Tuesday, June 25, 2024

Section

বাংলা
Dhaka Tribune

Bangladesh confident in manageable external debt despite rising obligations

The country's external debt comprises both concessional and non-concessional loans, which have varying maturity periods

Update : 26 May 2024, 06:59 PM

The Finance Ministry expects external debt repayment to remain within tolerable limits over the next two fiscal years, thanks to the government's efforts to diversify funding sources and boost foreign exchange reserves.

However, managing debt service obligations is essential for ensuring financial stability and preventing liquidity crises.

“Despite the increasing amount of external debt repayment, it is expected to remain within tolerable limits due to the government's efforts to diversify funding sources and build up foreign exchange reserves,” the Finance Ministry said in a document.

The country's external debt comprises both concessional and non-concessional loans, which have varying maturity periods.

According to the Finance Ministry document titled “Medium Term Macroeconomic Policy Statement (2023-24 to 2025-26)”, at the end of FY22, the government paid back $1.5 billion in principal repayment for external debt, and this amount was $2.1 billion in FY23.

The principal repayment in the current FY24 is projected to be $2.4 billion, and it will further increase to $2.6 billion by the end of FY26.

The document said that the majority of the external debt is denominated in US dollars, which accounted for around 50% of the total external debt stock as of FY22.

Other significant currencies include the Japanese Yen, which accounts for 21% of the total external debt, and the euro, which accounts for around 15%.

The remaining external debt is denominated in other currencies such as the Chinese RMB and the British pound.

The currency mix of external debt is a key consideration for the government as fluctuations in exchange rates can significantly impact the cost of servicing the debt, the document stated.

As of the end of March 2023, the outstanding guaranteed amount in Bangladesh was Tk102,443 crore.

In the current fiscal year, the government has issued Tk36,065 crore in new sovereign guarantees to state-owned enterprises (SOEs) for borrowing purposes.

These guarantees were primarily issued to entities such as Bangladesh Biman, power sector investments, fertilizer production plants, and TCB.

In the medium term (2025-26 fiscal), the government plans to amend the existing guidelines for guarantees to streamline the process and mitigate fiscal risks associated with sovereign guarantees.

As of June 2022, the total liabilities of SOEs in Bangladesh amounted to Tk431,304 crore, which accounted for 10.85% of the country's GDP.

Additionally, the outstanding balance of government on-lending to SOEs was Tk418,022 crore at the end of June 2022, compared to Tk353,727 crore at the end of June 2021.

Top Brokers

About

Popular Links

x