How do we avoid a debt trap?

Bangladesh's external debt has doubled since 2017, standing at approximately $100 billion in 2024. This accelerated growth indicates a significant turn in the country's economic direction. Most of this borrowing has gone towards financing large-scale infrastructure projects, supported by bilateral and multilateral sources. However, the pace and magnitude of this debt increase are a cause for concern regarding long-term financial stability. There is apprehension about the country's ability to repay and service this debt, especially in the face of threats from the prevailing global economic environment, rising interest rates, dwindling concessional loans, and stressed domestic economic and political situations.

- BY DR SELIM RAIHAN

The country's development spending has also increased, mostly in transport, energy, and connectivity. The investment, however, has not yielded the desired returns due to a chain of inefficiencies. In the meantime, the global situation has worsened, further taxing the country's economy. These external pressures, in addition to internal problems, necessitate Bangladesh's shift towards a more strategic approach to debt management, where borrowed capital is employed effectively and efficiently to promote sustainable growth. Also, emphasis on avoiding mismanagement and corruption will be essential in maximising the economic dividend of foreign borrowings and placing the country's financial situation on a firm footing.