Timely implementation of dev projects is time befitting demand
Zahid Hossain Biplob: The government is likely to receive $8.5 billion for implementing many development projects in the ongoing fiscal year 2019-20, said an official of Finance Ministry. Besides, experts expressed their deep concern to implement the project timely. Already, China recommended Bangladesh to implement development projects within the time frame for disbursing further loan. On the contrary, the government again sought US$3 billion loan from China.
Expert, however, urged the authorities concerned to usilise the foreign loan accordingly for the sake of the country.
The external borrowing of Bangladesh was US$ 33.11 billion as of June this year which is 27.90 percent of the country’s Gross Domestic Product (GDP). External Debt in Bangladesh averaged $ 21.55 billion from 2001 until 2018. The external borrowing was $ 28.34 billion in 2017, followed by $26.31 billion in 2016, $23.90 billion in 2015, $24.40 billion in 2014, $22.40 billion in 2013, $22.10 billion in 2012, $22.10 billion in 2011, $20.34 billion in 2010 and $20.86 billion in 2009
Member, CPD Board of Trustees and Distinguished Fellow, Dr Debapriya Bhattacharya said the foreign loan to Bangladesh has been increasing in recent times, thanks to the country’s latest status of a lower-middle income country.
Bangladesh is listed among the least developed countries (LDCs), which have been facing “an alarming increase” both in domestic and external public debt for the last five years, according to the Unctad report.
Dr Bhattacharya said Bangladesh should now explore low-cost loans and must be careful about [high interest] loans as it may create problems in repaying the money.
About 37 per cent foreign funding is required for the annual development programme, Dr Bhattacharya said, underlining the need for mobilising domestic resources.
“The foreign development partners also see how we are collecting revenues to meet our needs,” he said.
Quoting the report, CPD’s senior research fellow Towfiqul Islam Khan said cross-border tax evasion and avoidance linked to the flow of exports and imports remain a challenge for the Asian LDCs like Bangladesh.
Potential mis-invoicing and other illicit outflows for Bangladesh, as percentage of total trade with advanced economies, have been estimated to be more than 7.0 per cent, he said.
The Unctad report said that illicit financial flow from Bangladesh as of 2015 was equivalent to 36 per cent of its tax revenue, which is equivalent to the average of all LDCs.
He said Bangladesh’s tax-GDP ratio is significantly lower than that of LDC average.
The money laundered in 2015 was 36 per cent of the total tax collected during that period, according to the report.
Tax buoyancy and tax efforts are also very low compared to other LDC countries, the report noted. Khan suggested increasing tax collection for reducing money laundering and said Bangladesh’s exposure to illicit financial flow is high.
He said Bangladesh is among the seven LDCs having relatively lower tax efforts with a score of 0.68, ranking 27th among 29 LDCs.
The senior researcher said the resource gap, defined by the difference between domestic savings and gross fixed capital formation, in Bangladesh in 2015-2017 was lower than the LDC average of 8.0 per cent of GDP.
For nearly half of LDCs, the resource gap remained above 15 percentage points of the GDP, which is particularly high for small economics and island LDCs.
During 2012-2017, among LDCs, the beneficiary country with the greatest amount received was Angola at US$1.084 billion, followed by Senegal, at $0.895 billion. Myanmar was at $0.872 billion followed by Bangladesh at $0.794 billion, the report said.
Experts and economists attributed the increased borrowing from foreign sources mainly to lower interest rates compared to that of domestic sources and non-availability of funds for big projects. Most local banks cannot finance large projects due to their limited capital base.
They also said the debt would also rise significantly following mobilisation of fund for different mega infrastructure projects. The government should be careful about proper utilisation of the foreign loans, they suggested.
Dr Ahsan H Mansur, executive director of the leading local private think tank-’Policy Research Institute of Bangladesh (PRI) told the Daily Industry that the Rooppur plant raise the public debt significantly.
He predicted that government debt would increase by at least 50 per cent for the country’s lone nuclear power plant. He hinted that the debt sustainability will emerge as a major challenge for the government in future. “This is high time for the government to undertake a prudent debt management plan. Otherwise, risks will abound”, he said.