Bangladesh has low possibility of debt distress

Experts have cautioned Bangladesh to avoid falling into the middle-income trap by improving human capital, greening the economy, building infrastructure without taking on too much debt, and boosting efficiency. Additionally, they advocated for improving the tax-to-GDP ratio, diversifying export goods, and boosting investments in digital infrastructure.

Bangladesh's foreign minister, AK Abdul Momen,  firmly disregarded the danger of getting into a Chinese debt trap because the return on its investments far outweighs the cost of the funds. Many people, he claimed, have the false impression that Bangladesh will fall victim to the Chinese debt trap. Bangladesh has borrowed extensively from numerous nations, particularly China, in recent years to achieve its growth ambitions, raising the question of whether it is in a debt trap.

Bangladesh's external debt decreased by $1.43 billion in the July-December period of 2022, compared to the first half of the same year, indicating that foreign lenders are losing interest in extending financial facilities due to large deferred payments. Industry insiders blamed two key factors for the phenomenon: the growing deferred payment created by the USD shortage and increasing borrowing costs due to USD appreciation against the local currency Taka.