Bangladesh is facing a mounting debt crisis, compelling the government to resort to continuous borrowing to meet its repayment obligations.
The Centre for Policy Dialogue (CPD) has highlighted this concerning trend, stressing the urgent need for rapid escalation in domestic resource mobilization.
This not only strains the country’s finances but also underscores the critical necessity of strengthening domestic revenue streams.
Recent discussions by CPD, in collaboration with the Asia Foundation, have shed light on the escalating rate of external borrowings and debt servicing obligations.
Bangladesh’s total public and private external debt surpassed $100 billion in September 2023.
While the current external debt-to-GDP ratio may seem moderate at 21.6 percent, complacency would be unwise given the importance of repayment capacity.
A particularly alarming aspect is the shifting composition of Bangladesh’s debt portfolio.
Concessional loans are decreasing, while non-concessional and market-based loans are increasing, posing substantial challenges for sustainable debt management.
Bangladesh’s low revenue-GDP ratio underscores the need to address structural deficiencies in revenue collection mechanisms.
Central to addressing this crisis is robust domestic resource mobilization. Domestic revenues must shoulder the burden of servicing both domestic and external debts.
However, the current trend indicates an increasing diversion of domestic resources towards debt repayment, exacerbating fiscal pressures and hindering essential investments in human capital, infrastructure, and social welfare.
To navigate this crisis effectively, Bangladesh must embark on comprehensive fiscal reforms.
This includes enhancing revenue mobilization, broadening the tax base, and improving fiscal discipline.
Measures to curb tax evasion, streamline tax administration, and promote a conducive business environment are imperative.
Prudent debt management strategies, such as diversification of funding sources and renegotiation of unfavorable loan terms, are crucial for safeguarding fiscal sustainability and fostering inclusive economic development.
As Bangladesh strives for fiscal resilience and sustainable development, concerted efforts by policymakers, civil society, and the private sector are essential.
Addressing the burgeoning debt burden requires proactive measures to bolster domestic resource mobilization.
Decisive action to enhance domestic revenue mobilization is paramount to mitigate the risks posed by escalating debt obligations.
By prioritizing fiscal reforms and prudent debt management, Bangladesh can lay the groundwork for a resilient and prosperous future.
