Govt plans to extend debt relief to more countries

The government is expected to back more countries hit hardest by the Covid-19 pandemic for dealing with their debt problems — the plan is not welcomed by the economists.

Debt relief ranging from Tk100 crore to Tk150 crore might be provided to any countries vulnerable to debt due to the worldwide coronavirus pandemic, according to officials at the finance division.  

On Wednesday, Bangladesh gave Sudan 5.32 million SDR, equivalent to Tk 65 crore, to help the African nation achieve debt relief and unlock access to the needed resources to increase growth and reduce poverty.

“The country's macroeconomic situation looks good now if you notice the export growth figures, foreign exchange reserves, current account balance along with the balance of payment. We can easily provide funds to countries in need,’’ said an official.

Apart from Sudan, the government has already disbursed Tk 73 crore to Somalia to get rid of debt in response to the call made by the International Monetary Fund ( IMF).

"The main aim of this kind of help is to build up an image of the country,'' said the official.

The country’s current account deficit has started to shrink on the back of a rise in import payments.

 In February, the current account surplus dropped by $652 million, according to Bangladesh Bank.
 In July-January of the current fiscal year, Bangladesh posted a current account surplus of $2.21 billion, which declined to $1.56 billion in the July-February period.

The balance of payment was in deficit of $2.11 billion in the first eight months of the current fiscal year as the payment for imports, which was going at a normal pace, was much higher during the time with no Covid-19 impacts.

On May 1, Bangladesh's foreign exchange reserves hit a record $45.10 billion amid the Covid-19 pandemic.

The country's export earnings in the first ten months of the current fiscal year stood at $32.07 billion, marking an 8.74 percent growth compared to that of the corresponding period of last fiscal.

Former finance adviser to caretaker government Dr AB Mirza Azizul Islam said that the government should give a second thought before extending debt relief to any countries amid the pandemic situation.

“The country's people need food and jobs during the unprecedented situation stemming from the coronavirus. It is not the time to build the country's image in the world, it is time to save the people of the country.,’’ he said.

 “We should not utilise our foreign exchange reserve due to the country's low import expenses. Businesses and investments in the country remain stagnated now,’’ he also said.

Former adviser to the IMF Dr Reza Kibria said the government has no right to use public money to meet foreign countries’ debt relief.

“It has already provided the public funds to Sudan and Somalia for meeting their debts. Sudan's government's debt piled up just because of corruption. So why would we help that country?’’ he said.

The fund should be first used to ensure the welfare of the country's low-income people who lost their livelihood amid coronavirus pandemic, he said.

Kibria criticized the government, for now, stopped providing cash support to the Covid-affected people.

The “Sovereign Debt Vulnerabilities in Developing Economies” report of UNDP found that 72 of the 120 low- and middle-income countries are vulnerable to debt challenges, including 19 that are “severely vulnerable.”