The Asian Development Bank has recommended the formation of a separate ‘Dedicated Debt Management Office’ in Bangladesh to make the country’s public debt management more effective and transparent.
At the same time, the organization has warned that Bangladesh’s fiscal capacity or ‘fiscal space’ is gradually shrinking before it graduates from the Least Developed Country (LDC) list next November.
These observations have been highlighted in ADB’s Integrated Assessment Report on Good Governance and Macroeconomic Reforms of Bangladesh released on Saturday.
The report analyzes the country’s fiscal capacity, structural weaknesses and necessary reform priorities until 2024.
According to ADB, Bangladesh’s public debt has currently reached about 41 percent of the gross domestic product (GDP). However, there is still a lack of coordination in debt management.
As debt-related information is stored separately in different institutions, monitoring and analyzing the overall situation is becoming difficult.
In addition, it has been mentioned that the medium-term debt management strategy has not yet been fully institutionalized and there is a lack of disclosure of information related to this.
To address this situation, ADB has recommended consolidating all debt databases under a single authority.
The report stated that the proposed dedicated debt management office will be responsible for monitoring, managing and publicly disclosing the country's overall debt situation.
The report highlights several other important challenges to Bangladesh's macroeconomics. These include low revenue collection, increasing external imbalances, and narrowing policy decision-making space.
According to ADB, losing the existing preferential treatment in trade and development financing after LDC graduation could make these pressures more difficult to deal with.
The assessment report also mentions various weaknesses in the policy, legal, and institutional framework. The agency said that these weaknesses are negatively impacting macroeconomic stability and the ability to deliver citizen services.
However, ADB also highlighted progress in some areas. The report says that the introduction of an improved Integrated Budget and Accounting System (IBAS++) has increased the budget implementation rate.
The organization also cited the initiative to adopt International Public Sector Accounting Standards (IPSAS) and steps to strengthen the government procurement system as positive.
