Sovereign debt set to edge upwards in coming years

The government’s debt, that is the country’s sovereign debt, is projected to reach Tk 16,306.5 billion in the next 2022-23 fiscal, before growing to Tk 18,732.30 billion in 2023-24.

According to an official document, the sovereign debt is Tk 13,919.5 billion in the current 2021-22 fiscal.

In the 2023-24 fiscal, the government would get Tk 11,568 billion from domestic sources while Tk 7164.30 billion from external sources.

In the 2022-23 fiscal, the government would get Tk 10021.70 billion from domestic sources while Tk 6284.80 billion from external sources.

In the running 2021-22 fiscal, the target was Tk 8674 billion from the domestic sources while Tk 5272.50 billion from the external sources.

In the 2020-21 fiscal’s revised budget, the debt was Tk 12037.70 billion with Tk 7489.20 billion domestic debt and Tk 4548.5 billion external.

The government’s debt in 2019-20 fiscal was Tk 10,062 billion where the domestic debt was Tk 6313.7 billion and external was Tk 3748.30 billion.

The document said that the government debt has been projected to edge up in the medium term in line with the pace of economic recovery.

Outstanding debt is projected to increase by 1.3 percentage point of GDP to Tk. 13.9 trillion (Domestic vs. external ratio 1.6:1) at the end of fiscal 2021-22 from the revised target of fiscal 2020-21, as additional budget will be required for the health sector, including the cost of carrying out the vaccination programme and implementing the declared stimulus packages.

Government debt has been projected to rise in the subsequent years as the economic recovery path might be slow due to the advent of new variants of the Covid-19.

The government debt has been projected to 42.9 per cent of GDP at the end of fiscal 2023-24 where domestic debt is 26.5 per cent of GDP and external debt is 16.4 per cent of GDP.

The projection is 42.1 per cent of GDP at the end of fiscal 2022-23 where domestic debt is 25.8 per cent of GDP and external debt is 16.2 per cent of GDP.

The official document mentioned that additional government spending for implementing the declared fiscal stimulus package to foster economic recovery from the pandemic as well as weaker than expected revenue collection have been pushing up the government debt level slightly.

Considering the present trend in the revenue collection and the resulting fiscal deficit, total debt stock is projected to increase by 2.2 percentage point of GDP to Tk. 12.0 trillion in the revised budget from the original budget in FY21 where both domestic debt and external debt level rises by 1.1 percentage point.

As per the document, high GDP growth, stringent fiscal discipline, low interest cost that resulted from optimum borrowing mix, and stable exchange rate have contributed in stabilising government debt over the decade (fiscal 2010-11 to fiscal 2019-20).

Government’s outstanding debt hovered around 35-36 per cent of GDP during the decade.

It actually declined until fiscal 2017-18, but then the trend was reversed and the debt stood at 36.0 per cent of GDP at the end of FY20.

Composition of the debt stock has changed as well in the last 10 years.

Domestic debt increased gradually to 22.6 per cent of GDP at the end of fiscal 2019-20 from 16.7 per cent of GDP at the end of fiscal 2010-11.

External debt has declined gradually to 13.4 per cent of GDP at the end of fiscal 2019-20 from 18.3 per cent of GDP at the end of fiscal 2010-11.