is borrowed from different development partners.
Asked whether Bangladesh will be in trouble or not, he said, "It will actually depend on the country's reserve situation and the state of the economy at that time."
Dr Debapriya noted that Bangladesh has to pay mostly to Russia, China and Japan for big projects, of which China's debt repayment period is quite short.
He said 36.6 per cent of the total repayment for the loans of 20 mega projects would go to Russia, 35 per cent to Japan, and 21 per cent to China.
"The government has allocated 1.83 per cent of the GDP for the education sector and 0.83 per cent for the health sector in the current FY 2022-23 budget. On the other hand, it allocated funds worth 1.80 per cent of the GDP for debt serving in the budget."
"Currently Bangladesh needs to repay debts worth 1.1 per cent of the GDP, which could be almost double in 2026. The debt servicing could reach 2.0 per cent of the GDP," he added.
Dr Debapriya suggested the government to enhance its revenue income and go for more foreign exchange earnings.
The government should go to the International Monetary Fund (IMF) to borrow money to cushion the future shocks regarding foreign exchange, he said.
The proposed borrowing from the IMF would help to tame inflation and reduce budget deficit amid the volatile global scenario.
"If Bangladesh borrows from the IMF, confidence on the country among the development partners will remain positive. It will help the country in the future days to get more support from the global lenders."
The CPD fellow opined that the 20 mega projects are scheduled to be completed by 2026, but many of those would not end in due schedule, which would enhance their cost further.
"If we fail to complete the development projects in time and ensure their quality, we will face economic shocks in the coming days," he added.
Bangladesh's macro-economy is now under pressure due to high rate of US dollar, import payment, negative current account balance, weak remittance inflow, and reduced foreign exchange reserve.
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