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  • No reason for BD to face financial crisis like Sri Lanka

No reason for BD to face financial crisis like Sri Lanka


There is a lot of discussion concerning Bangladesh’s foreign debt at various levels following the economic crises in Pakistan and Sri Lanka. COURTESY

  • OPINION
  • Sufian Siddique
  • Published: 21 Jul 2022, 11:32 AM

Recent records from BD ERD show that from July to May of the 2021–22 fiscal year, foreign loan assistance to BD totaled $5.91 billion



Since gaining independence, Bangladesh has successfully repaid its foreign debt in order to maintain its sterling reputation abroad, according to analysts.

Few eminent economists noted that the nation has never defaulted on foreign loans due to its careful management of external debt, which has a significantly higher proportion of soft loans with longer maturity terms.

There is a lot of discussion concerning Bangladesh’s foreign debt at various levels following the economic crises in Pakistan and Sri Lanka.

However, according to economic specialists, Bangladesh is not in that much danger because its debt-to-GDP ratio is still below the safe level of 13 percent, as opposed to Sri Lanka’s close to 50 percent.

Bangladesh’s national debt (as a percentage of GDP) is much lower than that of Pakistan, Sri Lanka, and Afghanistan.

Sri Lanka’s national debt as measured by the World Development Indicators (WDI) in 2011 was almost 70% of its GDP. The percentage increased dramatically to almost 100% in 2021 as the economic crisis worsened. During the same time period, Pakistan’s national debt-to-GDP ratio grew from roughly 60% to 87%.


On the other hand, Bangladesh’s national debt is substantially lower, standing at roughly 40% of its GDP in 2021. But the US and Japan have likewise consistently had high debt-to-GDP ratios.


According to the Bangladesh Prime Minister’s Office, Bangladesh’s GDP and export volume are larger than those of Sri Lanka and Pakistan combined, and its foreign currency reserves are more than twice as large as those of these two South Asian nations (PMO).

Recent records from the Bangladesh Economic Relations Division (ERD) show that from July to May of the 2021–22 fiscal year, foreign loan assistance to Bangladesh totaled $5.91 billion. They gave $8.41 billion, exceeding their intended donation to Bangladesh by 42.40 percent. This kind of foreign credit assistance is uncommon, according to economists.

Project assistance of $8.22 billion and grants totaling $188.50 million were obtained from the disbursed loan. In the first 10 months of the previous fiscal year, $2.53 million in food grants and $186 million in project grants were received.

However, for the fiscal year 2020–21, from July to May, development partners released $5.72 billion. As a result, in the first 10 months of the previous fiscal, foreign credit assistance climbed by 47%.

Donors committed $5.36 billion in loans between July 2020 and May 2021, according to ERD. It climbed to $5.91 billion over the same period of the fiscal year 2021–2022 by 10.20 percent.

The amount of interest paid has increased by 10%. However, Bangladesh has already paid $1.88 billion to development partners in principal and interest. As a result, the loan’s principal and interest repayment increased from the previous fiscal year to this one by 10%, totaling $1.71 billion.

However, after the economic crisis in Pakistan and Sri Lanka, there is a lot of talk regarding Bangladesh’s foreign debt on several floors. In this regard, Bangladesh always accepts initiatives in terms of truth, according to Planning Minister MA Mannan, since we do not accept anything with passion.


“The nation’s reserves and remittances are strong. We consistently pay back international loans and interest due as a result of these factors. we’ve never failed before, and we won’t in this situation either. We always use loans from abroad for the correct reasons. We are paying regular interest and principal, which is primarily why we are unable to eat with the loan, he said.

The newly appointed Finance Secretary Fatima Yasmin explained that Bangladesh was swiftly recovering from the effects of the Covid-19 outbreak as an explanation for why the situation in Sri Lanka did not exist in Bangladesh. Many nations in the globe were unable to accomplish that. We had 6.94 percent GDP growth in the 2020–21 fiscal year.

In the most recent fiscal year, more than 7.25 percent will be made. More than 35% more has been made via exports. More than 15% more money is being collected in taxes. The private sector’s debt flow has risen to more than 12%.

“Bangladesh has exceptionally cheap interest rates on foreign loans,” she declared. Every economic indicator shows that the economy is doing quite well right now. Bangladesh has more than twice as many reserves as Pakistan and Sri Lanka combined. In contrast to Sri Lanka, Bangladesh has not made any errors. Consequently, there is no issue with international borrowing. Bangladesh will develop more quickly the more foreign loans with cheap interest rates there are.

Bangladesh has pledged $127 billion in foreign debt in total since its independence. According to ERD sources, of this, $72 billion has been disbursed, while the pipeline has $50 billion (excluding autonomous ones).

Various development projects have received loans and grants from development partners. Since Bangladesh’s independence, the World Bank has disbursed a total of $23 billion to that country.


ADB has since issued $18 billion, while Japan has paid out $16 billion. China issued $4.38 billion at this time. At the same time, the European Union contributed $4 billion, the United States $3.5 billion, Russia $3 billion, Canada and Germany both contributed $2 billion, UNICEF received $1.5 billion, India received $1.47 billion, the Netherlands contributed $1 billion, Denmark contributed $1 billion, Saudi Arabia contributed $1 billion, and Sweden contributed $1 billion.

Bangladesh has been successful in making timely principal and interest payments to the development partners on these loans. As a result, Bangladesh is constantly owed money by development partners.

There are now 498 million people who are able to pay international interest, up from 7.5 million previously. In contrast, Bangladesh’s war-torn fiscal years of 1971–1972 and 1972–1973 saw no repayment of foreign loans and principal.

Since 1973–1974, Bangladesh has made regular repayments of its foreign debt, including interest. Bangladesh barely paid $6.5 million in foreign interest during the first fiscal year (1973–1974).

The capacity to pay foreign interest has climbed to $498.18 million at the moment. According to economists, Bangladesh’s economy is always expanding and that country’s capacity to pay interest is also rising.

They claimed that Bangladesh’s economy is currently in a very good position and that as a result, the payment of foreign interest has increased significantly. Bangladesh has taken already cautionary measures to not be loan defaulter. Bangladesh has taken ‘cost minimization’ policy to not face Sri Lanka like crisis. 


The article first appeared on Eurasiareview

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