Bangladesh's Debt Trap Deepens as China Loans Mirror Sri Lanka Crisis

Bangladesh has gone the same way as its South Asian neighbours like Sri Lanka, according to a report in Asian News Post.

Following unsustainable borrowings from China, in 2022, Colombo was pushed to a situation of sovereign debt default; followed by an economic meltdown.

Moreover, Pakistan has sought $7 billion from the Extended Fund Facility of the IMF to repay Chinese debts. Under the China Pakistan Economic Corridor, Islamabad owes to China nearly $30 billion, according to a report in Asian News Post.

"Bangladesh has slipped into a debt trap. The confirmation has come from none other than Chairman of the National Board of Revenue of Bangladesh M. Abdur Raman Khan," the report mentioned.

Debt servicing has emerged as the second largest budget expense for Bangladesh.

The debt-to-GDP ratio of Bangladesh has climbed to over 39 per cent from about 34 per cent in 2017-18.

According to the report, at a recent seminar, leading economist Mustafizur Rahaman "regretted that agriculture and education used to be the second largest expenditure in the revenue budget for Bangladesh after salaries and pensions; but no longer so".

Moreover, Finance Secretary M Khairuzzaman Mozumdar has said the national budget of Bangladesh for the current year, for the first time in the history of the country, has been smaller than in the previous year.

It is like a "thin man has been asked to lose even more weight," he has observed pithily, said the report.

According to a latest 'International Debt Report 2025' by the World Bank, external debt of Bangladesh has jumped 42 per cent over the last five years, with total foreign borrowing reaching nearly $105 billion by the end of 2024, up from $26 billion in 2010.

"External debt now stands at 192 per cent of the export earnings of the country, with debt service payments surging to 16 per cent of exports; signalling growing pressure for repayment," said the report.

Under the leadership of Mohammed Yunus as Chief Advisor of the Interim Government, Bangladesh has deepened its relationship with China.

"Beijing has, however, not placed all their eggs in one basket. Aware that the interim government is a temporary arrangement, China has been engaging steadily with other power centres that are gaining ground in Bangladesh, among them Jamaat-e-Islami; a fundamentalist pro-Pakistan organization that is said never to have criticized Beijing for its treatment of the Uighur minorities," the report highlighted.

- IANS