Government borrowing from domestic and external sources is projected to swell over the next three years for financing the budget deficit, according to an official forecast.
It further suggests that the debt stock would double over a period of six years from fiscal year (FY) 2021-22 to FY 2026-27, and stand at around Tk 27.5 trillion - 39.4 per cent of the country's Gross Domestic Product (GDP).
As of the outgoing FY'24, the government borrowing, including domestic and foreign outstanding loans, is estimated to be Tk 19.0 trillion, 37.69 per cent of the GDP, according to the Ministry of Finance (MoF).
Analysts say that Bangladesh is gradually falling into a debt trap due to the steep rise in borrowing while the repayments would swell simultaneously in the coming years.
According to the MoF, the actual debt stock in FY'22 was recorded at Tk13.4 trillion, 33.8 per cent of the GDP.
The public sector debt stock has been maintaining a steep rise until FY'24. The debt stock in FY'23 was recorded at Tk 16.6 trillion or 37 per cent of GDP.
In the upcoming FY'25, the government's debt stock of the outstanding loans is projected to be Tk 21.6 trillion or 38.6 per cent of GDP, followed by Tk 24.5 trillion 39.1 per cent of GDP in FY'26 and Tk 27.5 trillion of 39.4 per cent of GDP in FY'27.
According to the latest "Medium-term macroeconomic policy statement" of the MoF, this loan escalation indicates a continuous reliance on both domestic and external borrowings to finance the government's fiscal needs.
Domestic debt is expected to grow to 24.5 per cent of GDP in FY'27 from 21 per cent of GDP in FY'22, it added.
The foreign debt as a percentage of GDP is projected to increase from 12.5 per cent in FY'22 to 15 per cent in FY'27, the MoF policy statement showed.
It said the distribution of domestic and external debt over the years suggested a preference of domestic borrowing, but that of external debt will gradually increase.
"Overall, the rising debt levels call for careful fiscal management to ensure sustainability and to maintain a healthy balance between growth and debt servicing obligations," the MoF policy statement said.
Former Comptroller and Auditor General (CAG) Mohammad Muslim Chowdhury told the FE that the debt is not always bad for countries like Bangladesh. However, the main challenge here is the nature of expenditures, he added.
"The past experience in Bangladesh is not so good. In most cases, the government capacity in terms of quality expenditure is very poor. So, it will be a big challenge for the country as well as for the economy if the capacity of the civil service does not improve," he said.
"The government had not taken proper projects at a suitable time. Even after undertaking the projects, those suffered from cost and time overrun. So, how can we expect proper return from those development projects," Muslim Chowdhury, also a former finance secretary, said.
In addition, if we fail to check the financial corruption, the country will fall into a debt burden, the public finance management (PFM) expert told the FE.
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