Country’s per capita debt rising fast

Unfavourable and fluctuating currency exchange rates and a rapid rise in borrowings from abroad increased the country’s per capita debt liabilities by about $2.3 a year, on an average, over the last six years, officials said on Saturday.

At the end of 2008-09, Bangladesh’s per capita debt obligation stood at $ 151.21, up from $136.92 in 2003-2004.

The country’s per capita debt obligation rose to $139.91 in fiscal 2005-2006.

Per capita debt burden has been on the rise in 2008-9 and onward requiring the government to repay more to service debt liability, said economist.

Finance ministry officials said that devaluation of US dollar against major international currencies forced Bangladesh to pay an additional $50 million to its overseas lenders in the last fiscal year.

A steep fall in the value of dollar by 16 per cent from March 5, 2009 to November 2009, forced Bangladesh to repay Tk 5,950 crore to the overseas lenders, up from Tk 5,575 crore, as estimated earlier.

Former finance secretary Akbar Ali Khan suggested for extra care in signing deals for suppliers’ credit.

He said that it was not at all clear why Bangladesh government signed the agreement with the Indian EXIM Bank for a $1 billion credit.

He said it was not clear either how the credit from the Indian bank would benefit Bangladesh.

He said that 60 per cent of the credit from the Indian Bank, was suppliers’ credit, the worst form of borrowing, leaving no option to a borrower from where to buy the goods or services.

Zaid Bakth, the research director of the Bangladesh Institute of Development Studies, told New Age that the debt obligation was rising without the citizens knowing why or how the loans are taken or utilised.

No study or survey on utilisation of overseas loans, he said, was ever done by Bangladesh despite repeated demands from the economists.

Economists maintain that but for projects like Bangabandhu Bridge across the river Jamuna, no impact of overseas loans are visible.

Bangladesh’s outstanding debt stood at $21.8 billion in 2008-09.

According to ERD Bangladesh received a total of $ 50.369 billion as loans and grants since 1972.

Bangladesh has been borrowings more since early 1990s as the flow of grants has been on the decline, said ERD officials.

Annual debt servicing has also been on the rise, they said, with Bangladesh repaying 1.74 billion dollars in 2008-09 up from US$ 100.90 million in 1974-75, they said.

The loan repayment in 2008-09 was equal to 11.17 per cent of the country’s merchandise imports, 6.42 per cent of exports and 1.9 per cent of GDP.

The debt burden increases on expiry of grace periods of outstanding loans and exchange rate fluctuations only aggravate it, they said.

The prime minister’s economic adviser, Mashiur Rahman, said that currency devaluation would cost the country dearly.

He called for alternative funding sources to avoid increasing debt service liabilities.