‘Big economic shock waits for mega projects debt repayment’
22 July 2022
Staff Reporter :
Bangladesh is likely to face a major economic shock between 2024 and 2026 as the time for debt repayments for the country's mega projects is nearing.
Over Tk 5.56 lakh crore are being spent on the country's 20 mega projects, of which about 62 per cent is foreign debt.
In view of the foreign debt repayment pressure, it should take a plan and go for a negotiation with development partners on loan rescheduling.
"The thresholds of debt repayments on mega projects are approaching, which is a matter of concern for the economy. A plan is needed to deal with this situation," said Debapriya Bhattacharya, a distinguished fellow of the Center for Policy Dialogue (CPD).
The eminent economist was addressing an online discussion with journalists titled 'Top Twenty Mega Projects in Bangladesh: Trends and Status' on Thursday.
Padma Bridge, Rooppur Nuclear Power Plant, Karnaphuli River Tunnel, Matarbari Coal Based Power Plant, Metro Rail and rail way communication through Padma Bridge, among the twenty big projects of the country and around Tk5.56 lakh crore are being spent on these projects, of which about 62 per cent is foreign debt, he said.
Bangladesh has to pay mostly to Russia, China and Japan for the projects of whom China's debt repayment period is quite short, the CPD's fellow said.
Dr Debapriya also said, "This debt repayment pressure will be in action from 2024 and the debt service liabilities will increase from the current one per cent of GDP to 1.5 per cent to 2 per cent. The first debt repayment pressure will come from China, and later from Russia."
Of which, 36.6 per cent of the total debt repayment will go to Russia, 35 per cent to Japan and 21 per cent to China, Debapriya calculated.
He further said there was a national consensus in taking mega projects since 2009 as the politicians showed interest in it as visible development can be seen if big projects are implemented.
He does not think that theses mega projects will not be completed in current decade, though the projects are scheduled to be completed by 2028.
Besides, there are lack of transparency and accountability in implementing the mega projects, he opined.
"Currently, the cost of 20 mega projects of Bangladesh is reaching $70 billion, of which 61 per cent or $43 billion are foreign debt," Dr Debapriya said.
About taking loan from International Monetary Fund (IMF), he said, "To tackle inflation and to ensure a stable exchange rate, Bangladesh now seriously needs to take loan from IMF but the statement from the government is not encouraging."
"Sri Lanka's experience shows that borrowing from the IMF is necessary before the situation worsens. By taking this loan, the world can see that the IMF is with Bangladesh. Then, confidence will increase and it will be possible to retain the value of taka against dollar," he added.
Asked whether Bangladesh will be in trouble or not, he said, "It would actually depend on the country's reserve situation and the state of the economy at that time."
