Bangladesh’s external debt crosses $97b: World Bank

The external debt stock of Bangladesh increased by 6.59 per cent to USD 97.01 billion in 2022 from USD 91.48 billion in 2021 despite a fall by 3.4 per cent in the external debt of low- and middle-income countries (LMICs), according to a World Bank report.

The International Debt Report-2023, released recently, said the external debt of Bangladesh has multiplied by more than two-and-a-half times since 2010.

External debt stock of LMICs fell in 2022 for the first time since 2015, decreasing by 3.4 per cent, to USD 9.0 trillion in 2022 from USD 9.3 trillion in 2021. 

Total net debt flows to LMICs dropped by 66.72 per cent USD $185 billion in 2022 from USD 556 billion in 2021. Both short- and long-term debt flows were negative in 2022.

According to the World Bank report the external debt stocks of Bangladesh was USD 26.57 in 2010 billion, which rose to USD 57.17 billion in 2018, and surpassed USD 97 billion in 2022.

The report said the fall in net long-term debt inflows was due entirely to the USD 189 billion outflow from private creditors, reflecting a sharp retrenchment in bond issuance by sovereigns and other public and private sector borrowers.

Tighter monetary policy in advanced economies to curb inflation raised borrowing costs, pricing some LMICs out of the markets, and offered investors attractive returns in the US and European bond markets.

As a result, there was a net outflow of USD 127.1 billion from LMICs to bondholders in 2022, compared to an average annual inflow of $202 billion in 2019–21.

This increase takes place during a time of rising interest rates and largely unfavourable exchange rate movements, which exacerbated the fiscal burden of external debt service payments, according to the International Debt Report.

In 2022, the external debt stock of International Development Association (IDA)-eligible countries increased 2.7 per cent to a record USD 1.1 trillion, more than double the 2012 level.

International Debt Report 2023 sounds an alarm about the danger confronting low- and middle-income countries—particularly the poorest.

In 2022, LMICs paid a record USD 443.5 billion to service their external public and publicly guaranteed debt. In a time of pinched government budgets, these payments diverted spending away from health, education, and other critical needs.

Countries eligible to borrow from IDA are likely to face a rough ride in the coming years: interest payments on their total external debt stock have quadrupled since 2012, to an all-time high of USD23.6 billion, the report read.

As interest rates climbed in advanced economies, private creditors followed the money in 2022: they largely withdrew from developing countries, pulling out USD 185 billion more in principal repayments than they disbursed in loans. The World Bank, along with other multilateral development banks, stepped in to help close the gap.

Multilateral creditors provided a record US$115 billion in new financing for developing countries in 2022, nearly half of which came from the World Bank, the report cited.