Public debts in Bangladesh ballooned by 20 per cent to Tk 16.2 trillion in the past fiscal from Tk 13.5 trillion in FY22, latest official disclosure shows.
The higher debt buildup is believed to be driven by a rise in external borrowings during the year under review.
According to the Ministry of Finance (MoF) data released Tuesday, the external debt at the end of FY 2022-23 stood at Tk 6.7 trillion, up by nearly 36 per cent year on year.
However, the domestic debt of the country, from banking and non-banking sources--stood at Tk 9.44 trillion in an annualized rise by over 11 per cent.
The MoF reports that as a percentage of the GDP, total debts and liabilities accounted for 36.34 per cent in FY 2023, up from 33.79 per cent in FY22.
The data reveal that interest payments on debts amounted to Tk 925.38 billion, compared to Tk 757.59 billion in the previous fiscal year.
While the size of external debt increased during the year FY23, the domestic interest expenses were 90 per cent of total expenses due to the higher interest rates for the government securities prevailing on the market.
The external interest payments constituted only 12 per cent of the total government interest expenses.
Economists say due to a high degree of political and economic uncertainties in FY23, the government faced challenges in mobilising revenues and had to bank on borrowed money.
They also note that government borrowing from commercial banks has been on the rise on the back of introduction of a new interest regime.
By the end of FY23, the government had secured an IMF loan amounting to $470 million out of a package deal, meant for repletion of the country's falling foreign-exchange reserves, and it was now expecting $681 million in a second tranche within December next.
In the ongoing FY24, the country is projected to spend around Tk 943 billion on debt servicing, including both domestic and external interests. This constitutes Tk 820 billion for domestic interest and Tk 123.76 billion for external interests.
The significant debt servicing leaves little room for the government to allocate funds toward development projects and other expenditures. Government's main recourse is borrowing from domestic and foreign sources.
The government report shows this debt-to-GDP ratio still lower than the IMF-set threshold of 55 per cent.
The gap between the debt from the banking source and debt from the non-bank source has decreased.
The report says the external debt stock is around 15.12 per cent of GDP at the current market prices.
Domestic debt constitutes the major share of the total debt stock, and financing from the domestic sources is increasing gradually.
Financing from the banking sector constitutes 53 per cent of the total domestic debt followed by NSCs, which is 39 per cent, and the rest was financed from the provident fund.
"It is expected that the ongoing NSC reforms will help reduce the need to finance from the NSCs," the report reads.
Some 71 per cent of the banking-sector financing is sourced from treasury bonds and SPTB which reflects government preference for long-term instruments.
According to the provisional calculation in FY23, net government borrowing was 77 per cent of the budgetary target
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