Bangladesh not at risk of debt trap: Dr Shamsul
Bangladesh has no risk of falling into the debt trap of Chinse loans -- as cautioned by many economists, said Dr Shamsul Alam, a leading economic policymaker of the government.
He said this while addressing a workshop titled “Implications of BRI for Sustainable Development Goals in Bangladesh” as chief guest. The workshop was jointly organised by the Bangladesh Institute of International and Strategic Studies (BIISS) and the UN Department of Economic and Social Affairs (UNDESA) at the BIISS auditorium in the capital yesterday.
Though Chinese loans under its flagship scheme Belt and Road Initiative (BRI) are large in size -- sometimes bigger than the GDP of smaller economies, Bangladesh is safe from its risks, Dr Shamsul said.
For example, the China-Kazakhstan deal under BRI is roughly US$ 37 billion, which is over 50 percent of Kazakhstan’s GDP, while its external loan is more than 80 percent of its GDP, said Shamsul Alam, member of the General Economics Division of the Planning Commission.
“There are high risks for developing economies because of their less-effective debt management,” he said, adding that the case of Bangladesh is very different.
He said Bangladesh has never failed to pay back its debt in the past. The country’s debt-GDP ratio has been 34 percent in the past -- 20 percent of which came from domestic sources while the other 14 percent came from foreign sources. This is far below the average of developing countries, Shamsul Alam said.
“Our GDP is fast growing. Our budget deficit is below 5 percent. It is less than that of India, Pakistan and Sri Lanka. If we raise debt-GDP ratio from 65 to 70 percent of GDP, it won’t affect our macroeconomic balance in anyway,” he added.
“There’s nothing to be afraid of at this stage,” he stated. “We are eagerly participating in the BRI loans in pursuit of our own economic ambitions.”
BRI is a programme of China that seeks to connect Asia with Africa and Europe via land and maritime networks along six corridors with the aim of improving regional integration, increasing trade and stimulating economic growth.
China, which is a leading trade partner of Bangladesh, signed deals to provide $22.5 billion loans for the 27 projects. These deals were signed during Chinese President Xi Jinping’s visit to Dhaka in 2016.
According to a paper presented by Dr Mahfuz Kabir, research director of BIISS, of the 27 BRI projects, only five are at the implementation stage as of now. China has so far disbursed US$981.36 million, which is less than 5 per cent of the amount promised.
Analysts at the workshop questioned why the disbursement is slow – whether it is because Bangladesh is not ready to receive the loan or whether Chinese authorities are delaying it. They suggested that this issue needs to be looked into as Bangladesh needs huge resources in order to achieve the Sustainable Development Goals (SDGs) by 2030.
BRI can be an important tool for achieving many of the SDGs by developing crucial road and rail infrastructure, creating jobs and building resilient cities and reducing poverty.
According to the planning ministry, Bangladesh needs 66 billion dollars per year to achieve the SDGs by 2030. Mitigating the climate-induced risks and inclusive development are some of the crucial goals under the SDGs.
While Shamsul Alam has denied any concern over Bangladesh’s risks of falling into the Chinese loan debt-trap, he did not clarify his stance on fossil fuel-based power projects.
He said BRI feels heightened pressure to address the emission implications of its energy projects. In 2018, over 40 percent of the BRI lending was for the power sector.
However, this has come under scrutiny after BRI’s recipient countries have started to raise concerns over Chinese coal projects for their impact on local coal environments. In light of this, environmentalists suggest environmental impact studies are earnestly considered before taking up BRI projects.
At the workshop, UNDESA, New York Programme Officer Lin Yang, Bangladesh Institute of Development Studies Senior Research Fellow Dr Nazneen Ahmed, Economic Relations Division Additional Secretary Sultana Afroz and BIISS Chairman M Fazlul Karim also spoke.