Bangladesh is facing a serious budget crunch, New Delhi‑based news reports say, as the country chokes on huge interest payments and loan repayments. The international news service quoted an article in Dhaka’s The Business Standard that highlighted the strain on the government’s finances.
The report argues that the country’s heavy debt burden leaves very little money for economic development. This imbalance is pushing poverty levels higher, according to analysts in the region.
Economists say the soaring cost of interest – the price the government pays to keep its debt alive – is becoming a major policy challenge that must be tackled urgently. Selim Jahan, a former UNDP director and senior economist, warned that Bangladesh could face serious vulnerabilities as its external debt and interest obligations grow.
Jahan explained that Bangladesh will soon lose concessional grants and low‑interest loans when it graduates from “Least Developed Country” status next year. The loss means the government will have to turn to more expensive commercial borrowing, often with higher interest rates and shorter repayment periods.
The cost of borrowing has risen further because of global monetary tightening, domestic inflation and a weakening taka. Banks have driven up interest rates, which pushes the government’s debt‑servicing bill to new, higher levels.
The balance of payments has also worsened. In four years, the exchange rate slid from 84 taka per U.S. dollar to over 123, meaning that more local currency is now needed to repay the same foreign‑currency debt. The effect on the budget is stark.
To counter this trend, Jahan calls for a bold reform programme. He stresses the need to “raise the tax–GDP ratio” through stronger direct taxes and better tax administration. He also urges diversification of exports, rationalizing imports, and channeling more remittances into foreign reserves. Reducing dependence on foreign loans would help stabilize the economy.
Jahan also recommends tighter spending controls. He suggests postponing new large infrastructure projects—except for essential sectors such as education and health—cutting unnecessary expenses, and tightening discretionary budget items. The plan includes cautious debt management, careful project selection, and improved implementation.
He warned that non‑essential, prestige‑driven projects with little economic or social return should be stopped. The new government, he said, must outline a clear strategy to ensure long‑term debt sustainability.
The key takeaways for Bangladesh: battle high interest costs, strengthen tax revenue, diversify trade, manage debt prudently, and curb wasteful spending. These steps could help lift the country out of its precarious debt situation and reduce poverty rates across the nation.
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