Bangladesh’s foreign debt rises 125pc in 10 years: World Bank

The Business Standard     14 October 2020

Bangladesh’s total external debt stock was $25.3 billion in 2009 which rose to $57 billion in 2019, an increase of 125 percent

The country’s total foreign debt has more than doubled in a decade and reached $57 billion in 2019, a World Bank report said.

According to the report, Bangladesh’s total external debt stock was $25.3 billion in 2009 which rose to $57 billion in 2019, an increase of 125 percent.

The report titled “International Debt Statistics 2021”, published on Monday, said that Bangladesh’s long term debt increased to $45.93 billion at the end of 2019 up from $41.56 billion recorded in 2018.

Meanwhile, short-term external debt stocks rose marginally by 7.8 percent to reach $9.73 billion at end of 2019.

Bangladesh’s long term disbursements fell to $9.18 billion from $9.7 billion in 2018, with $6.06 billion constituted by the public sector, showed in the report.

Bangladesh’s long term interest payments increased by 31.8 percent to reach $639 million at the end of 2019, of which the public sector alone paid $487 million.

External debt stocks to exports increased by 10 percentage points from 2018 and stood 127 percent at the end of 2019. It was 149 percent a decade ago.

Foreign debt stocks to gross national income (GNI) were the same as 18 percent in the last three years. Debt service to exports reached 13 percent in 2019 from six percent in 2018.

In contrast, foreign direct investment (FDI) inflows rose 10 percent to $1.4 billion, mostly into the garment industry, said the report.

In South Asia, FDI inflows raised by 11 percent which was driven by India where additional relaxation of investment barriers in mid-2019, including in retail and insurance, boosted FDI by 10 percent in 2019 to $43 billion, directed largely at the technology and communication industry.

Pakistan rebounded to $2 billion, up to one-third compared with 2018 FDI inflows.

External debt stocks of the country reached $8 trillion at the end of 2019, with the pace of debt accumulation as in 2018.

China alone accounted for 26 percent of the 2019 external debt stock of low and middle-income countries and heavily influenced outcomes.

Neighbouring India drove the six percent rise in debt stocks in the South Asian region, but the increase was mirrored in the 9.5 percent rise in the external debt stock of Bangladesh.

India’s external debt saw a 7.5 percent rise in 2019 to $560 billion from $521 billion at the end of 2018.

According to the latest data, total external debt stocks of low-income countries eligible for the DSSI (Debt Service Suspension Initiative) rose nine percent in 2019 to $744 billion, equivalent on average to one-third of their combined gross national income.

Lending from private creditors was the fastest-growing component of the external debt of DSSI eligible borrowers, up fivefold since 2010. Obligations to private creditors totalled $102 billion at the end of 2019.

“The Covid-19 pandemic has ended a two-decade streak of steady global progress in poverty reduction, pushing up to 150 million people into extreme poverty by 2021,” said David Malpass, president of the World Bank.

“In 2019, the World Bank shows that almost half of all low-income countries were either already in debt distress or at a high risk of it,” he added.

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