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24 July, 2021 06:47:18 PM
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External debt, dependency and mega projects

After 2009, the government has taken numerous mega projects for establishing this country as a golden Bangladesh in the long run and they are successful in many ways.
Md. Obaidullah
External debt, dependency and mega projects

From extreme poverty to one of the world's fastest-growing economies, Bangladesh has come a long way. The nation has seen many ups and downs in the political field over the last 50 years. Despite this, the economy continues to expand due to a large young population, strong trade, and political ties with regional and international forces that attract significant foreign investment. It undeniably accomplishes a lot, but still more needs to be done. After 2009, the government has taken numerous mega projects for establishing this country as a golden Bangladesh in the long run and they are successful in many ways.

However, various governments have taken mega-projects to grow Bangladesh since independence. As a developing country, it has been taking loans from international donor agencies and the fact remains that the country's external debt is much higher over the past 40 years than in the past 10 years. Major development projects with concessional debt from institutions such as World Bank, ADB and Japan have been implemented for so long. Consequently, these loans had low interest burdens and a long period of repayment. The large-scale projects currently undergo relatively short-term and commercial implementation. As a consequence, the external debt repayment will at this time not be very high. But the government could soon bear a huge burden.

The external debt of Bangladesh reaches record level in 2020 during the pandemic period. According to central bank statistics, the total foreign debt in December 2020 stood at USD 70.7 billion, almost 16% more than in March of 2020. Nevertheless, the total external debt in Bangladesh amounted to 25.3 billion in 2009. In recent years, this debt burden has risen significantly. Over the 11 years, foreign debt grew by 180%.

The total cost of the seven mega projects has been estimated at Tk 2,74,536 crores. Of this, Tk 87,195 crores is being provided from the government's own funds, Tk 1,85,124 crore from foreign assistance and Tk 2,119 crore from the implementing agencies' funds. Thus, the government largely depends on external debts for achieving its vision.

Indeed, debt and aid create dependency for its borrowers. The root cause for augmenting the external debt of Bangladesh is financing of high-cost mega projects. These projects are under construction now and there are no financial benefits. Also, the reasons for increasing government borrowing are slow economic activities, poor revenue generation and additional government expenditure related to the Covid-19 issue. There is indeed a huge risk for taking such a huge loan, and for paying off the debt with its limited resources, Bangladesh could face many problems. The pandemic hit the country’s economy abruptly which led to lower revenue collection. Multilateral institutions are providing loans for Covid-19 recovery. However, if the government fails to make proper use of money, undoubtedly that will put an extra burden on the economy.

Debt trap diplomacy is a theory, which describes the obstruction of a borrower country by a powerful lending country or institution with a lot of debt, so that the country becomes completely dependent on it. Bangladesh is, behind Pakistan, the second largest receiver of Chinese investment in South Asia. Critics point to Colombo's experience that, after failing to pay its loans, Sri Lanka was forced to cede control of its southern port of Hambantota to China for a 99-year lease. ‘The 99-year lease’ could be defined as the debt trap diplomacy and new colonialism of China. Moreover, there is a massive debate whether Chinese investment is a debt trap, notwithstanding it provides opportunities as well as risks. However, skeptics remain concerned about the increasing economic and political impact of China over Bangladesh.

Debt money has embezzled before in Bangladesh due to the extreme corruption and lack of proper monitoring. So, money should be utilized properly for project implementation and the projects must be completed efficiently as well as within a specific timeframe. The government should attract foreign direct investment instead of taking loans. Concerned authorities need to be more interested and efficient in terms of tax collection. Further, the citizens have to be aware and responsible. After all, the government must rethink the debt policy and beef up necessary steps for abating the external debt.

The writer is Research Assistant, Centre for Advanced Social Research, Dhaka, Bangladesh. Email: [email protected]

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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